Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of pharmaceutical company Impax Laboratories plunged as much as 26% after announcing an update on the Food and Drug Administration's inspection at its Hayward, Calif., facility for its idiopathic Parkinson's drug, Rytary.

So what: The FDA's findings from its pre-approval inspection and good manufacturing practices inspection revealed 12 points of concern -- three of which were repeat violations that the FDA had issued concerns about in a warning letter in 2011. Unfortunately, this would appear to pit Impax and the FDA much further apart than investors had first thought with regard to the number and scope of manufacturing deficiencies discovered. Brokerage firm Canaccord also downgraded Impax on the news from "buy" to "hold," adding insult to injury.


Now what: This really is a shame because Rytary has shown plenty of promise in trials, and there's little question about its efficacy. However, two complete response letters later and Impax still can't seem to get things right. One possible scenario could see the company sell its entire rights to Rytary to international licensing partner GlaxoSmithKline  -- if it wereinterested that is! While this scenario is a long shot, it's pretty clear Impax has no clue what to do to bring Rytary to market, and it can't be completely discounted. The other scenario is Impax will trudge along, make the appropriate fixes, and perhaps in nine months to a year we'll see if the third time is the charm.

Craving more input? Start by adding Impax Laboratories to your free and personalized watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in biotechs like Impax, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

The article Why Impax Laboratories Shares Cratered originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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