Diplomat Pharmacy's stock plunges to record low after 'going concern' warning

Shares of Diplomat Pharmacy Inc. fell 50% after the specialty pharmacy company disclosed a "going concern warning" as it reported wider-than-expected losses for a third consecutive quarter.

Shares of Diplomat Pharmacy Inc. fell 50% after the specialty pharmacy company disclosed a "going concern warning" as it reported wider-than-expected losses for a third consecutive quarter. In its third quarter earnings release, Diplomat warned that it may not be able to meet the net leverage and interest coverage ratio covenants in its credit agreement for the end of the year. This prompts Diplomat's lenders to terminate funding of its credit line, accelerate debt repayments, or foreclose on assets if its "mitigating" plans, including the potential sale of businesses or the whole company, are not executed in time. Separately, Diplomat reported a net loss of $177.3 million, down from net earnings of $169,000 a year ago. This includes a $156 million charge associated with its PBM business from a lower anticipated win rate, a lower expected rate of renewals, and a reduction in rebate value. Diplomat said that, as of November 28, it will no longer participate in a significant group of specialty and retail networks with one of its largest payers, as they were unable to reach an agreement to renew network participation rates. The company said that group of networks comprised the "vast majority" of the specialty pharmacy business it conducted with that payer. Diplomat stock has fallen 77% year-to-date, while market benchmarks SPDR Health Care Select Sector and the S&P 500 Index have risen 10.2% and 23.3%, respectively, in the same period.