The lifting of patent protection on GlaxoSmithKline’s (GSK) asthma treatment Advair continues to be a poisoned chalice for generic healthcare firms hoping for a pay-off.
After regulatory approval struggles for UK-listed Hikma Pharmaceuticals (HIK) and Vectura (VEC), now treatment delivery device designer Consort Medical (CSRT) has also come a cropper following delays in the approval process of partner Mylan.
That news has hammered Consort's share price, which has slumped nearly 21% to 777p, valuing the business at around £380m.
2019 PROFIT HIT COULD BE JUST THE START
Mylan's setback in getting an FDA OK for its Wixela alternative to Advair is expected to knock £3m off Consort's pre-tax profit this year, and the issue could easily spill into 2020 or beyond.
Analysts had been anticipating Consort to put up pre-tax profit of £40.9m this year to 30 April 2019, according to consensus. Which now means something like £38m is more likely.
That lowered target seems, for the time being, to be doable, based on today's half year results to 31 October. Consort turned in underlying pre-tax profit of £19m, up 6%, on flat sales of £152.5m.
INVENTORY BUILD UP HITS DEMAND
Consort's problem is that it has delivered lots of inhalers to Mylan on the premise of Wixela being launched to consumers. With that launch now delayed, it means a log-jam in demand for more Consort inhalers until the existing stock held by Mylan has been run down.
Mylan hopes to win FDA approval in the ‘near future,’ but investors have been given nothing more concrete.
The FDA had previously blocked the launch of Wixela in in 2017, asking for various changes to the treatment to be made. Investors must now be concerned that those remedies have not proved sufficient, although we'll have to wait and see.
Consort is also likely to incur approximately £9m of one-off charges this year as it tries to focus manufacturing on more profitable products.
