Why Hi-Tech Pharmacal Shares Popped
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 generic drug maker Hi-Tech Pharmacal (NAS: HITK) exploded higher by as much as 16%, after reporting better-than-expected second-quarter results.
So what: For the quarter, the company noted a 1% improvement in year-over-year revenue, to $57.5 million, as EPS declined 35%, to just $0.66, from $1.04 in the year earlier. Sales of its best-selling drug, Fluticonase Propionate, a generic version of GlaxoSmithKline's (NYS: GSK) allergic rhinitis treatment Flonase, fell 6.5%, to $21.5 million, and Hi-Tech Pharmacal was hurt by supply disruptions due to Superstorm Sandy. On the plus side, its ECR Pharmaceuticals segment witnessed a 59% boost in sales, primarily due to higher sales of Bupap and Tussicaps.
Now what: As expected, increased competition from an Indian peer further reduced sales of the drug that led Hi-Tech to its greatest success - Fluticonase Propionate. I'm relatively certain that, as a generic drug maker, Hi-Tech Pharmacal will find other drugs in its pipeline to step up and fill the growth void, but it's going to be multiple quarters before this happens. Even though Hi-Tech sailed by EPS expectations by $0.13 this quarter, the simple fact that sales growth will likely be flat next year is enough reason to take a step back and avoid this company altogether.
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The article Why Hi-Tech Pharmacal Shares Popped 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.