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 prescription and over-the-counter generic drug producer Hi-Tech Pharmacal (NAS: HITK) are going downhill quickly today, losing as much as 21% following news of a competitor's drug being approved by the Food and Drug Administration.
So what: According to reports, Indian drug company Wockhardt today received FDA approval to market fluticasone, a corticosteroid used to treat allergic rhinitis and a generic version of GlaxoSmithKline's (NYS: GSK) Flonase. "What's the problem?" you might be wondering. Hi-Tech Pharmacal also markets a generic version of fluticasone in the United States. In fact, fluticasone accounted for $23 million of the company's $56.9 million in total revenue during the second quarter, so today's approval could indeed be pivotal.
Now what: The great thing about generic companies is that they have a seemingly endless supply of drugs falling off patent. Unfortunately, when you sometimes have multiple companies competing for the same bone, you run into an issue like Hi-Tech has today. It remains to be seen how badly Hi-Tech's revenue stream will be affected by today's FDA ruling, but clearly this isn't good news and I completely understand the move lower. As of now I'm more than happy waiting this one out on the sidelines.
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At the time thisarticle was published 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. Motley Fool newsletter services have recommended buying shares of GlaxoSmithKline. 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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