The Roller Coaster Ride of the BSE Healthcare Index - Chart Of The Day 21 June 2018 - Equitymaster
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The Roller Coaster Ride of the BSE Healthcare Index
Jun 21, 2018


The BSE Healthcare Index has been on a roller coaster ride in the past few years. The period from 2012 to 2015 saw the index go up more than three times.

Since then it has been a painful ride downwards.

Pre-2015, pharma companies enjoyed a fairytale ride in the US market. Low labor costs, good chemistry skills, along with efficiency, ensured Indian companies could copy innovator drugs to make generic drugs at a fast pace.

The generic business had lucrative margins for all major pharma players. But the party did not last long. In the quest to supply drugs quickly, they compromised on quality at their manufacturing facilities .

No wonder, the US regulatory authority (USFDA) took strict action. Sun Pharma received a warning letter for its Halol manufacturing facility in 2015. It was like a bolt out of the blue. Since then, the downward spiral began and has continued till date.

Lupin, was also issued a warning letter for two of its plants last year.

These regulatory issues coupled with price erosion in US markets has impacted the business of major pharma players.

The recent regulatory clearance for Sun Pharma's Halol plant has led to hopes of a revival in the sector.

But the diverse business models of pharma players make it necessary to adopt a stock specific approach. One such pharma stock is under our watchlist for ValuePro.

The stock has an impeccable track record. Unlike other pharma players, it has grown without much exposure to the US and European markets. In fact, entry in to the US market could be the next big trigger for the stock.

It has also faced recent headwinds in some of its geographies. But we are confident the management is more than capable of coming out of this situation strongly.

Data Source: Ace Equity

This Chart Of The Day was published in The 5 Minute WrapUp - Which Pharma Stock (or Fund) Should You Buy?

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