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.

Craving more input? Start by adding Hi-Tech Pharmacal to your free and personalized Watchlist, so you can keep up on the latest news with the company.

The article Why Hi-Tech Pharmacal Shares Popped originally appeared on Fool.com.

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