Pharma stocks decline amid Trump’s prescription drug price cuts announcement

Synopsis

The Nifty Pharma Index ended 0.2% higher Monday aft tumbling astir 2.4% earlier successful the time successful effect to Trump's remarks. The Sensex and Nifty jumped astir 4%-posting their biggest single-day gains successful 4 years. Of the 20 stocks successful Nifty Pharma, 13 gained and 7 declined.

Mumbai: Several pharmaceutical shares underperformed connected Monday contempt a beardown wide marketplace rally, aft US President Donald Trump announced plans to motion an enforcement bid slashing medicine cause prices successful the US to lucifer those successful favoured nations, implying cuts of 30% to 80%.

Sun Pharmaceuticals fell 3.2%, Ajanta Pharma slipped 2.3%, and Glenmark and Divi's Labs mislaid implicit 1% each. Biocon dipped 0.5%.

The Nifty Pharma Index ended 0.2% higher Monday aft tumbling astir 2.4% earlier successful the time successful effect to Trump's remarks. The Sensex and Nifty jumped astir 4%-posting their biggest single-day gains successful 4 years. Of the 20 stocks successful Nifty Pharma, 13 gained and 7 declined.

"The bid implies a 30-80% expected chopped to align US cause prices with different regulated markets. But specified cuts are commercially unviable for pharma firms, particularly those with low-double-digit margins," said Nikhil Ranka, CIO astatine Nuvama Alternates. "That's wherefore companies similar Sun Pharma, which derives astir 40% revenues from the US, saw declines."

Ranka said astir pharma stocks rebounded aft an archetypal knee-jerk reaction, arsenic the projected changes are not expected to beryllium instantly enforceable oregon impactful. "Pharma stocks could resume their uptrend successful the coming sessions," helium said.

Year-to-date, the Nifty Pharma Index is down 10%, compared with a 5% summation successful the benchmark Nifty.

Bhavesh Gandhi, pb expert for pharma and healthcare astatine YES Securities, said the projected argumentation chiefly targets the branded drugs segment, which accounts for 90% of the US market. Indian companies cater mostly to the remaining 10% - the generics abstraction - wherever prices are already low.

"Sun Pharma, with immoderate vulnerability to the branded segment, whitethorn look constricted risk. But for now, the absorption is mostly sentimental, and the existent interaction volition beryllium connected however net signifier up," Gandhi said.

India Ratings and Research said Trump’s enforcement bid to trim the prices of medicine drugs successful the US, erstwhile implemented, volition person a constricted near-term interaction connected the Indian pharma companies, but it whitethorn person a bearing connected their semipermanent superior allocation strategies. Most Indian companies run connected bladed margins successful the generic drugs segment, which limits scope for further terms reductions. The projected cuts are much apt to people the branded drugs segment, said analysts.

“Volumes whitethorn stay stable, but little prices could compression margins and measurement connected stock prices,” said Dharmesh Kant, caput of probe astatine Cholamandalam Securities. He expects firms specified arsenic Sun Pharma, Aurobindo Pharma, and Cipla to beryllium affected, though the grade of the interaction is inactive uncertain.

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