Bad week for pharma: Top 3 lose Rs 10,280cr in mkt cap

Moneycontrol Bureau

Pharma stocks gave investors more headaches this week than shielding them from market volatility like they are known to. The BSE pharma index has lost Rs 16,822 crore in market cap, with the Ranbaxy, Glenmark and Wockhardt combined losing Rs 10280 crore.

But more importantly the reputation of Indian drug manufacturers took a beating last week, after Ranbaxy pleaded guilty to felony charges related to drug safety and agreed to pay USD 500 million in civil and criminal fines under a settlement with the US Department of Justice.

Shares of Ranbaxy continued to take a beating this week, down over 17 percent, after majority shareholder Daiichi Sankyo said it believed former shareholders of the company hid information regarding US regulatory probes and threatened to sue them. However, Malvinder Singh, the former promoter of Ranbaxy, rebutted the current Japanese owner's allegations saying they did not misrepresent any facts or falsify any data.

The trial has cost Ranbaxy dearly; a 3-year import ban in the US for over 30 drugs. As part of the decree, Ranbaxy also forfeited 180-day exclusivity on 3 drugs, which translates into around 300 million dollars in lost opportunity. Ranbaxy also had to surrendered new drug applications on 27 compounds.

Also Read: Ranbaxy's revival tough; 5-10% correction likely: Antique

Next on the list was Glenmark Pharmaceuticals, which came off after the US drug regulator said the company's generics arm is recalling several lots of three of its drugs from the US market due to an "odd smell."

A spokesperson told PTI news agency that the recall pertained to off-odour complaints from bottles supplied by one HDPE bottle supplier whose services have now been discontinued.

But the biggest loser of the week was Wockhardt, down nearly 38 percent, hit by the US FDA banned imports from one of its plants in India. Wockhardt chairman Habil Khokariwala said at a press briefing in Mumbai that the ban could affect sales worth 100 million dollars.

Expert Opinion 

Dipan Mehta, member of BSE says despite the negative new flow, long-term fundamentals of the sector are sound and recent rupee depreciation will also be beneficial.

"So, I would say that at corrections these stocks are interesting to increase exposure to, but in case of stocks like Wockhardt one should just wait and watch," he told CNBC-TV18.

But investment advisor SP Tulsian believes that this might be a good time to buy Wockhardt as he expects things to settle down over next 10 days. The stock can move back to Rs 1300-Rs 1350.

"One cannot make the stock to correct beyond this because the share is now ruling at a PE multiple of less than eight... the management has also said that they will be appointing a consultant to retrace these grievances," Tulsian says.