Pharma Stocks Outlook for the week – 19 to 23.06.2017

Pharma Stocks Outlook for the week – 19 to 23.06.2017

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Pharma Stocks Outlook for the week – 19 to 23.06.2017 )

The rally in pharmaceutical stocks over the last three weeks, after hitting their 52-week lows, is likely to pause in the coming sessions, as the long-term view on the sector remains weak. We have cautious outlook for the pharmaceutical sector for the next 12-18 months and advise investors to stay selective. Besides this, a stronger rupee against the dollar is also likely to weigh on the earnings of companies in the sector in the near term. In the US market, companies are currently facing severe pricing pressure on account of consolidation of distribution channels there, as well as greater competition in the generic drugs segment. The new US Food and Drug Administration Commissioner, Scott Gottlieb, in an interview last week, had said he aimed to lower prices of drugs by ensuring there is enough competition. We continue to remain cautious on the generic space and believe that the structural dynamics of the industry have worsened significantly. Recent stock corrections do not warrant fresh exposure. In the Indian market, apart from concerns over price control of drugs and other regulatory issues, companies also expect weak earnings for Apr-Jun due to de-stocking by distribution channels before the goods and services tax is introduced. This week, India's largest drug-maker and Cadila Healthcare both received an approval from the US Food and Drug Administration for the generic of blockbuster drug Zetia. For the year ended April, estimated sales of the anti-cholesterol medicine in the US were at $2.7 bln. Approval for the drug may further erode the price of Glenmark's generic version of the same drug. Glenmark's management had last month said that the company expects sales of the generic of Zetia in the US to be lower than $200 mln during the exclusivity period, which started in December. The company had earlier guided for sales of $200 mln-$250 mln.

Source : Cogencis Information Services Ltd.