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Why Psychemedics Corporation (PMD) Shares Crashed 20.5%?

by | Mar 6, 2019

Psychemedics Corporation (PMD)

M.Cap: $84 million

Psychemedics Corporation is the world’s largest provider of hair testing for the detection of drug abuse.

Reason for the stock price crash

The shares of Psychemedics fell 20.5% after the announcement of fourth quarter and year-end financial results for the period ended December 31, 2018. The stock price crash could be due to the potential risk of cancellation of the agreement with its distributor in Brazil which accounted for 31% of 2018 revenue. PsychemedicsBrasil, the company’s independent distributor in Brazil, has had 55% of its shares acquired by Instituto Hermes Pardini SA, a provider of medical and diagnostic services in Brazil. The company is discussing whether the distribution agreement which expires in July 2019 would be terminated or extended. The company added that it is also exploring additional options in Brazil.

Other notes

• For the fourth quarter of 2018, revenue increased 2% to $9.9 million and net income fell to $0.9 million from $2.4 million for the comparable period last year.
• The CEO argued that excluding currency rate fluctuation, 2018 revenue would have been up 13%, against the current growth rate of 7%.

10-K

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