Sales data, Obama push healthcare pulse on BSE

The healthcare index of the Bombay Stock Exchange rose to a 52-week high on Friday. A record increase in revenues from domestic drug sales and anticipation on a new healthcare Bill in the world’s biggest medicine market, the US, which is expected to encourage export there of low-cost medicines, were the reasons attributed.

The latest medicine sales data of market research firm ORG showed a record increase of 17.4 per cent in domestic pharmaceutical revenues in January. The monthly sales on a moving annual total (MAT) basis was Rs 41,000 crore. The sales growth was across the board and driven by higher revenues from the branded medicine business, analysts said.

The market is also awaiting introduction of the US Healthcare Bill to see if it encourages more contract research business and export of low-cost medicines. Healthcare tourism is another sector expected to be benefited. The US plans to introduce a law to make healthcare services affordable to all its citizens.
 

CHARTBUSTERS INTRA-DAY INCREASE IN HEALTHCARE STOCKS
Company	% increase  in share price
Apollo Hospitals	3.27
Cadilla Health	2.43
Dr Reddy’s	1.62
GSK	1.58
Jubilant Organosys	1.40
Glenmark	1.36
Cipla	1.18

While the impact of domestic sales growth will have an immediate impact on the healthcare industry’s fortunes, the US Bill may have a long-term effect, experts feel.

“The domestic pharmaceutical business is growing phenomenally. In January, domestic drug sales grew 17.4 per cent, against 17.2 per cent in December. I will not be surprised if the February growth touches 18 per cent,” said Ranjit Kapadia of HDFC Securities.

The average annual growth of domestic pharmaceutical business is in the range of 11 to 12 per cent.

According to Kapadia, the healthcare industry is going to see sustained growth due to multiple factors, including the sustained growth in domestic revenues. “Over $86 billion worth of medicines are expected to go off-patent in the next two to three years in the US. Even if Indian companies are able to tap one-tenth of that, it is the size of the entire Indian market.”

The healthcare reforms in the US should also have a positive impact on Indian generic companies, as none of the 14 countries loosely identified in the run-up to the Bill as the places to source low-cost medicines actually have the capacity to supply the raw materials needed to produce those medicines, say observers. “The active pharmaceutical ingredient supplies should (instead) happen from India or China. There is a growth chance,” Kapadia added.

However, Muralidharan M Nair of Ernst & Young felt it was too early to predict the impact of the US bill. “At least from the side of hospitals, medical tourism developing into a major revenue will not happen until we have a credible health insurance system in place,” he said.