Shares of Sigma Healthcare Ltd [ASX:SIG] are down 28.52% today.
Why did the SIG share price fall?
Sigma has decided to pursue legal action against My Chemist/Chemist Warehouse Group. The dispute claimed by Sigma centres on a breach of supply agreement, with the two retailers intending to source products from a new wholesaler.
Sigma estimates the outcome could result in a $5 million dip in revenue.
This comes on the back of a slow earnings season for Sigma during the 2017/18 fiscal year. A 5% drop from the previous year.
The supply agreement between Sigma and pharmacy retailers runs until June 2019. Sigma has stated its commitment to the partnership.
What now for Sigma?
After changing their name from Sigma Pharmaceuticals earlier this year, Sigma seems to want to be involved in more than just wholesaling. Especially as they wait for findings from the Pharmacy Remuneration Review report. Sigma is hoping for an increase in revenue based on new remuneration models.
Legal costs and a tenuous relationship have not inspired investor confidence, though. Sigma and investors alike will wait to see how court proceedings progress.
For Money Morning