Pharma stocks rally up to 4%, but will Trump order really have minimal impact?

Synopsis

The Nifty Pharma scale gained astir 2% connected Tuesday, defying the broader marketplace trend, arsenic the Nifty slipped astir 0.5% amid profit-booking pursuing Monday’s crisp rally — the strongest single-day summation successful the past 4 years for the benchmark indices.

Shares of pharmaceutical companies rallied up to 4% connected Tuesday arsenic investors expect that US President Donald Trump's enforcement bid volition person minimal interaction connected US generics. Dr Reddy's shares were up astir 4% portion Granules, Glenmark, Lupin, Divi's Lab, and Aurobindo Pharma were trading astir 3% higher.

Nifty Pharma index itself roseate astir 2% adjacent erstwhile Nifty fell astir 0.5% amid profit-booking station Monday's rally, which saw the benchmark indices making the sharpest single-day summation successful the past 4 years.

"As acold arsenic the interaction connected Indian pharma companies is concerned, we foresee precise constricted impact. Based connected our enactment with companies, the generics pricing dispersed is bladed crossed developed nations, and hence, the scope of simplification successful prices is expected to beryllium constricted connected the US generics portfolio," brokerage Motilal Oswal said.

Trump's bid says that the cause prices successful the US should beryllium aligned to the prices successful different developed countries. Trump intends to instrumentality enactment against pharmaceutical manufacturers charging higher prices to Americans portion providing steep discounts to different affluent nations but analysts accidental determination is uncertainty connected however successfully the enforcement bid is yet implemented.

An earlier effort by the Trump 1 medication successful 2020 to instrumentality a akin bid for lowering pricing was defeated successful assorted courts

"The bid is much inclined toward innovator pharma companies, which mightiness beryllium having pricing disparity connected medicines sold successful the US and different developed nations," Motilal said, adding that it estimates a precise constricted interaction of the enforcement bid connected US generics.

Nomura, however, warned that If the enforcement bid is implemented, it volition person a antagonistic interaction connected branded and specialty cause sales.

"In our sum universe, Sun Pharma has the largest vulnerability to branded income successful the US. We estimation that US specialty income are astatine ~USD1036mn (FY25F) for Sun Pharma. The largest merchandise Ilumya (FY25F US income of ~USD570mn) is mostly supported done Medicare Part B, which perchance accounts for 50%+ of the income of the company, successful our assessment. The listed terms of Ilumya successful the US is ~4x that successful different developed countries, successful our view. Therefore, the implementation of little pricing tin person a important antagonistic interaction connected revenues and earnings, successful our view," Nomura said.

As generics are priced astatine lone a humble discount (~30-40%) to the marque prices, the brokerage steadfast said it is not apt to person a antagonistic interaction connected emblematic commoditized generics with much than 5 players successful the market.

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