|Impax CEO Fred Wilkinson|
With the FDA continuing to pressure Impax Laboratories ($IPXL) to improve practices at its plants in Hayward, CA, and Taiwan, the drugmaker is considering using some of its $400 million cash reserves to add new capacity.
Impax has endured a tricky few weeks, with the FDA issuing Form 483s to both of its production plants. Having spent the past few years trying to fix the problems that led to a FDA warning letter for the Hayward plant in 2011--while also maintaining supplies of existing products and winning approvals for new drugs--Impax sees value in diversifying its manufacturing footprint. And with $413 million in cash and short-term investments on its balance sheet, the company has the financial clout to buy capacity.
"We're well positioned to execute on a number of transactions," Impax CEO Fred Wilkinson told investors on a conference call to discuss the company's second quarter results. "Anything we would do would be to diversify the opportunities and actually give our operations team a little better footprint as to where they could allocate resources and where products would come from." Having another plant would add flexibility to the company's supply chain.
For now though the primary focus is on resolving the points made by FDA in its Form 483s and trying to mitigate the effect of the remediation on new product approvals. Impax spent almost $8.7 million on remediation of the Hayward facility in the second quarter, up 90% year-on-year. The outlay brings total expenditure on the remediation effort up to almost $17.2 million over the first six months of the year.