ASX pharmacy networks are looking to follow in the footsteps of supermarkets, with panic-buying due to the coronavirus crisis causing a surge in demand. In an update to the market, Australian Pharmaceutical Industries Ltd (ASX: API) reported that the company has experienced unprecedented demand in the month to date.
Here’s a closer look at how pharmaceutical companies on the ASX have performed and the outlook for the sector during this bear market.
What did API report?
API is the listed owner of Priceline Pharmacy chains, with a network of nearly 500 stores across Australia. In the update, API informed the market that the company has seen demand during March surge by more than 50% as consumers stockpile medications. The COVID-19 pandemic has seen unprecedented demand for PBS (Pharmaceutical Benefit Scheme) and other medications.
Although API reported improved like-for-like sales throughout its pharmacy network, the company was unable to provide a profit guidance given the fluid nature of the pandemic. API pharmacies are likely to remain open during any shutdown given their essential role in the healthcare system.
API elaborated on the company’s ability to ensure an ongoing supply of medicines during times of crisis, citing the measures and contingencies it put in place during the bushfire emergency to ensure the delivery of vital medications to fire-affected areas.
The API share price is currently trading more than 4% higher today.
How have other pharmacy networks performed?
Sigma Healthcare Ltd (ASX: SIG) and AFT Pharmaceuticals Ltd (ASX: AFP) are 2 other notable pharmaceutical networks listed on the ASX. Both companies have reported an increased demand for product, especially for cold and influenza medications.
In order to ensure that there is an ongoing supply for medicines in the community, the government has had to intervene by placing purchase limits on pharmaceutical products. Under the restrictions, pharmacies have been instructed to dispense only 1 month’s worth of prescription medicines and limit the purchase of some over-the-counter products.
Should you buy?
Pharmacies are considered an essential service and will most likely remain open for business if there is a nationwide lockdown. Although pharmaceutical companies may be experiencing a surge in demand, investors should exercise caution when selecting stocks to invest in.
For example, Sigma has reported an increase in demand, however the company recently reported a full-year loss of $12.33 million, in comparison to a profit of $36.52 million in January 2019. I think a prudent strategy would be to compile a larger watchlist of pharmaceutical and biotech companies and let positive price action dictate before making an investment decision.
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Motley Fool contributor Nikhil Gangaram 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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