Improved quarterly figures bring bulls back to pharma counters

New Delhi, January 30: | Updated: Jan 31 2002, 05:30am hrs
Punters have shifted focus to pharma counters after some drug majors staged a smart quarterly show. The recent buoyancy in select pharma counters is mainly driven by value investments in multinational pharma stocks and outperformance of market expectations by pharma majors.

MNC stocks like Novartis, Glaxo Smithkline and E-Merck have gained 9-11 per cent in the last fortnight. Select domestic drug companies like Abbott Labs, Avantis Pharma, Torrent Pharma and Ranbaxy Labs also witnessed spurt in prices of stocks.

These defensive stocks have lived upto investor expectation as the BSE healthcare index outperformed the Sensex spurting 3.26 per cent, as against the sensex gains of 1.56 per cent since December 31. However, the depressed sentiments prevailing in the stock market prevented a rally Dr Reddys which came out with better than expected results for the quarter ended December 2001.

According to a Delhi-based broker, The multinational stocks currently enjoy lower valuations and thus are attracting value buying. However, investors are skeptical about investing in Indian pharma stocks even after good quarterly results as they are already trading at higher levels. While the price to earning multiple (PE ratio) of MNC pharma stocks like E-Merck, Novartis and Glaxo ranges between 11 and 26, the Indian stocks like Dr Reddys, Ranbaxy and Cipla are trading at a PE of 25-36.

Torrent Pharmaceuticals has gained over 28 per cent since January 16 to close at Rs 182.4. The company received a windfall gain of Rs 41.5 crore in November through the sale of its 50 per cent stake in Sanofi Torrent India, a joint venture company with Safoni Synthelabo of France. Besides, the company is also entering the anti-HIV drug market in Brazil and Latin America.

Abbott Labs also jumped over 10 per cent during the period to close at Rs 160.7. The stock was stuck at the 8 per cent upper circuit filter on Wednesday. According to the Delhi-based broker, there are expectations of an open offer as the US-based Pharmacia Corporation acquired a controlling stake in the company at a hefty premium.

Among the MNC counters, Novartis, Glaxo and E-Merck 9-11 per cent since January 16. The Novartis stock gained 10.77 per cent during the fortnight to close at Rs 238 on Wednesday.

In fact, the Glaxo Smithkline scrip has gained about 20 per cent since January 1 when it closed at Rs 285.85. The stock closed at Rs 340.8 on Wednesday gaining 1.23 per cent during the day.

E-Merck which closed at Rs 295.05 on January 30 with a gain of 9.12 per cent since January 16. The company had declared a 16 per cent increase in net profit on January 29.