Shares of generic drugmakers already believed to be under investigation for possible price fixing dropped sharply after another major industry player was added to the list of firms under suspicion.
The investigation is in relation to drug pricing in the pharmaceutical industry. "As has been previously disclosed by a number of companies, the Antitrust Division has been looking at industry-wide pricing practices. The company is taking this investigation seriously and is cooperating with the appropriate authorities," Perrigo said.
Perrigo shares fell just over 5%, or $3.88 to $72.35.
On Wednesday the shares of other companies that had previously announced investigations and thought to be subject to the investigation fell also. Mylan(MYL) - Get Report fell 2.57% to $37.19, Teva(TEVA) - Get Report was down $1.39 to $30.72, Endo(ENDP) - Get Report down 6.5% to $10.89, Lannett(LCI) - Get Report fell 18.6% to $22.10, Impax (IPXL) down 6.29% to $13.02, Dr.Reddy's Laboratories(RDY) - Get Report down 27 cents to $40.58 and Taro Pharmaceutical(TARO) - Get Report falling $1.42 to $115.73.
Wells Fargo Securities analyst David Maris observed in a note Wednesday that Perrigo had not previously mentioned as tied to the DOJ investigation. "Perrigo had not previously been mentioned in reports tied to the investigation, nor had Perrigo included a disclosure in its prior SEC filings related to an investigation," he wrote.
That the net may be widening is not good news for generics generally. The possibility of eventual penalties across the industry broadly adds another layer of gloom over a business that already is under severe pricing pressure.
"We continue to think that the general pricing environment in generics is concerning, and we continue to caution investors that we do not believe things are poised to rebound soon," Maris wrote.
Gary Nachman, analyst at BMO Capital Markets, wrote in a May 2 note about Lannett that, "The generics industry has been a very challenging sector; macro headwinds are expected to persist."
Take a look a Real Money to find out why Teva is ready for a rally.