Pharma shares trade firm; Laurus up 2%, Sun Pharma nears 52-week high

Sun Pharma, Cipla, Natco, Dr Reddy's, Torrent Pharma, Aurobindo Pharma and Strides have launched a generic version of Molnupiravir in India post approval for emergency use authorisation from DCGI

Shares of pharmaceutical companies were trading firm in an otherwise subdued market, with Nifty Pharma index gaining nearly 1 per cent on the National Stock Exchange (NSE) on Wednesday, on expectation of improved outlook.

At 09:33 am; Nifty Pharma index, the top gainer among sectoral indices, was up 0.81 per cent at 13,948.60, as compared to 0.15 per cent rise in the Nifty50 index. The pharma index hit a 52-week high of 14,938.25 on October 4, 2021. In past seven trading days, the index has rallied 5.8 per cent.

Strides Pharma Science, Laurus Labs, Cipla, Natco Pharma, Lupin, Aurobindo Pharma, Ipca Laboratories, Dr Reddy’s Laboratories, Sun Pharmaceutical Industries and Cadila Healthcare were up in the range of 1 per cent to 2 per cent on the NSE.

Sun Pharma, Cipla, Natco, Dr Reddy’s, Torrent Pharma, Aurobindo Pharma and Strides have launched a generic version of Molnupiravir in India post approval for emergency use authorisation from Drugs Controller General of India (DCGI).

According to total sales data from IMS, IPM grew by 12 per cent year on year (yoy) in November 2021 vs 10 per cent yoy in October 2021. On a MAT basis, IPM grew by 18.2 per cent, driven by volume growth (9 per cent), new product growth (4.9 per cent) and pricing growth (4.3 per cent).

Pharma and healthcare stocks, analysts believe, are in favor of the back of an increase in Omicron covid 19 virus in India. 

"As the cases increase, we will require more covid-related tests. We have a buy call on Metropolis Healthcare with a target price of Rs 3,600; and a buy call on Dr. Lal PathLabs with a target price of Rs 4050. An increase in covid testing in India will have a positive impact on companies revenue and margins. That apart, we have a buy call on Sun Pharma with a target price of ₹970," said Yash Gupta, equity research analyst at Angel One.

Analyst at Emkay Global Financial Services believes that IPM growth is returning to normal levels as Covid cases have dropped and the monsoon season has ended. Barring any Covid related upside, we expect IPM to grow in mid-to-high teens for FY22, implying high single digit growth in the rest of the financial year, the brokerage said in pharma sector update.

Among the individual stocks, Sun Pharma was up 1 per cent to Rs 824.50 on the NSE in intra-day deal. The share price of drug maker is trading close to its 52-week high of Rs 851 hit on October 18, 2021. The company also plans to set-up a end-to-end manufacturing unit in Andhra Pradesh.

Emkay maintains a 'Hold' rating on the stock as the brokerage firm said it believe the current valuations limit the upside potential in view of near-term headwinds such as potential increase in R&D expense, reversal of Covid and seasonal product sales in India and increase in S&M costs.

Sun Pharma’s Q2FY22 operational performance was better than brokerages estimates with growth in multiple segments moderated by decline in API sales.

That said higher contribution from specialty and strong domestic franchise is likely to change the product mix towards more remunerative businesses by FY22. This would have positive implications for margins also as we expect faster absorption of frontloaded costs on the specialty front, ICICI Securities said in Q2 results update.