Pharma shares catch the flu on Donald Trump’s remarks

Our Bureau Chennai | Updated on January 12, 2018 Published on January 12, 2017

US President-elect makes strong remarks on pricing, tougher working environment

Pharma stocks were among the worst hit on Thursday following US President-designate Donald Trump’s strong remarks on pricing of medicines, indicating a tougher working environment for Indian drug firms in the US, going forward.

Index slips over 1% intraday

The Nifty Pharma index slipped 0.60 per cent to 10,401.75. Earlier at the start of the session, it had slipped to as low as 10,230.10.

Of the 10-stock Nifty Pharma index, only two — Cipla and Piramal Enterprises — closed in the green. Lupin was the worst affected, falling 1.82 per cent on the NSE, followed by Glenmark Pharmaceuticals (1.76 per cent), Cadila Healthcare (1.54 per cent) and Aurobindo Pharma (1.49 per cent).

Donald Trump emphasised on getting the US drug industry back to home shores.

“Our drug industry has been disastrous. They’re leaving left and right. They supply our drugs, but they don’t make them here, to a large extent. And the other thing we have to do is create new bidding procedures for the drug industry because they’re getting away with murder,” he said.

Mustafa Nadeem, CEO, Epic Research Pvt Ltd, said with focus now on bidding drugs and a new procedure, companies from the pharma space could take a hit. A number of challenges may crop up for pharma firms with the end of Obamacare.

According to broking firm Sharekhan, the US part of business of companies such as Sun Pharma, Aurobindo Pharma, Glenmark, Cadila Healthcare, and Dr Reddy’s Labs, among others, could continue to witness pricing pressure, going forward. “We would (have to) wait for more clarity on the changes being initiated in the existing policies,” it added.

“It is too early to comment on this as details of Trump’s plans for pharmaceutical companies are not very clear,” a Chennai-based analyst said. According to Ramesh Chordia, an independent analyst, though pharma shares have run up quite sharply, “I don’t see Trump forcing healthcare companies to shift manufacturing units to the US as that will take away the cost advantage for US consumers,” he added..

‘Muted revenue growth’

Meanwhile, global investment banking firm Jefferies, said it expects the pharma sector to report muted revenue growth for the December quarter due to weakness in US business, inspections by the USFDA (health regulator) and pricing in the US market.

Published on January 12, 2017
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