No matter how bad the Department of Justice's investigation into possible price collusion by generic drug makers turns out for the industry, the huge drop in generic and other pharma and biotech shares on Nov. 3 after reports that criminal charges are pending is unwarranted, said some analysts. That may mean investors have a buying opportunity in select companies, given that the estimated $8.5 billion in market cap initially destroyed after the news far exceeds any plausible damage that will be inflicted by the feds.
That's not to play down the threat the investigation poses to anyone caught participating in a price fixing scheme--the DOJ takes that kind of illegal activity seriously, and the possibility of huge fines and prison sentences can't be dismissed.
However, "it is hard to imagine a scenario in which the financial penalties, if any, would end up approaching the ~$8.5bn in market cap that was wiped out," Gregg Gilbert, Deutsche Bank Group specialty pharmaceuticals analyst, said in a research note Friday.
The likelihood that Thursday's plunge was an overreaction seemed to be gaining credence by the market. Shares of the 12 generic drug makers reportedly targeted by a DOJ investigation that plunged only the day before had by and large inched upward through late afternoon trading Friday.
Among the shares enjoying small upticks were Mylan (MYL) , which rose 2.53%, to $35.01; Teva Pharmaceutical (TEVA) , risng 2.50%, to $40.18; Endo International (ENDP) , up 1.61%, to $14.87; Lannett (LCI) , up 3.48%, to $17.85; Impax Laboratories Inc. (IPXL) , at 17.57, it was up 6.52%; and Taro Pharmaceutical (TARO) , which climbed 2.86%, to $96.36. Shares of Allergan (AGN) , started heading upward too, rising to $195.18, up 3.37%.