Shares in Sigma Pharmaceuticals plummeted 18% and more yesterday after the company shocked the market by revealing it could lose up to 15% of its wholesaling revenue because of a change in strategy by a key supplier.
That was after Sigma had announced that US-based pharma giant Pfizer had decided to supply prescription drugs directly to pharmacies rather than through Sigma.
Sigma will still distribute Pfizer’s OTC & Consumer Products.
Pfizer has a number of block buster drugs, the best known probably being Lipitor, which lowers blood cholesterol.
The change will take effect from January 31, 2011, which is the end of Sigma’s 2010-11 financial year.
Sigma said the change would mean its wholesaling revenue would drop by 10-15% from that time.
The shares ended down 17.3% at 40.5c, a loss of 8.5c or around $100 million in market value.
The move by Pfizer would force it to "further reduce its customer trading terms", the company said on Monday.
Sigma said in a market update that Pfizer had told it of the change, which involved "expanding its current Pfizer Direct model".
"All prescription products (PBS and non PBS) will be delivered by Pfizer direct to pharmacies" from that time, Sigma said its statement to the ASX before trading opened yesterday.
"This program will by-pass the national full line wholesaling system.
"As a result of Pfizer’s decision, Sigma expects its annual wholesaling revenues to decrease by approximately 10-15 per cent from February 2011.
"However, the full impact on future earnings is being assessed.
"Given the significance of this change, combined with the impact of the recent PBS reform legislation, this will accelerate the need for Sigma to further reduce its customer trading terms," Sigma said.
Pfizer also announced it would not be seeking to participate in the Community Service Obligation (CSO) funding pool, Sigma said.
Drugs like Lipitor are coming off patent soon and Pfizer wants to establish relationships with the pharmacies in its role as a generic drug maker.
Logistics giant DHL already had some of Pfizer’s business in Australia, so it was an easy step away from Sigma.
And we still haven’t heard from the ACCC about the proposed sale of Sigma’s Pharmaceutical business to Aspen of South Africa for $900 million.
