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Sigma Pharmaceuticals at memoir low after No 2 executive resigns

SIGMA Pharmaceuticals chief financial official Mark Smith resigned with immediate effect today, prompting shares in the Australian unsalable article maker to hit a record low.

Already seeking a new supreme executive and facing an asset fire sale to fend off creditors, Sigma shares fell almost 7 per cent to a low of 34 cents adhering news that the second senior executive in less than a month was departing the meeting of friends.

The company said in a statement that Mr Smith, who joined Sigma in January 2008, was leaving to try to obtain other interests and Mark Watson, a partner at KPMG, will act for example an interim replacement.

The resignation comes after chief executive Elmo de Alwis handed in his attention on April 16, shortly after unveiling a $389 million net loss for the 12 months ended January 31.

It coincides with added straits on the company after this week’s federal budget included measures to keep clear $1.9 billion in government drug subsidies over five years, largely from the generic products that Sigma specialises in.

Analysts at Citi downgraded Sigma to "vend" from "hold" yesterday, estimating the budget changes could thin piece 10 per cent off Sigma’s earnings before interest, tax, diminution of value and amortisation.

But Deutsche Bank said the budget’s impact wasn’t the most pressing problem facing Sigma, instead pointing to impending asset sales needed to fall in with its debt obligations.

"The key risk for Sigma is the potential breach of the tight banking covenants or failure to generate full cash from asset sales and working capital improvements to meet obligation repayments," Deutsche analysts said in a note.

Mr De Alwis, who is staying without interrupti~ at Sigma until his successor is found, revealed at the annual. result that the company must pay its creditors $90m by November 30.

The association plans to sell assets to make the payment, which is piece of tough conditions imposed on Sigma by its banks after the visitor breached debt covenants in the last financial year.

The forced quality of the sale has prompted concerns that the banks are effectively in charge of Sigma and it may exist forced into a fire sale of assets, where it will struggle to realise their truthful value.

It hasn’t identified which assets it plans to sell, although speculation has centred on the underperforming Herron brand.

One algebraist, who declined to be named, said Sigma lacked a clear strategetics to turn its fortunes around.

Mr Smith’s departure will become greater concerns among already jittery investors about the company’s leadership for example it attempts to steer itself through the debt crisis, he reported.

But the analyst also said Mr Smith’s resignation, and that of Mr de Alwis in the sight of him, showed things were changing at Sigma.

"It’s altogether part of fixing up a company with problems," he afore~.

Shares in Sigma fell 2.5c, or 6.9 per cent, to 34c in in good time trade in a higher overall market, before recovering slightly to 34.5c ~ the agency of mid-afternoon.