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It has been a mixed bag in terms of performance of pharma stocks in the last one year. Jubilant Life, Biocon and Caplin Point Lab gave top returns; up by 118 per cent, 104 per cent and 79 per cent, respectively. In contrast, the stock price of Wockhardt, Divi’s Lab and Marksans Pharma corrected the most; down by 45 per cent, 38 per cent and 31 per cent, respectively.
The initial public offerings (IPOs) by Thyrocare Technologies and Healthcare Global Enterprises – received a good response from investors last year.
Sales for the sector were up by 7 per cent y-o-y during the first half of FY17. Sales were up 30 per cent for Glenmark Pharma and 28 per cent for Lupin, while Wockhardt, Dr Reddy’s Labs and Torrent Pharma witnessed a drop in revenues to the tune of 82 per cent, 67 per cent and 60 per cent, respectively. Net profit for the sector was down by 11 per cent.
Biggies such as Ipca Labs, Biocon, Sun Pharma posted higher growth in net profit during the first half of FY17; up by 208 per cent, 177 per cent and 131 per cent, respectively.
Many pharma stocks are on the back foot due to stringent regulatory scrutiny by the US drug regulator FDA as well as slowdown in US generic sales. Moreover, there are concerns over pricing – all of which weighed heavily on their operating margins.
Issuance of warning letters and 483 observations from USFDA for key facilities led to correction in the local share prices. The share price of Divi’s Laboratories hit a two-year low with issuance of the observation letter to its Unit II facility while that of Sun Pharmaceuticals took a hit when the Form 483 observations were issued to its Halol plant.
Competition in generic marketMoreover, increased competition in the US generic market coupled with delay in approvals and launches have impacted the sales growth of Indian pharma companies — having presence in the US.
Also, companies with domestic presence such as Sun Pharma, Dr Reddy’s Lab and Cipla witne ssed moderation in their growth due to the drug price ceiling directives.
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