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Informist, Friday, Nov. 22, 2024

MUMBAI – The pharmaceutical sector is expected to remain lacklustre next week, after having underperformed the headline indices this week. Risk appetite remains weak across global financial markets, even after the rebound seen in some equities and other risky assets Friday, said experts. A dismal Jul-Sept earnings season, delays in new launches due to regulatory issues and uncertainty over the health policies under Republican Donald Trump's administration in the US are likely to keep investors cautious on pharmaceutical stocks, they said. 

The Nifty Pharma index gained 1% this week, after falling for three consecutive weeks. The index lost 3.5% last week, after having fallen 1% each in the previous two weeks. The Nifty 50 is up 1.6% for this week. 

The valuation premium of the pharma index is holding up, despite the 8% decline since October and low single-digit cuts in earnings per share estimates for 2024-25 (Apr-Mar) and 2025-26, Nuvama Institutional Equities said in a report. The Nifty Pharma index is trading at 30 times the price-to-earnings multiple, up 28% in the last one year but down 5% from August, the brokerage said. This multiple is at a 49% premium to the Nifty 50's price-to-earnings ratio, as against a 30% average premium in the last 10 years, it said. 

Nuvama cut its FY25 earnings per share estimate for six pharmaceutical companies after the September quarter earnings--Biocon Ltd., Cipla Ltd., Aurobindo Pharma Ltd., Zydus Lifesciences Ltd., Torrent Pharmaceuticals Ltd., and Ipca Laboratories Ltd. 

On the other hand, it raised the earnings estimates for Lupin Ltd., Natco Pharma Ltd., Sun Pharmaceuticals Industries Ltd., and Dr. Reddy's Laboratories Ltd. Pharmaceutical companies covered by Nuvama posted an 11% on-year growth in revenue for the September quarter with their net profits rising 21%. The earnings before interest, taxes, depreciation, and amortisation for these companies expanded 20% during the quarter. These companies' revenue from the Indian market grew 10% on year, while their revenue from the US market rose 7%. 

When it comes to the US business, some investors remain worried as Trump has indicated that Robert F. Kennedy Jr., a well-known critic of vaccines and advocate against some Big Pharma companies, would be the secretary of health and human services, but also that he would put "America First" across all sectors. This could mean changes in strategy, pipeline or supply chains for global pharmaceutical giants, who are clients and business partners of many Indian pharmaceutical companies, according to analysts. 

However, there could be some churn within the sector, in favour of some pharmaceutical companies that are present in faster growing areas like contract development and manufacturing, said an analyst at a city-based brokerage house. For traditional drugmakers, new niche launches are key to sustaining growth momentum and the worry is that regulatory hurdles or some supply problems may delay the pipeline, he added.   

TOP HEADLINES

* Nuvama cuts FY25 EPS estimate for six pharma cos after Jul-Sept earnings
* Natco Pharma submits ANDA with US FDA for generic version of Risdiplam
* Delhi HC sets aside temporary ban on sale of Sigrima by Zydus Lifesciences
* Natco Pharma sells investment in ISCA for INR 173.90 million
* Dr Reddy's gets seven observations from US FDA for mfg unit in Hyderabad
* Akums Drugs gets exclusive rights to sell pdts of S Korea's Caregen in India
* AstraZeneca to launch lung disease drug Breztri Aerosphere in India in Jan
* Dr Reddy's Laboratories issues clarification over product recall in US
* Decide interim injunction plea on Sigrima vs Zydus Life quickly, SC to HC
* Promoters revoke pledged share holdings in Sun Pharma, Sun Pharma Advanced
* Mankind Pharma pledges 39.68% stake in Bharat Serums for INR 50 bln NCDs
* Glenmark posts INR 3.54 billion consol PAT in Jul-Sept vs loss yr ago
* HC bars Alder Biochem from using "Biochem" name on Zydus Life arm's plea
* Ipca Lab Jul-Sept net profit rises 50.6% on year to INR 2.44 billion
* SC rejects plea to mandate medical professionals to specify risks of drug
 

Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Apoorva Choubey 

Edited by Deepshikha Bhardwaj

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