The pharma space has been in focus post Sun Pharma-Daiichi deal and the likelihood of a possible merger between Teva and Mylan globally. In an interview to CNBC-TV18, Abhishek Sharma of IIFL discusses his outlook on the sector and on specific companies.
Below is the transcript of Abhishek Sharma’s interview with CNBC-TV18's Ekta Batra and Anuj Singhal.Ekta: First wanted your opinion on Sun Pharma. The recent correction according to many is possibly a buying opportunity at this point in time. How would you view it?A: On Sun I would agree with the opinion that you just shared. Sun essentially the dilutive effect of Ranbaxy merger was already incorporated into the stock price and the correction that you saw yesterday essentially related to the fact that large block by Daiichi Sankyo came to the market and because the quantum was so big essentially because of that there was a discount which was offered to the buyers of Daiichi block in order to clear the trade. It does not reflect the fair market value of the company and we would essentially see the stock moving up from here. There had already been a bounce back today morning I believe it was up some two or three percent.
Anuj: So that is on Sun Pharma where you have a price target of Rs 1,050. The other stock which is quite active is Natco Pharma. How do you see this Mylan-Teva deal and what kind of impact is it likely to have on Natco and especially with regards to the big drug that Natco has?
A: The Teva-Mylan deal is still in very early stages. Teva has just made an offer yesterday and we don’t still know how Mylan is going to react to it but in terms of what Teva has stated, what it intends to take the benefit out of the Mylan transaction is both on the cost as well as on capability perspective.As you rightly said Copaxone is the big drug there. It is going off patent in September and there is a high likelihood that Mylan would be asked to divest its Copaxone generic where Natco is the partner. We do not see any challenge to the Copaxone drug as such because whatever share Mylan has in the Copaxone generic that it partners with Natco we believe it would be in a position to sell those rights to a third generic company and essentially move out of it. That would still not block the Natco Copaxone generic coming to the market provided it gets the approval.So, I don’t see any specific impact of the Teva-Mylan deal if it does go through on the Natco Copaxone generic.
Ekta: That is on Natco and Copaxone. But Mylan has some tie up with Biocon as well. Do you think that there would be any impact on the likes of Biocon if in case the USD 40 billion merger goes through?
A: Teva in its press release yesterday highlighted a couple of therapeutic areas and out of which they did specify that biologics is one of the reasons why Teva is looking at Mylan with interest. Teva doesn’t have a biosimilar programme of its own. This is something that they have publically stated. Teva also doesn’t have any injectible insulin in their pipeline. So from that perspective Biocon doesn’t run into a competing program and it is actually only additive to the deal if it does go through. So I don’t see any cuts of any breaking of partnership that Mylan has with Biocon.
Anuj: What about Lupin? That has corrected about 17 percent and for a good reason after the kind of surge that we had seen and the kind of negative news flow that hit it do you think the kind of correction that we have seen that kind of prices in the negatives or would you expect more correction in Lupin?A: Lupin is a stock that I like at current market price. The negativity has been more than factored in at the current market price. There were concerns about the delayed US approvals, but that is something that is happening for the entire industry and it is not specific for Lupin as such. Lupin was the first one possibly to flag the concerns around the delay in approvals and the resultant impact on EPS it will have. The reason why I like Lupin at these levels is because it is building its specialty pipeline in a very aggressive manner and in a very sensible manner. So the inhaler product that they have been licensed from Celon Labs is one product that could give them huge returns if it does get commercialised in two to three years time.
Ekta: Even Glenmark was in focus on account of the stake that Temasek is picking up in the company. How would you view it?
A: Glenmark has had a debt of Rs 3,000 crore because of which we believe that the company was constrained in order to carry out its expansion program both in terms of pushing through more Abbreviated New Drug Application (ANDA) filings and also getting more biologics in New Biological Entity (NBE) pipeline. So, once this debt overhang on the company is resolved with the help of the fresh equity money that has come in we see this as a very big positive for the company because we believe now the company would be in a position to deploy capital both on the capacity side which we believe they need and also on enhancing their capabilities both on the NBE pipeline as well as on the generic pipeline.Disclosure: I don’t own any pharma stocks. My family also doesn’t.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
