Drug Deal Shot In The Arm For Pharma Firms

Pharmaceutical multinationals (MNCs) counters feverish action today following the government moving out at least 30 drugs from price control. The new drug policy announced yesterday has only 38 drugs under price control.

On Tuesday, the Union Cabinet approved a new drug policy aimed at boosting investment in the pharmaceuticals sector. The main objective of the policy is to strengthen the sector by reducing barriers and accelerating investments. The policy even enlists criteria to improve the quality of Indian drugs and promote research and development.

Among the MNC stocks, E-Merck was the major gainer (up 10.30 per cent at Rs 326.75), Pfizer (up 11.42 per cent at Rs 461), Wyeth Lederle (up 10.76 per cent to Rs 280.45), GlaxoSmithKline (up 7.98 per cent to Rs 367.30) and Novartis (up 7.48 per cent to Rs 249.95).

Meanwhile, domestic pharmaceutical majors traded flat to end marginally lower -- Dr Reddy's (down 0.14 per cent to Rs 932.80), Ranbaxy Labs (down 0.15 per cent at Rs 720.95) and Cipla (down 2.35 per cent at Rs 1,050.95).

Analysts feel the easing of price control would benefit all drug firms, but multinationals would gain the most as controlled products account for a large part of their sales. The major MNC beneficiaries would be Knoll Pharma, Hoechst Marion Roussel, Glaxo India and Pfizer, while the major Indian beneficiaries, according to analysts, would be Cipla, Dr Reddy's Labs, Ranbaxy Laboratories and J B Chemicals. While Hoechst Marion's formulation under Drugs Price Control Order (DPCO) is about 60 per cent, that of Pfizer and Glaxo are 46 per cent and 40 per cent, respectively. Indian pharmaceutical companies Cipla and Ranbaxy have 35 per cent each of their formulation under DPCO, while Dr Reddy's Labs has 40 per cent of its formulation under the order.

Some of the new drugs, which analysts expect to be brought under control for the first time, are diclofenic sodium, cefuroxime axetil, piroxicam, progestogen and gilbenclamide.