Pharma stocks decline on fears of new US order, competition

IPCA Laboratories was biggest loser, with US having banned drug import from its three plants

Pharmaceutical sector stocks slipped on Friday, following adverse observations from the US regulator, the Food and Drug Administration (FDA), increased competition and fears of a new pricing policy in the US.

The BSE healthcare index declined 1.5 per cent on Friday. On a year to date basis, it (comprising 69 companies) is down nearly four per cent, while the overall benchmark has risen 16-17 per cent.

IPCA Laboratories was the biggest loser, with the US having banned drug import from its three plants. The stock fell a little over 15 per cent in intra-day trade but recovered to close eight per cent lower at Rs 471.70. Its plants in Madhya Pradesh and Silvassa were under a US import alert since 2014 and 2015, respectively; the company was exporting limited products, exempted from the ban. On Thursday, the company said the FDA had withdrawn those exemptions.

Lupin's stock fell 4.4 per cent, after Aurobindo Pharma received approval for the first generic version of Renvela, used for treating kidney ailments. The drug has a market size of $750 million in the US and Aurobindo received approval ahead of Lupin.

"Aurobindo is the first to receive the Sevelamer generic approval, despite being one of the last filers. While multiple generic drug makers, including Lupin, Cipla, Actavis, have filed for the product, they have struggled to get approval. In fact, Lupin, the first filer, has now forecast for a late FY19 approval at best," said Piyush Nahar and Anurag Mantry of Jefferies, in an investor note.

A US government move to reduce drug prices was another reason for the overhang. On Thursday, Bloomberg reported that US president Donald Trump is set to issue an executive order to lower prices. Trump's moves to lower health care care costs of US citizens would present opportunities for Indian drug makers but uncertainty prevails on the policy details.

Bloomberg had reported that top health and budget officials in the administration will meet on Friday to discuss the issue. Trump sought recommendations from the nation's health agencies on reducing medication costs, the minister in charge told legislators last week.