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What: Shares of over-the-counter drug maker Hi-Tech Pharmacal
So what: You know the old story of not being able to hit the broad side of a barn? That adequately sums up Hi-Tech's first-quarter results. For the quarter, Hi-Tech's revenue dipped by 7% to $52 million with the company reporting a steep 58% drop in net income to $0.44. Wall Street had been looking for revenue north of $57 million and a profit of $0.68! Hi-Tech had a trio of excuses for the shortfall, including the removal of antihistamine, Lodrane, from market shelves, the introduction of another version of generic Flonase, an allergic rhinitis treatment produced by GlaxoSmithKline
Now what: Hold onto something, because it actually gets worse. Not only is it having trouble with increased competition and pricing decreases in some of its key generic drugs, but its operating expenses rose to 51% of total sales from 41% in the year-ago quarter. Hi-Tech blamed this on those aforementioned lowered drug costs.
What a mess! Management tried their best to spin this around as a company with a robust pipeline, but I'm just not seeing it if their key products are already heading in the wrong direction. On paper Hi-Tech is relatively inexpensive at 10 times forward earnings, but after today's miscues, I'd hardly call it an intriguing value play.
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