Gland Pharmaceuticals, Cipla and Sun Pharma are the top picks from the pharma pack of stocks for Sanford Bernstein, said Director Nithya Balasubramanian in an exclusive interview with CNBC-TV18.
''Sun Pharma is moving away from the pack given their exposure to US specialty which seems to be doing well and Cipla is moving because of their complex generic pipeline in the US, where we see material opportunities to play out in the next few years,'' Balasubramanian told CNBC-TV18.
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''Gland Pharma has corrected quite a bit. We think the market is unwilling to appreciate the resilience in the company's business model. Their B2B business affords a few luxuries such as slightly lesser price erosion and the ability to grow the base.'' she added.
However, according to Balasubramanian, it is still very soon to decipher that the re-surfacing COVID-19 concerns are an opportunity for pharma stocks.
''China is a very different economy and their vaccination coverage is lower, while infection rate is higher than India's. So as of now, it presents little opportunity to our generic players,'' said Balasubramanian.
Pharma, Covid-related stocks in focus
Ever since the onset of the COVID-19 pandemic in 2020, pharma and diagnostic stocks have been in focus for market players. Covid-19 related stocks include Wockhardt - which established a contract with the UK government for supplies of AstraZeneca's COVID vaccine.
The vaccine-related stocks that continue to be in focus include Dr Reddy's, Zydus Life, Biocon. Pfizer was also in focus on hopes of their vaccines coming to India. Cipla and Zydus Life had one of the largest portfolio of COVID-19-related drugs in India at the height of the pandemic.
COVID-19 drug-related stocks include Gland Pharma and Alembic. Alembic was one of the largest manufacturers of the antibiotic Azithromycin -which had seen a huge volume spurt during the first and second waves of COVID in India. Lastly, the diagnostic stocks include Dr Lal Pathlabs, Thyrocare, Metropolis Health which have been in focus.
This year, many of these stocks saw a slowdown in projects related to COVID. Wockhardt's UK revenue fell considerably from Rs 794 crore in H1FY22 to Rs 422 crore in HIFY23.
Cipla's demand for COVID-19 drugs was negligible in Q2FY23, while Gland Pharma's sales were impacted in Q2 as it went down 3 percent due to absence of COVID-related drugs during the July-September quarter. Diagnostic stocks also fell between 80-97% on a YoY basis in Q2.
What experts say
Experts reckon that India is much more resilient this time, as the county now has a hybrid immunity and a large amount of adult population has been fully vaccinated. Hybrid immunity is a combination of natural immunity due to exposure and vaccination.
Increasing market competitiveness, regulatory scrutiny, and domestic price regulations will shape the growth of the generics and injectables market in India, according to Gland Pharma MD & CEO Srinivas Sadu.
Rating agency ICRA's Assistant Vice President & Sector Head Corporate Sector Ratings Mythri Macherla said the domestic pharmaceutical companies are expected to report steady revenue growth of 6-8 per cent in FY2023 and in FY2024.
The revenue increase in FY23 will be supported by healthy growth in the domestic and emerging markets, while pricing pressures in the US and European markets will moderate the growth to a certain extent, she added.
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