U.K. Pet Drugmaker Dechra Sparks Share Tumble With Brexit Plans

(Bloomberg) -- Dechra Pharmaceuticals Plc, a maker of animal medicines, is looking at setting up dual testing facilities in the U.K. and European Union in preparation for Brexit, a sign companies are stepping up their contingency plans as politicians stumble over a future deal.

The veterinary company sparked concern on Monday when it said it may need to spend as much as 2 million pounds ($2.6 million) in the event of a hard Brexit, in part to duplicate testing and move product registrations to the EU to avoid trade barriers. The stock fell as much as 21 percent in London trading, the steepest decline in more than two years.

Most companies in the U.K. are preparing contingency plans as the British government and EU officials struggle to reach a deal over what their future relationship will look like. Regulatory alignment and the avoidance of tariffs on goods traveling between the two regions are key for business, with a number of companies stockpiling goods for a worst-case scenario. The U.K. and EU are now looking at a November deadline for an agreement.

“The group has implemented a hard Brexit mitigation plan," Dechra Chief Executive Officer Ian Page said in a statement. “Our primary focus is on addressing Brexit risk in our supply chain.”

Dechra said it will have to invest 200,000 pounds in capital upfront to set up a laboratory testing facility with staff in the EU, with another 1 million pounds in one-time expenses. If EU batch testing is required and the company faces increased customs duties, it forecast another 800,000 pounds in additional operating costs.

“Contingency costs in case of a hard Brexit could impact the bottom line in 2019 and beyond,” said Chris Glasper, an analyst at N+1 Singer Ltd. in London.

The stock traded at 2,654 pence at 12:18 p.m. in London, giving the company a market value of 2.7 billion pounds.

“Despite the possible additional administrative burden, our distribution model can adapt to changes in tariffs and duties,” Page said.

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