I did some home work today and here's my take:
1) Given WOCKHARDT has been under serious financial troubles, I don't
think WOCKHARDT will (if ever) launch its generic version of Flonase
in the US any time soon. As in the past, WOCKHARDT always confidently
anounced the immediate lauch or the near-time launch of its newly FDA
approved ANDA drugs. This time I didn't see any anouncement of its
generic flucticasone launch timeline. It only said that the drugs
will be manufactured in it's US facillity in Morton Grove, Illinois.
This means (if they will lauch) they can not take advantage of the
cheap labor market in India, so it may not be cost effective to be
competitive. Plus, the manufacturing of this liquid drug requires
very diffifcult, complex processes and sophisticate equipments. Are
they ready there?
2)Even if it wants to, The creditors may have the power to not allow
it because of the high risks of loosing money, given there are
already 3 manufacturers of this generic drugs, where HITK occupies
more than 50% of the generic market for this drug.
3) If it will survive its own financial and debts problems, by then
it will be too late in the game and it may not be a good business
decision for it to launch this drug.
I think this big price drop is just an immediate market over-reaction
when investors didn't have enough time to do their research. The
price will go back up when Investors spend some time to study all the
possibilities. Plus, if Wockhardt got a new ANDA approval, we may
hear some for HITK soon. HITK is still a solid company with
experienced, smart management teams,. It's a long-term keeper. I
will buy some more if it goes lower.
Your honest, serious opinion please - no B.S.
You certainly have given us some nice information and theories.
But first I must point out one thing - you say hitk has 50% of the flonase market - no. A year ago, they said they had 15%; about 4 - 5 months ago they said about 30%. The articles today said that flonase had sales of 580 million. Hitk is NOT selling 290 million (or at such a rate). We are more like 100 million, which is about 17 - 18 per cent (hitk said that these sales numbers are a little underestimated, and the hitk prices may be "wholesale", but that won't mean much).
I also don't know how much reliance I can put on your articles that suggest financial troubles. They certainly seem to be having pressures. And their financially statements (summarized on yahoo but old), and although they show losses, also show some equity.
Otherwise, I think you make some valid points. Remember, hitk bought a machine last year that cost some funds. Further, there is a shortage of components, and, if Wockhardt is trying to buy them on credit, a customer may be leary if they are having trouble. And customers may be leary of signing up with a company with financial troubles which translate into trouble in delivering, particularly when a reliable source is important.
If, and this is a big if, Wockhardt sells very little, if any, this could turn into something good - good because we will have, effectively, just three generics, although it will be officially 4, which will scare away others because who wants to be 5.
Wouldn't that be something - we see 20 plus in sales this pending quarter, 30 plus the next two, and so on.
I think $580 million was the total sales of both brand and generic.
The 50% number is my rough guess on the total sales of the generic
only, given the other players didn't do well in the past quarters. I
believe with the agressive cost cutting efforts from the government
and healthcare insurance companies, the sales of generic, in general,
will grow at the faster rate in the up-comming many quaters.
Zolpimist is an excellent example, most insurance companies requires
high co-pay, prior authorization and quantity limit. That's why
Zolpimist doesn't sell well. Zolpimit can become a big hit product if
HITK will lower the price enough that insurers see it will save them
money in the long run due to the effectiveness of the drugs, which
inturn reduces the chance of further complications arose from
The information about Wockhardt's financial troubles is real, as I
spent some time doing my research. You can confirm this with your own
research. Even Wockhardt website posts the news about their
financial issues. Yahoo doesn't provide much and is not reliable.
Also, don't forget that, beside price, production capacity and
reliability plays an important role in winning and maintaining large
Good luck on your investment decision.