Bloomberg News

Shoppers Drug Mart Tumbles on Bulk Drug Purchases: Toronto Mover

January 18, 2013

Shoppers Drug Mart Corp. (SC), the country’s largest pharmaceutical chain, declined the most in almost three years as some Canadian provinces said they will buy generic drugs in bulk.

The shares fell 5.2 percent to C$41.83 at the close in Toronto today, the largest one-day drop since April 8, 2010. The stock has fallen 2.3 percent this year.

Every province except Quebec and three territories plan to buy six generic drugs, which represent about 20 percent of publicly funded spending on such medicines in Canada, in bulk to lower prices, according to a government press release. One of the six drugs is Atorvastatin, a popular drug used to treat high cholesterol, marketed by Pfizer Inc. (PFE:US) under the brand name Lipitor. The new prices are set to take effect by April 1.

The provinces will pay 18 percent of the equivalent brand name drug price instead of the current 25 to 40 percent.

The lower price will put pressure on Shoppers same-store sales and eventually its profit, said Brian Yarbrough, a retail analyst at Edward Jones. He rates the stock a hold.

“It seems that every few years, they come out with more and more drug reforms,” he said in a phone interview from St. Louis. “This is the first time that all provinces have gotten together for drug reform. The headwinds and more negative news is driving down the stock.”

To contact the reporter on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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Companies Mentioned

  • PFE
    (Pfizer Inc)
    • $29.73 USD
    • -0.37
    • -1.24%
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