Why the Australian Pharmaceutical Industries Ltd share price is plunging

Healthcare stock Australian Pharmaceutical Industries Ltd (ASX: API) is at the top of the S&P/ASX 200 declines today after the release of its earnings results last week revealed a flat revenue and shrinking sales in its Priceline brand.

Credit Suisse has placed a neutral rating on the stock with the broker saying the short-term outlook for the company is “challenging” and Australian Pharmaceutical Industries shares are down 4.2% at the time of writing to $1.36.

The broker believes the conversion of independent pharmacies to the Priceline model could see an increase in operating leverage but PBS reforms could prove problematic as some manufacturers choose to bypass wholesale distributors and go direct to pharmacies.

Credit Suisse has reduced its price target on the stock from $1.62 to $1.50.

In the healthcare space Sigma Healthcare Ltd  (ASX: SIG) has also signalled struggles with PBS changes with its Hepatitis C medicines with Sigma shares down at the time of writing to 73c per share.

Mayne Pharma Group Ltd (ASX: MYX) shares have recovered slightly today with a gain of 0.7% to 69c per share at the time of writing after a week of falls.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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