Sensex Continues Downtrend; GSK Consumer Down 9%

Wed, 28 Mar 01:30 pm

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After opening the day in red, share markets in India have continued to slide and are trading below the dotted line. Sectoral indices are trading on a mixed note with stocks in the metal sector and stocks in the metal sector leading the losses.

The BSE Sensex is trading down by 175 points (down 0.5%), and the NSE Nifty is trading down by 53 points (down 0.5%). Meanwhile, the BSE Mid Cap index is trading down by 0.5%, while the BSE Small Cap index is trading down by 0.8%. The rupee is trading at 64.94 to the US$.

Lupin share price was in focus today, after it was reported that the company received a ANDA (abbreviated new drug application) approval from the United States Food & Drug Administration (USFDA) for Clobetasol Propionate Spray.

The drug is a generic version of Galderma Laboratories' Clobex Spray.

According to IQVIATM sales data, the Clobex Spray had sales of around US$ 30.5 million in the US for the twelve months ended January 2018.

Indian pharma companies catering to the US markets are breathing a sigh of relief. After being adversely affected by import bans and the suspension of new drug approvals from manufacturing facilities in the past three years, there has been a sharp pick-up in new drug approvals in FY17.

Expediting Drug Approval Process to be a Positive for Industry

However, note that USFDA alerts on Indian pharma companies have increased over the past few years. Regulators used to visit the plants every two years. Now they come every eight months. Increasing inspections have led to a total of 41 import alerts in the past eight years - 33 of them (80%) in just the last four years (2013-16). This clearly signifies increased USFDA scrutiny on Indian pharma firms. If that wasn't enough, increasing pricing pressure in the generics segment has dented realisations.

However, the recent development of USFDA expediting the drug approval process can bring some respite for Indian pharma companies. This comes as drug approvals for Indian companies have gone up 50% in the period from January to June 2017 compared to the same period last year.

While short-term pain is expected, companies with strong R&D capabilities and compliant plants will do well over the long term. The uncertainties make it important to be stock specific in the sector. It is important to look for companies that have the competence and staying power to overcome the challenges.

At the time of writing Lupin share price was trading up by 0.8%.

Moving on to news from stocks in the FMCG space. GSK Consumer Healthcare share price is among the top losers on the bourses today.

The selloff came amid news that the company is looking to put iconic Horlicks for sale.

According to a leading financial daily, British pharmaceutical company GlaxoSmithKline plc will assess its Indian consumer healthcare subsidiary as it looks to fund a $13 billion buyout of Novartis' stake in their global consumer healthcare joint venture.

This is part of a 'strategic review' of consumer nutrition products that may include the sale of Horlicks, for which India is a big market.

It is not clear whether this assessment means that GSK plc would dilute its 72.5% stake in the subsidiary, GSK Consumer Healthcare. Horlicks Ltd held 43.16% stake in GSK Consumer Healthcare Ltd as of December 2017.

The combined sales of Horlicks and other nutrition products were approximately £550 million in 2017, GSK said in its statement. Nearly 85-90% of total Horlicks sales come from the India market. Besides India, GSK sells Horlicks in Sri Lanka and Bangladesh.

GSK expects the outcome of the strategic review to be concluded around the end of 2018, the company stated in a global release. It added that there can be no assurance that the review process will result in any transaction.

According to GSK, the company will increase focus on OTC and oral health categories. This portfolio includes Sensodyne toothpaste, Eno antacid, Panadol headache tablets, muscle gel Voltaren and Nicotinell patches, among others.

At the time of writing, GSK Consumer share price was trading down by 9%.

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