Pharma stocks remained the biggest losers on both the BSE and NSE index on Tuesday with Sun Pharma registering a fall of over 4 per cent after Taro Pharmaceutical Industries reported weak March quarter results. The NSE pharma index closed 3.12 per cent down, while the BSE Healthcare index ended 2.72 per cent down.
Pharma major Sun Pharma closed 4.33 per cent down at Rs 612.55 on BSE. The share price opened at Rs 629 and touched a high and low of Rs 631 and Rs 589.20, respectively, in trade so far. On NSE, the share price of Sun Pharma settled 3.87 per cent down at Rs 615.35. The BSE Sensex closed 205.72 points down at 30,365.25, while NSE Nifty closed 52.10 points down at 9,386.15.
According to Reuters, Taro Pharmaceutical Industries reported 25.9 per cent fall in net sales for the March quarter, while gross profit decreased by $80.4 million to $143.8 million. Centrum Broking’s analyst Ranjit Kapadia attributed Taro to be behind Sun Pharma’s Tuesday’s fall. Kapadia added that Taro Pharmaceutical, which has posted very bad set of numbers, accounts for about one-fifth of Sun Pharma’s revenue and profit.
Brokerage House Angel Broking said that the Pharma index was the worst performer on the NSE and the BSE in trading. The pharma stocks were spooked by the quarterly results of Taro Pharmaceuticals, which is the overseas arm of Sun Pharma. Taro Pharmaceuticals reported a 26% decline in revenues for the March quarter and a 28% fall in net profits compared to the year-ago period. The EBITDA margin, an indicator of operating profitability of Taro, actually saw 1600 bps shrinkage, which raised concerns over the operating economics of Taro Pharmaceuticals.
The brokerage house further added that the reason Taro Pharma is important for the pharmaceutical sector in India is that it is seen as representative of the vast Indian generics business in the US. Generic manufacturers like Taro Pharma are seeing an unfavourable pricing environment in the US generics market due to intense competition, threat of new entrants and higher ANDA (Abbreviated New Drug Application) approvals by the US Food & Drug Administration (FDA).
With weak results expected from Sun Pharma and Aurobindo as well as a negative guidance issued by Glenmark, Indian pharma looks likely to operate in a difficult environment. Pharma stocks are trading at multi-year low valuations.”
Aurobindo Pharma (down 5.94 per cent), Cipla (down 4.89 per cent) and Orchid Pharma (down 5.57 per cent) were some of the worst performers on BSE on Tuesday.