Yes generics area is tough business area at the moment for Sigma. Overseas generic Companies like Sandoz,Ranbaxy etc etc are marketing ruthlessly (and can afford to) on very small margins or in fact negative margins. The government is overseeing this farcical affair as it will save them dollars as they pull back generic prices. However, it is causing Sigma substantial pain at the moment. The Goverment seems prepared to make one of the very few Australian Owned Pharmaceutical Companies suffer. Sigma should be lobbying the politicians hard to support local production and employees. Some of the overseas companies are in my opinion breaking trade practices laws (preditory pricing) to destroy their competitors....the government is doing nothing of course in these tough economic times. Giving products away to keep other companies out is preditory in my opinion.
If a generic company is only in the "me too" game it may as well get out of it. You need to be the first one out with an off patent blockbuster regularly. What happened to Sigma's Efexor equivalent?
Sigma generics will just need to hang in there for a while longer until the current mad house situation calms down. Next year there will be a lot less generic companies in the mix I feel.
However, Sigma will still do ok in the medium to long term. Pharmaceutical Wholesaling is still the cash cow and it has now probably the best manufacturing set up of any pharmaceutical company in Australia. It has a substantial range of products which atract good margins. So apart from the generic area it has plenty scope for solid earnings.
There are no other Australian Full-line Wholesalers who has anywhere near the growth capacity that Sigma has to take advantage of the better years ahead (as the population ages). "Thats what I'm talking about"
If the Sigma share price drops any lower I'll consider selling the house to add a lot more to my current holdings.
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