X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
DPCO: A let down once again? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Feb 14, 2001

    DPCO: A let down once again?

    The last few trading sessions have witnessed multinational pharma stocks capture the market’s interest. The primary interest is due to the anticipated relaxation of the Drug Price Control Order (DPCO).

    Decontrol will better prospects for MNCs
    Company % sales under
    price control
    E Merck 70.0
    Hoechst Marion Roussel 65.0
    Glaxo 60.0
    Cipla 55.0
    Ranbaxy 55.0
    Knoll 53.0
    Wockhardt 35.0
    SmithKline Beecham 33.0
    Novartis 30.0
    Dr Reddy's Labs 25.0
    Pfizer 23.0
    Torrent 20.0
    Sun Pharma 19.0

    The expectation of a relaxation in the DPCO could have re–surfaced due to the fact that the government has recently replaced the chief of the NPPA. However, what one should be careful about here is the therapeutic profile of the pharma company. For instance, if only antibiotics/anti–infectives were to be excluded from the purview of the DPCO then it might not benefit the companies involved in producing these products since quite a few of these products are quoting at prices which are below the limits set by the DPCO.

    But if the product has already become an over the counter brand such as ‘Avil’ (the anti–infective brand of Hoechst Marion Roussel) then the benefit to the company can be substantial. For instance Hoechst sells almost a billion capsules of ‘Avil’ annually. These are sold at a controlled price of Rs 0.25. Even if the company were to raise the prices of ‘Avil’ by Rs 0.15, it would add Rs 150 m to the company’s bottomline. This amounts to more than 50% of the net profit (i.e. Rs 275 m) that the company reported last year.

    If however, the relaxation in the DPCO does not come about, the price reaction in the share prices would be equally sharp. This has happened almost thrice before and one is not sure whether the expected relaxation would fructify again.

     

     

    Equitymaster requests your view! Post a comment on "DPCO: A let down once again?". Click here!

      
     

    More Views on News

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    The Power of 5 Minutes (The 5 Minute Wrapup)

    Jun 16, 2017

    Here's what you can expect from The 5 Minute Wrapup in the coming months and years.

    Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter (Quarterly Results Update - Detailed)

    Jun 23, 2017

    Net Profit lower due to exceptional items in the previous year.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE HEALTHCARE


    Aug 23, 2017 (Close)

    S&P BSE HEALTHCARE 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS