Pharma Stocks Outlook for the Week – 20 to 24.06.2016
Sideways; bias seen weak
on regulatory woes
( www.rupeedesk.in )
Stocks of pharmaceutical
companies are seen trading range bound with a negative bias next week due to persisting
regulatory issues. While the overall trend for pharma sector remains weak, movement in stocks is
likely to be largely range bound next week on caution ahead of the referendum on Thursday to
decide whether the UK will continue to be a part of the European Union or not. Pharma stocks may
gain in line with broader market if the UK decides to stay in the EU but the upside potential is
seen limited. Since November, we are seeing pressure on pharma and the weakness is likely to
continue. There are no signs of a possible recovery on charts. Aurobindo Pharma and Sun
Pharmaceutical Industries look weak. Lupin and Cadila Healthcare are expected to remain under
pressure but Dr Reddy's Laboratories could see some rebound. Many companies in the sector
are facing troubles with global regulators, particularly the US Food and Drug Administration, due to
violation of quality norms at their manufacturing plants. This has hurt
earnings of all such companies,
which is weighing on investor sentiment. Domestic sales of pharma companies have also taken some hit
due to government's ban on 344 fixed-dose combination drugs and
increased number of
products under the National List of Essential Medicines.
Pharma companies are
grappling with a number of issues such as pricing pressure on generic drugs in the US, delays in
product approvals, currency headwinds in emerging markets and regulatory scrutiny. According to a
joint study by the Associated Chambers of Commerce and Industry of India and TechSci Research,
India's pharmaceutical products' exports may see a compounded annual growth of just 8% during
2015-20, compared with a CAGR of around 15% in 2010-14 due to lower exports in the US, the
largest market for Indian pharma companies.
