Shares of several pharmaceutical companies surged in trade on September 10 buoyed by the double treat of a GST cut on cancer drugs and the passage of the much-awaited draft US Biosecure Act.
The GST council decided to cut taxes on cancer drugs to 5 percent from the earlier 12 percent. This tax cut, aimed at reducing the cost of cancer treatment in the country will see prices reduce for cancer drugs Trastuzumab Deruxtecan, Osimertinib and Durvalumab.
Previously, the government had scrapped the basic 10 percent customs duty on these three cancer drugs in the Union Budget of 2024. One key beneficiary of these tax cuts is Astra Zeneca, as it is the major manufacturer of these drugs in India, making 62 percent of sales from oncology drugs.
On that account, shares of AstraZeneca Pharma surged over 4 percent in trade to hit an intraday high of Rs 7,089.95 on the NSE.
Meanwhile, the tax cut also aided sentiment for other pharma companies as well, largely on expectations that it will provide incentives to other drugmakers to dive into oncology drugs.
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In addition, the US government also passed the draft of the Biosecure Act that prohibits the US government from contracting with, or providing grants to, companies that do business with a “biotechnology company of concern.” It specifically names five Chinese companies: BGI Genomics, MGI Tech, Complete Genomics, WuXi AppTec, and Wuxi Biologics.
This much awaited development sparked hopes of more contracts in the Contract Development and Manufacturing Organisation (CDMO) space being diverted to Indian companies, lifting shares of Divi's Labs, Suven Pharma and Piramal Pharma over 3 percent higher.
Infact, shares of several pharma companies--Suven Pharma, Ajanta Pharma, Divi's Laboratories, Laurus Labs and Syngene International also surged to their highest levels in 52-weeks.
Brokerage InCred Equities highlighted that low manufacturing prices, foreign direct investments, and government incentives such as the Production-Linked Incentive (PLI) plan have turned India into an appealing CDMO destination for businesses looking for alternatives that are cheaper than China.
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