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Nifty Pharma index on Tuesday touched its 52-week low of 10,353.9 led by heavyweights Lupin and Cipla whose stock prices hit 52-week low of ₹1,280 and ₹494.55, respectively.
Lupin’s clarification Lupin’s shares tanked 14 per cent intraday on reports that its Madhya Pradesh unit was inspected by US Food & Drug Administration during February 2-19 and the agency’s observations are serious in nature. But the shares recovered later on and closed down 6 per cent after the company’s clarification that observations are minor in nature and it does not expect any disruption to product supply from the unit.
Madhya Pradesh manufacturing facility is reportedly the second largest revenue contributor to Lupin’s US business after its Goa plant. The company’s Goa plant has also been inspected by the USFDA earlier, according to reports.
Inspection galore Stock prices of frontline pharmaceutical companies dropped around 14 per cent in the last one year. Nifty Pharma index is down 5.5 per cent in the same period. Price-to-earnings multiple of Nifty Pharma index, which shot up to 60.69 times on January 1, 2016, from 35.11 on January 1, 2015, has crashed to 40.31 as of Tuesday.
“Every fortnight, one or the other large company gets inspected by US FDA . After Lupin, Sun Pharma, Cipla, Dr Reddy’s Laboratories and Glenmark Pharmaceuticals, were inspected and only Aurobindo Pharma is left now, said a market expert.
Market experts believe that the PE multiple is unlikely to expand in the medium term and the stock prices of large companies would continue to be under pressure as they are most exposed to the US market — an unavoidable but largest pharma market in terms of size despite all the regulations.
Besides Lupin and Cipla, companies such as Dr Reddy’s laboratories and Cadila Healthcare are also trading at their 52-week low levels.
Mid-cap pharma attractive In a scenario when series of large companies are coming under US FDA scanner, mid-cap pharma companies look like better bets.
G Chokkalingam, founder of Equinomics Research and Advisory, prefers mid-cap pharma companies such as JB Chemicals and Pharmaceuticals, Biocon and Unichem Laboratories, while Daljeet Kohli, head of research at IndiaNivesh likes Torrent Pharmaceuticals and Glenmark Pharmaceuticals and Industries.
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