Sigma Pharma Says It May Miss Full-Year Profit, Names Jamieson Chairman
Sigma Pharmaceuticals Ltd., the Australian drugmaker that posted a record loss last month, appointed a new chairman and said it may miss its full-year profit forecast. The shares fell the most in about one month.
Brian Jamieson succeeds John Stocker as chairman today, Sigma said in a statement. Stocker is among three executives who resigned after the loss, which was followed by a 48 percent one- day drop in the shares and a takeover bid from Aspen Pharmacare Holdings Ltd., Africa’s largest drug company.
Sigma said it may not meet the earnings target as government regulations hurt the Arrow generics business. The Melbourne-based drugmaker said it started the sale process for its 30-year-old Herron brand of consumer products and will sell and lease back some properties to raise funds for debt repayment.
“Underlying earnings are going to remain under significant pressure, exacerbated by ongoing and intensifying competition in the generics markets, which goes hand-in-hand with further tightening in regulatory policy,” David Arter, an analyst at Wilson HTM Investment Group in Melbourne, said by telephone. He has a “hold” rating on the stock.
Sigma had forecast profit this fiscal year to be similar to the A$80.1 million reported in the 12 months ended Jan. 31, 2009.
“Given the performance of our generics division to 31 May 2010 and the continuing volatility of the industry generally, we believe there is considerable uncertainty that our budget will be achieved in the current financial year,” Jamieson said in the text of a speech at the annual general meeting. “Significant one-off corporate costs arising from the Aspen bid and other non-recurring activities will also impact on the result.”
Sigma posted a loss of A$389 million in the year to Jan. 31, 2010, because of writedowns, including A$375.1 million for Arrow. Earnings may have been hurt by government-mandated price reductions to generic drugs and laws that require pharmacists to disclose the prices at which they buy medicines from distributors such as Sigma, Dan Hurren, a Sydney-based analyst at UBS AG, said in March.
“It’s going to get worse before it gets better,” Hurren said today. “Everyone we’ve spoken to in the generics industry says discounts are accelerating very rapidly.”
Sigma lost 4.8 percent to 50 Australian cents in Sydney trading, reducing its market value to about A$589 million. That’s the biggest decline for the shares since May 25. The stock fell by a record on March 31 after Sigma reported the full-year loss, erasing A$513 million from its market capitalization.
Durban, South Africa-based Aspen offered on May 21 to buy Sigma’s outstanding shares for 60 Australian cents each, or a total of A$708 million, and assume net debt of A$785 million. The Australian company said today that due diligence continues and advised shareholders to take no action.
Jamieson is also chairman at Mesoblast Ltd., a Melbourne- based developer of stem-cell treatments. Sigma said June 16 it appointed Mark Hooper, a former finance chief at the company, as chief executive officer to replace Elmo de Alwis from September. The drugmaker has yet to name a replacement for Chief Financial Officer Mark Smith, who quit May 13.
Products under the Herron brand range from vitamins to nappy rash treatments to paracetamol, once promoted by Hazel Hawke, the ex-wife of former Australian Prime Minister Bob Hawke.
“They’re not going to get a good price for it,” Hurren said. “They’ve really underspent on that business, so it’s not well-positioned.”
Sigma doesn’t break out earnings at Herron, part of its pharmaceuticals business. The unit accounted for A$716 million, or 22 percent of revenue in the year ended Jan. 31. The company’s other main business is a health-care division that distributes medicines to drugstores and owns the Guardian and Amcal pharmacy brands.