Pharma Stocks Outlook for the week – 04 to 08.04.2016
Bias
weak; Aurobindo Pharma likely to gain
( www.rupeedesk.in )
Stocks
of pharmaceutical companies may continue to trade with a negative bias next
week on
persisting
regulatory issues, but Aurobindo Pharma is likely to buck the trend due to
product approvals in the US. Aurobindo Pharma, which became a Nifty 50
constituent from yesterday, has received eight product approvals in the US
since Mar 1. Aurobindo and Sun (Sun Pharmaceutical Industries) are the only
stocks that positive in pharma. Overall, the sector is seen under pressure
because of increasing incidence of regulatory action on pharma companies'
plants.
During
Jan-Mar, shares of pharma companies were the worst hit, as investors
aggressively offloaded
these
shares on account of rising regulatory troubles. Over the last few days, the US
Food and Drug
Administration
has issued Form 483 on Lupin's Mandideep and Goa units, Natco Pharma's Manali
and Kothur units, and Alembic Pharmaceuticals' Panelav unit, due to deviations
from good manufacturing practices. Though the observations on Lupin's
facilities are not related to data integrity, there is concern over delay in
product approvals.
We
believe that in the near term, the (Lupin) stock is likely to remain range
bound till the US FDA
concerns
subside, especially since a few observations are repetitive in nature.
Moreover, it is little
worrying
that it is the second plant under the US FDA scanner in a short period of time.
There is not
much
strength in Lupin. Even if we see some rebound after recent losses the upside
is not sustainable.
On
Natco Pharma, Our analysis of Form 483 issued on Kothur facility lends comfort
that its resolution will not disrupt approvals. There are no data integrity
concerns and all observations pertain to Standard Operating Procedures. Hence,
we believe new product approvals for US will remain on track. Natco Pharma is
our top pick in the mid-cap pack. Concerns over the recent government order
banning 344 fixed-dose combination drugs is also likely to weigh on the sector.
The
Delhi High Court, while extending the stay on government ban on fixed-dose
combination drugs, has asked the Centre if efficacy of the drugs was the only
ground on which the court should hear the case. The next hearing of the case is
scheduled on Thursday. Among other factors, investors will keep an eye on the
Reserve Bank of India's monetary policy, scheduled for Tuesday.
