Shares of pharmaceutical companies were in demand in Friday’s session, with stocks of Alkem Laboratories, Divi’s Laboratories and Syngene International rallying up to 14 per cent to hit record highs on BSE amid expectation of strong earnings for the quarter ended June 2021 (Q1FY22), helped by low base last year and strong demand led by the pandemic.
Besides these three stocks, Glenmark Pharmaceuticals, Wockhadart, Alembic, Indoco Remedies, Jubilant Pharmova and Gland Pharma were up between 2 per cent and 4 per cent on the BSE.
At 10:01 am, the S&P BSE Healthcare index was up 1 per cent, as compared to a 0.07 per cent rise in the S&P BSE Sensex. The healthcare index hit a new high of 26,364.82 in intra-day trade today. Thus far in the financial year 2021-22 (FY22), the healthcare index has rallied 24 per cent as against a 9 per cent gain in the benchmark index. Nifty Pharma too hit a fresh record high of 14,715 in intra-day session on National Stock Exchange (NSE).
Indian Pharmaceutical Market (IPM) was up 37 per cent year-on-year (YoY) in Q1FY22 on a low base, strong demand led by pandemic and Covid drugs. Adjusting for the low base and Covid portfolio, analysts estimate IPM growth at 15 per cent YoY for the quarter.
A lower base and a revival in domestic formulations are likely to drive overall sales. On the other hand, despite a favourable base in some select stocks, US formulations growth is expected to remain subdued amid a lack of meaningful launches, price erosion and currency headwinds. On the hospitals front, the second wave is likely to change the product mix more towards Covid occupancies, which is likely to impact realisations, analysts at ICICI Securities said in a healthcare sector update.
“Q4FY21 saw tough US business for several Indian pharma firms on a decade-low flu season. On the low base of the previous quarter, we build in growth for most of our coverage firms. In our view, Sun pharma will clock the best quarter-on-quarter (QoQ) growth on continued traction in specialty segment, followed by Alkem, which would benefit from a very low base of Q4FY21. Cipla’s growth comes from a low base and new product launches in the quarter, Dr Reddy’s growth would be driven by its healthy product launch rate, but key growth driver for the year, Vascepa, will come in effect from Q2FY22,” the brokerage firm Jefferies said in Q1FY22 pharma sector preview.
Due to the severe second Covid wave, Covid beds saw near 100 per cent occupancy across the country, and Apollo, Max and Fortis would be no exception to it. Max Healthcare, which is metro-centric with high beds concentrated in Delhi and Mumbai, should witness the highest occupancy (85 per cent) among the three, in our view, Jefferies said. However, high Covid occupancy will drive down ARPOB (average revenue per occupied bed) for all the three hospitals, the brokerage firm added.
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