Australia's Sigma Cuts Outlook, Shares Plunge

Australian drug maker and distributor Sigma Pharmaceuticals cut full-year forecasts for the second time in three months on Thursday as regulatory changes hit profits, sending its shares plunging as much as 15%.

Sigma, which failed in a A$1 billion (US$855 million) bid for a rival earlier this year, also reported a 27% drop in first-half net profit as expected, partly due to lower prices for some products.

Sigma shares, which have already tumbled 30% since early July when it first cut its forecast, fell as much as 15% before recovering slightly to trade 7.1% lower at A$1.37 in the morning session Thursday.

The company blamed changes in the allocation of funds under a government funding pool designed to ensure that people across Australia have access to all government-subsidized medicines at affordable prices.

The company has also faced increased competition from other suppliers of generic drugs.

Sigma said it now forecast full-year underlying net profit of A$88 million (US$75.2 million) to A$93 million, down from an underlying A$104.6 million profit last year.

In July, it forecast earnings in line with last year, a downgrade from March predictions for growth of 10-15 percent.

Sigma said the reduced forecast was due in part to some deferred product launches into the next fiscal year, and the underperformance of the Herron pain reliever brand, where it has appointed a new sales team.

Net profit before one-offs fell to A$36.6 million for the six months to July 31 from A$50.1 million a year earlier.

That was in line with the company's forecast and with a consensus estimate of A$36.3 million in a Reuters survey of four analysts.

Sigma cited increased competition and discounting from generics suppliers for a decline in first-half sales of some generics, though overall sales revenue rose 13.8%.

Analysts have also cited concerns about increased competition for generic products.

Sigma has been rebuffed in recent attempts to participate in consolidation in Australia's healthcare sector.

It made an unsuccessful A$1 billion bid for some businesses of rival Symbion Health in June and an unsuccessful approach to rival drug wholesaler Australian Pharmaceutical Industries last year.