Nifty Pharma index hits 7-week high

Divi's Lab biggest gainer with over 50% rise in one month

The Nifty Pharma index hit a seven-week high of 9,629.7 on Thursday on the back of positive news flow for Divi’s Laboratories and Dr Reddy’s Laboratories. 

The US Food and Drug Administration’s (FDA’s) clearance to the facilities of Dr Reddy’s Laboratories, and minor observations in audit inspections at plants of Divi’s Labs boosted their stock prices. While Dr Reddy’s gained the highest, 7.4%, on Thursday, Divi’s Lab gained 5% to end at Rs 2,486 and Rs 990, respectively on the National Stock Exchange. 

Divi’s Labs has also been the highest gainer in the past one month, registering a gain of 59%. 

“The inspection was for full cGMP (current good manufacturing practices) and verification of all corrective actions proposed against the previous inspection observations. Divi's Laboratories announces that all previous observations have been confirmed as completed and resolved,” the company said in a stock exchange filing. The successful implementation of the post-audit corrective plan is expected to pave the way for the lifting of the import alert, which was issued when the USFDA pointed some manufacturing-related issues earlier. 

Similarly, Dr Reddy’s got a boost because of Unit II of its formulation facility at Srikakulam plant in Andhra Pradesh received an establishment inspection report from the US FDA. “We believe a promising complex generics pipeline equips Dr Reddy's to battle headwinds in the US market,” said Deepak Malik of Edelweiss Securities in a report on Thursday. “Biosimilars’ revenues are estimated to jump three times to $150 million over FY18-20, riding on emerging markets portfolio of four products and another eight in the pipeline. Royalties from the developed markets would also start contributing in FY21." 
 

Pharma sector stocks have been slow this year, as they under-performed the broader market indices on pricing and regulatory concerns. But the sector has reversed its losses in recent trading sessions.

Last week, Credit Suisse upgraded the Sun Pharma stock to 'outperform' rating. Sun Pharma's profit is expected to surge at a compound annual growth rate of 20% between 2019 and 2022 because of growth in its specialty drug business, the brokerage said. Sun Pharma stock has gained over 12% in a month and closed at Rs 519.55 on Thursday.

Also, multinational pharma giant Novartis’s India unit rose 6.7% to Rs 692.65 a share on Thursday, following the announcement of share buyback by the company. Novartis is not in the Nifty Pharma index.