Reuters reports that FDA will meet with officials from Barr Pharmaceuticals soon to discuss the possible approval of non-prescription sales of the Plan B "morning-after" contraceptive pill to women 18 and older. Richter is the supplier of the finished drug, which is distributed by Barr in the US
Our view: Barr share price surged 5% on the news yesterday but market finally calmed down and stock closed up 2%. Barr reports that it expects US$ 17.7m sales from Plan B this year, which could double next year if non-prescription status of the drug is given. Assuming that Richter will deliver finished form drug worth US$ 4-5m, and we see double the sum next year. Assuming 25% EBIT margin on this drug, the additional profit on the bottom-line could be US$ 1m, less than 1% of Richter's expected 2007 profit. However, market reaction might be a bit more positive seeing further turnover growth of Plan B beyond 2007.