Consolidation of operations is just not enough to get the share price to jump; there is more than meets the eye
The share price of Wockhardt has seen a handsome rise. It has gained by more than 30 per cent over the past three months.
On the one hand, there have been speculations that the management would want to sell off its stake in the company. On the other, there have been signs of a revival in its earnings profile that have boosted outlook.
Wockhardt has posted a consolidated net loss of Rs 116.28 crore for the June 2010 quarter, against a net loss of Rs 189.87crore for the corresponding quarter last year. Net sales of the company, on a consolidated basis, decreased marginally by 3.41 per cent to Rs 921.64 crore for the June quarter, against Rs 954.15 crore for the corresponding quarter in 2009.
Going ahead, the company has received the final approval from the United States Food & Drug Administration (US FDA) for marketing Metoprolol Succinate Extended-Release tablets – in 25mg, 50mg, 100mg and 200mg – that are used for treating high blood pressure, long-term treatment of chest pain, certain types of heart failure and to stabilise the heart rhythm in conditions in which the heart is beating too fast or in an irregular rhythm.
According to industry experts, Metoprolol Succinate is the generic name for the brand Toprol XL, which is marketed in the US by Astra Zeneca. The product (Metoprolol Succinate Extended-Release tablets) is one of the most widely prescribed hypertension and angina drugs valued at over $1.1 billion in the US, said analysts.
The termination deal inked with Abbott in July 2009 did not go well with the investors. Now, Wockhardt will have the second generic version of this technically demanding product in the US market, they said.
Given this, and the overall dismal performance over the last one year, the strong performance comes on the back of alignment rather than strong growth prospects. The spike in the share price, does increase expectations of deals and stake sales, as overseas predators are on the move and the company is a prime target.