Pharma Stocks Lead the Gains

Thu, 18 Feb 11:30 am

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After opening the day on a positive note, the Indian Markets have continued to trade in the green. Sectoral indices are trading on a positive note with stocks from the healthcare and capital goods sectors leading the gains.

The BSE Sensex is trading up 272 points (up 1.2%) and the NSE Nifty is trading up 83 points (up 1.2%). The BSE Mid Cap index is trading up by 0.9% while the BSE Small Cap index is trading up 1.4%. The rupee is trading at 68.47 to the US$.

Stocks in the Pharma space are trading on a positive note with Strides Shasun and Dr Reddy's Laboratories witnessing maximum buying interest. As per a leading financial daily, Cipla has closed the transaction to acquire two US-based companies, InvaGen Pharmaceuticals Inc., and Exelan Pharmaceuticals Inc. These two drug companies were purchased by Cipla last September in an all cash transaction worth US$ 550 million. The acquisition is made by Cipla (EU), Cipla's UK arm, through a wholly owned special purpose vehicle which would merge into InvaGen Pharmaceuticals Inc. after the acquisition. The combined revenue for the two companies for the year-ended 2015 is over US$ 230 million.

This acquisition is the second landmark acquisition in Cipla's 80-year history- the first was Cipla Medpro, South Africa. The acquisition will scale up Cipla's US business which is currently 8% of total revenue. Further, it will provide a launch pad to introduce Cipla's pipeline of products in respiratory and injectables, among others, in the coming years.

Combined with the pipeline of InvaGen products, the overall portfolio for the company will be wide-ranging and will cover chronic therapies like CVS, CNS, respiratory, oncology and diabetes among others. The acquisition of InvaGen pharmaceuticals also provides Cipla with about 40 approved ANDAs (abbreviated new drug application), 32 marketed products, and 30 pipeline products which are expected to be approved over the next 4 years.

The management of the company stated that the development marks an important step in bolstering its fledging presence in the US, with additional revenue of US$ 230 million in FY2017. The deal closure is expected to vault its sales from that market to around US$ 400 million. Cipla expects to file 3 to 4 products cumulatively each quarter via this newest acquisition.

It should be noted that on the international front, Cipla is building portfolio on the front end and also working with its partners. This combination will help the company in driving the export growth. Further, the company expects to garner around 25% of its total revenues from the US over the next 4 to 5 years.

Presently the stock of the company is trading up by 1.2%.

Automobile stocks are trading on a positive note with Hero MotoCorp and Escorts leading the gains. As per a leading economic daily, Mahindra & Mahindra (M&M) is looking to enhance its market share in the utility vehicles segment beyond 40%. For this, the company is banking on the KUV100 and it's another new model TUV300.

The company's young SUV, 'KUV100' has crossed 21,000 bookings and 1.75 lakh enquiries since its launch in January 2016. The company is of the view that the model will not only help gain additional volumes but will also help increase M&M's market share in the utility vehicles segment. Further, the company expects TUV300 to contribute to the effort which is clocking around 3,500 to 4,000 units a month.

It should be noted that the company for the month of January posted a good set of numbers with volumes increasing by 13%. The company posted a double digit growth inspite of facing a recent setback from Supreme Court's decision to ban diesel vehicles above 2000cc capacity. Further, in the April-January period this fiscal, M&M had sold a total of 1,74,276 units of utility vehicles out of a total industry sales of 4,68,323 units in the segment.

On a separate note, M&M is planning to invest Rs 80 billion in its automotive plants in Maharashtra over the next seven years as part of its expansion plans. The investment for this will be utilized towards infrastructure development, product development and capacity expansion for vehicles.

Presently the scrip of the company is trading up by 0.7%.

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