Sensex Trades in Green; Auto, Pharma Stocks Rally

Tue, 3 Jul 12:30 pm

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After opening the day flat share markets in India are trading on a positive note and are presently trading above the dotted line. Sectoral indices are trading on a mixed note, with stocks in the auto sector and stocks in the pharma sector witnessing maximum buying interest.

The BSE Sensex is trading up by 156 points (up 0.4%) and the NSE Nifty is trading up by 52 points (up 0.5%). Meanwhile, the BSE Mid Cap index is trading up by 0.5%, while the BSE Small Cap index is trading up by 0.3%. The rupee is trading at 68.61 to the US$.

In news from stocks in the pharma sector. Strides Shashun share price is in focus after its subsidiary received approval from the US Food and Drug Administration (USFDA) for its painkiller drug Ibuprofen.

Strides Pharma Global Pte Ltd received final approval from the USFDA for Ibuprofen which is a generic version of Motrin IB tablets, 200 mg, of Johnson & Johnson Consumer, Inc.

Ibuprofen is used to relieve pain from various conditions such as headache, dental pain, muscle aches, or arthritis. It is also used to reduce fever and to relieve minor aches and pain due to the common cold or flu. Ibuprofen is a non-steroidal anti-inflammatory drug (NSAID).

The product will be manufactured at the company's Oral dosage facility at Puducherry and will be marketed by Strides Pharma Inc in the US market, it added.

The approval further strengthens Strides Ibuprofen franchise for the US markets that now comprises of 7 approved products addressing a combined Rx and OTC opportunity of US$900 million as per IMS and IRi data.

Strides now has 75 cumulative ANDA (abbreviated new drug applications) filings with USFDA of which 51 ANDAs have been approved as of date and 24 are pending approval.

he approval covers Atovaquone and Proguanil Hydrochloride tablets, a generic version of GlaxoSmithKline's Malarone tablets.

At the time of writing, Strides Shashun share price was trading up by 2%.

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.

With an aim to lower the overall healthcare costs in the country, the US Food and Drug Administration (FDA) approved a record 763 generic drugs for the financial year ending 30th September. As per Mint Analysis, Indian pharma companies received 295 approvals accounting for 40% of the overall approvals during the year.

Generic Drug Approvals Hit the Roof

Even the total filings of abbreviated new drug applications (ANDAs) for generic drugs rose to 1,292 in FY17 from 852 in the previous year. While, faster approvals expedite the commercialisation of product pipelines of domestic pharma companies spurring growth. At the same time however, it has raised the intensity of competition resulting in pricing pressures. The price erosion has been further compounded by a consolidation among US distributors and the decline in the number of products going off-patent over the past few years.

In other words, acceleration in generic drug approvals is like a double-edged sword. The growth boost can be quickly offset by the ensuing pricing pressures. Pharma companies that invest in creating a pipeline of complex generics or building competencies in alternative dosage forms are better equipped to tackle the changing dynamics in the US generics market.

Therefore, despite a lot of pessimism surrounding pharma stocks on regulatory uncertainty, we have stocks in open positions in StockSelect and have remained bullish on pharma stocks in our long term service, ValuePro.

Moving on to news from stocks in the auto sector. Hero Motocorp share price is in focus today after the company reported a rise in vehicle sales.

Hero MotoCorp sold 704,562 two-wheeler units in the month of June 2018, which is a 13% growth over the 624,185 units sold in June 2017.

The company also clocked record sales of more than 2.1 million unit sales in the first quarter of the current fiscal.

Hero also took a price hike in most of its models of motorcycles and scooters to partially offset higher input costs amid rising demand as sales climbed in June. The company did not however, specify the quantum of increase.

The company expects better sales going forward with the monsoon already hitting many parts of the country ahead of time, which will lead to a positive consumption pattern.

One of the major indicators of this is the volume of vehicles sold.

For the first nine months of FY18 at least, the auto industry has done well to grow in double digits after some lean years.

Vehicle sales grew by 11.3% YoY during this period. The best performing of the lot were commercial vehicles (CVs), volumes of which grew by 15% YoY. Two-wheelers also did well growing by around 12% YoY.

In fact, in a recent conference call, the management of the largest two-wheeler company in the country - Hero Motocorp - said they expect the two-wheeler industry to grow in double digits in FY19 as well.

We're keeping a close eye on auto stocks in this correction.

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