On December 12, the stocks of several pharma companies declined. The sectoral downtrend is attributed to increased inspections of manufacturing facilities post Covid-19.
While the sensex and Nifty rose on December 12, Dr Reddy’s, Aurobindo Pharma, Cipla, Lupin, Sun Pharma, and Divi’s Labs stocks lagged behind. After USFDA’s findings on Dr Reddy’s formulations plant FTO-3 in Hyderabad sparked worries, its stock fell. Other drug businesses face USFDA regulatory issues. This sectoral downturn is due to enhanced manufacturing facility inspections after Covid-19.
Several pharma stocks have lagged as sensex and Nifty have reached fresh highs.
BSE sensex exceeded 70K for the first time on Monday, but Dr Reddy’s scrip plunged almost 7% in early trading hours and closed about 5% lower at Rs 5,473 from Rs 5764.
Dr. Reddy’s stock fell after a stock broking business expressed concerns about the USFDA’s findings on its formulations facility FTO-3 in Bachupally, Hyderabad, leading to a warning notice. In October, USFDA examined the plant and issued Form 483 with 10 observations. According to reports, these observations included improper cleaning of utensils and equipment, refusal to explain unexplained disparities, use of non-standard instruments and equipment, and ill-maintained drug manufacturing buildings.
Aurobindo Pharma (-1.3%), Cipla (-1.2%), Lupin (-0.8%), Sun Pharma (-0.4%), and Divi’s Labs (-0.4%) also closed in red on Monday, while Nifty Pharma and BSE Healthcare fell 0.8% and 0.4%, respectively.
Analysts and experts ascribed the sectoral decrease to the USFDA’s increased inspections of Indian generics manufacturers’ facilities post-Covid-19. “The sensex and overall markets have been doing well because of the certainty of the Modi government continuing for five more years but sectors like pharma are not doing well due to regulatory challenges,” V S Vasudevan, a veteran of the pharma
Rashmi Shetty, Daulat Capital pharma analyst, thinks “not-too-great” domestic sales data and profit-booking may be hurting pharma stocks.
Conclusion
Dr Reddy’s, Aurobindo Pharma, Cipla, Lupin, Sun Pharma, and Divi’s Labs have lagged as the sensex and Nifty rise. Concerns regarding USFDA’s observations on Dr Reddy’s formulations plant FTO-3 in Hyderabad drove its stock down roughly 7% in early trading. In October, the USFDA inspected the facility and issued Form 483 with 10 observations, including improper cleaning of utensils and equipment, failure to explain unexplained discrepancies, use of non-standard instruments, and ill-maintained drug manufacturing buildings. Pharma heavyweights Aurobindo, Cipla, Lupin, Sun Pharma, and Divi’s Labs closed in red. Analysts blame the sectoral slump on the USFDA’s post-Covid-19 inspections of Indian generics makers’ facilities. Besides “not-too-great” domestic sales figures, profit-booking may be hurting pharma equities.
