May 17, 2013, 10.36 AM IST | Source:

Drug pricing regime comes into effect; pharma stocks mixed

The Department of Pharmaceuticals on Thursday notified Drug Price Control Order 2013. Once implemented over next few months, prices of 348 essential drugs will come down. Market reaction was mixed with firms like Cipla, Sun Pharma, Ranbaxy, Lupin and Glenmark down 0.5-2%.

Moneycontrol Bureau

Pharma stocks were trading mixed on Friday, with the likes of Cipla , Sun Pharma , Ranbaxy , Lupin , Glenmark and Dr Reddy's down 0.5-2 percent in morning trade. Multi-national players like Pfizer , Wyeth and GlaxoSmithKline were up 0.2-0.5 percent. The Department of Pharmaceuticals on Thursday notified the much awaited Drug Price Control order 2013.

Once implemented, prices of 348 essential drugs will reduce; prices of drugs are likely to come down by average 20-25 percent.

The new pharma pricing policy will be implemented over the next few months. Companies will be given 45 days to clear existing inventory and adjust product prices after ceiling prices are notified based on the simple average formula.

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"Pricing control is likely near-term negative for most stocks, though more so for MNCs, though we believe the stocks are already pricing in market-based mechanism to quite an extent," according to a foreign brokerage.

It further says that downgrades for MNCs will be larger as their revenue comes from the Indian market, products are premium priced and their exposure is higher to the actue therapy segments, where more drugs are in the essential list.

The brokerage expects "moderate" impact on Cipla and Cadila Healthcare with potentially 8-10 percent earnings downgrades. Sun Pharma and Lupin, meanwhile, are likely to be least impacted by the policy and have strong "tailwinds" from the US business, it adds.

Cipla stock price

On April 16, 2014, at 13:33 hrs Cipla was quoting at Rs 395.90, down Rs 4.85, or 1.21 percent. The 52-week high of the share was Rs 450.00 and the 52-week low was Rs 364.05.

The company's trailing 12-month (TTM) EPS was at Rs 17.18 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 23.04. The latest book value of the company is Rs 110.47 per share. At current value, the price-to-book value of the company is 3.58.

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