Pharma shares underperform in a firm market; Glenmark, Ipca Labs fall 6%

Shares of pharmaceutical companies fell up to 6 per cent on Monday due to profit-booking even as the benchmark indices hit their respective record high levels.

Among individual stocks, Glenmark Pharmaceuticals and Ipca Laboratories slipped 6 per cent, while Cipla, Laurus Labs, Neuland Laboratories, Caplin Point Laboratories, Strides Pharma Science and Novartis India were down in the range of 2 per cent to 4 per cent on the BSE.

At 12:47 pm, the S&P BSE Healthcare index, the sole loser among sectoral indices, was down 0.39 per cent, as compared to 1.1 per cent rise in the S&P BSE Sensex. The Sensex and Nifty50 indices hit their record highs level of 42,566.34 and 12,451.80 points, respectively, today in early morning trade.

In the past month, the S&P BSE Healthcare index underperformed the market by falling 5 per cent, as compared to 5.4 per cent rise in the S&P BSE Sensex. Prior to that, healthcare index had rallied 53 per cent during the calendar year 2020, against 2.6 per cent decline in the benchmark index.

Glenmark Pharmaceuticals fell 6 per cent to Rs 474 on the BSE. In the September 2020 quarter (Q2FY21) the company’s adjusted profit after tax down 9.7 per cent year-on-year (YoY) to Rs 231 crore. Revenues grew 4.9 per cent YoY to Rs 2,953 crore with 17.2 per cent YoY growth in domestic sales to Rs 1,051 crore due to additional contribution from Fabiflu (favipiravir) being partly offset by 11.3 per cent decline in US to Rs 752 crore.  Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins improved 272 bps YoY to 18.7 per cent mainly due to lower other expenditure, ICICI Securities said in a note.

Operationally, barring the US, other geographies are, more or less, looking stable led by domestic formulations. The brokerage firm believes reduction of debt, improvement in free cash flow and margins are key events to watch.

Ipca Lab’s Q2 results were below our estimates on all fronts due to lower than expected sales in the domestic formulations. Notwithstanding quarterly gyrations in domestic formulations, the company continues to thrive on exports front, both in formulations and APIs. Going ahead, with firm growth tempo in domestic formulations, good prospects both for API exports, formulation exports, we expect further improvement in financial parameters, ICICI Securities said. The stock slipped 6 per cent to Rs 2,196 on the BSE in intra-day trade today.