Just two months ago, investors were seen flocking at Ferozsons stock counters as if there was no tomorrow! Led by the staggering demand, its stock price kissed a high of Rs675 per share with its average monthly turnover soaring by over five times during December 2014. Surely, those who managed to get their hands on the stocks must now be standing in good stead. But, the madness seems to be losing steam these days.
It all started when Ferozsons joined hands with Gilead Sciences, USA to serve as its exclusive business partner for the treatment of Hepatitis C and Hepatitis B infections in Pakistan. And the registration of Sovaldi in Pakistan, which is Gileads drug for treatment of Hepatitis C and considered to be a revolutionary treatment in Pakistan, brought further excitement in company's stock performance.
Since November 2014, its stock price has sky-rocketed by nearly 71 percent, vis-à-vis a modest gain of 13 percent generated by the benchmark KSE100 index. Thanks to bulk of the gains accrued between November-December 2014 as the current month has remained lull for Ferozsons. This is evident as average volumes during the ongoing month have dropped by nearly 44 percent, while its stock performance has underperformed the benchmark.
Here, the culprit has been the unresolved conundrum on the pricing of Sovaldi drug. Mind you, Ferozsons cannot sell the drug unless the pricing is approved by the pricing committee. Pricing approvals of a good number of 200 drugs (including Sovaldi) are pending with the pricing committee, according to industry sources.
"Pricing committee had approved the summary and sent it to the Secretary for final approval. Thanks to our systems ineffectiveness, the summary has been sent back to the pricing committee for re-assessment recently. Hence, the pricing approvals are being delayed. Still, we are hoping to see some progress on the matter soon", lamented a company official in a conversation with BR Research.
Some investors have expressed their apprehensions about the unnecessary delays arguing that it runs the risk of the drug formula getting generic, hence shaking company's competitive advantage. "The risk of being generic is always present but there have been cases in the past where the consequences of using generics did not prove to be effective hence people were compelled to revert back to the original formulae. So quality consideration and the sole distribution right will give Ferozsons an edge over others, the source added.
Reportedly, the proposed pricing of the treatment in Pakistan has been set below the selling prices in USA. Though it raises questions over the drugs financial viability for Ferozsons, the lower rate has been set on purpose to make it affordable in Pakistan. In any case, the situation is a win-win for Ferozsons as it will continue to reap a specified margin from Gilead.
Given these considerations, there is not much to worry for investors of Ferozsons in the long term! Though, one can expect the stock to remain lackluster on local bourse until some progress is seen on the pricing front.
Comments
Comments are closed.