Pharma Stocks Outlook for the week – 11 to 15.09.2017

Pharma Stocks Outlook for the week – 11 to 15.09.2017

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Pharma Stocks Outlook for the week – 11 to 15.09.2017 )

 Muted Apr-Jun earnings cast shadow on growth Stocks of pharmaceutical companies are likely to be subdued next week as muted growth in the June quarter and myriad negative factors have cast a shadow on earnings going forward. The Indian government and regulatory agencies like National Pharmaceutical Pricing Authority are focussed on reducing prices of drugs either through controlling mechanism or by encouraging the use of generic medicines. The pressure on prices has made analysts uncertain of growth in India. In the US, some companies continue to be under pressure from regulatory issues, even as others are seen coming out of it. On Thursday, the US Food and Drug Administration has issued two observations related to manufacturing practices followed by Aurobindo Pharma Ltd at its formulation drugs unit-6 at Hyderabad in Telangana. On the other hand, Cadila Healthcare on Thursday said that the US regulator had cleared the company's Moraiya facility with no observation after an inspection. This is the second clearance for the unit following a warning letter issued to the unit in December 2015. In the US, there is also the issue of consolidation of distribution channels and faster clearances for generic drugs by the US FDA which has put prices under pressure. However, some analysts believe the faster clearances for generic drugs, while increasing competition, may also aid the earnings of companies going forward. We have looked at the upcoming product pipeline of many companies for the US market which makes us believe that the earnings will soon start to stabilise against the high base and FY19E earnings trajectory should improve this year. We expect one more quarter of dismal earnings for Sun Pharmaceutical Industries and Lupin in the September quarter, but expect strong growth from Aurobindo Pharma and Cadila Healthcare.

Source : Cogencis Information Services Ltd.