US economy, MNC pharma & more... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

US economy, MNC pharma & more...

Mar 11, 2008

  • Fears of a US recession were founded on Friday when the Bureau of Labour Statistics reported that the economy lost 63,000 non-farm jobs in February. This figure is considerably worse than the January data, which reported a revised decline of 22,000 jobs and has set the alarm bells ringing across the world. While the unemployment rate in the US dropping to 4.8% from 4.9% at first appears to provide some semblance of a relief, the same has been attributed to a reduction in the labour force as some people have given up looking for jobs. The US economy is now being haunted by falling house prices, rising energy and food prices, a weaker dollar, job cuts and declining consumer spending. This has impacted the country's stockmarkets, which in turn have had a negative bearing on the other markets around the world as well.

    The gloom afflicting the global stockmarkets as a result has spilled over to India too with the BSE-Sensex displaying weakness yesterday following a turbulent week when the benchmark index fell by 9%. Inflation rising to 5% has not helped matters either and has possibly dimmed the chances of the RBI undertaking interest rate cuts. As against this, the expectations of the Fed cutting rates appear all the more imminent.

  • The healthcare index was the top performer last week registering losses of only 3% as against the Bankex, which registered a steep decline of 16%. While the uncertainty surrounding the waiver of the Rs 600 bn loan to small farmers was one reason why the banking sector was at the receiving end, the other was the revelation of ICICI Bank's exposure to the subprime crisis raising concerns that Indian banks were not completely insulated from the subprime malaise after all. As far as the waiver is concerned, the government is expected to compensate the banks either in bonds or cash over a period of three years. However, pressure on net interest margins (NIMs) is likely to persist till such time the banks are compensated. The pharma sector being a defensive play was not as affected as some of the other sectoral indices last week. One of the major reasons for the same can be attributed to the fact that notwithstanding a slowing growth in the economy, demand for medicines will prevail in the event of sickness, consequently supporting sales.

  • MNC pharma companies have had a dismal CY07, with the top four companies namely GSK Pharma, Pfizer, Aventis and Novartis reporting either decline in sales or growth in lower single digits. This has been due to various reasons namely supply shortages, lack of visible product launches and price control imposed by the DPCO. Having said that, two of these companies namely GSK Pharma and Pfizer have unveiled plans of launching new products into the country, which is an encouraging sign. Among the patented products, GSK Pharma has chalked out plans of launching 'Tykerb', an anti-cancer drug along with its vaccines 'Cervarix' and 'Rotarix'.

    Pfizer, meanwhile, envisages the launch of its smoking cessation drug 'Champix' in India in the current year. This product was already launched in the global markets in CY06 and amassed revenues of US$ 883 m in CY07 (US$ 101 m in CY06). Similarly, GSK Pharma has already launched 'Tykerb' in the global markets (including the US) in CY07 and the drug has reported revenues of US$ 103 m in that year. Besides this, both the companies have announced plans to launch around two more products each, which will either be from the parent's product folio or through the in-licensing route. That said, these will not be eligible for patents in India and will have to contend with generic players, who have already launched their versions of the drugs. As we have mentioned earlier, while the initiatives taken by the companies to launch patented products in the country can indeed be construed as a positive sign, it remains to be seen as to how these products will be priced in a low priced market like India.

Equitymaster requests your view! Post a comment on "US economy, MNC pharma & more...". Click here!


More Views on News

How Much Money Should an Investor Set Aside for Trading? (Fast Profits Daily)

Sep 21, 2020

In this video, I'll give you a simple equation which you can use to decide how much money you can set aside for trading.

Kotak Standard Multicap Fund: Strategizing Growth with Focused Approach (Outside View)

Sep 21, 2020

PersonalFN's analysis on the features and performance of Kotak Standard Multicap Fund.

Sensex Can Go to 25,000 Before it Goes to 60,000. Are You Prepared? (Profit Hunter)

Sep 21, 2020

Am I expecting a big crack in the Sensex and what next?

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

Sundaram Bluechip Fund: Will Hold the Stable Horses (Outside View)

Sep 18, 2020

PersonalFn briefly outlines the newly launched NFO note HSBC Corporate Bond Fund.

More Views on News

Most Popular

Will the IPOs in 2020 Be as Rewarding as the Ones in 2019

In 2017 funds raised through IPOs is highest over a decade. And the stock market still flying high, some observers are predic...

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 21, 2020 03:35 PM