Pharma stocks dive 20-55% this year after ban on combination drugs
While Marksans Pharma has fallen 47% in 2016 so far, Wockhardt posted a decline of 38% and Pfizer 29%
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Mumbai: The government ban on fixed dose combination (FDC) drugs has taken a toll on pharmaceuticals stocks, which saw a fall in the range of 20-50% year-to-date. Marksans Pharma Ltd has fallen 47% in 2016 so far, while Wockhardt Ltd posted a decline of 38% in its share price. Pfizer Ltd, another company which got affected with the FDC ban, saw its shares fall 29% year-to-date.
The government has banned 344 fixed dose combination (FDC) drugs, citing lack of therapeutic justification in the said combinations. An FDC is a combination of two or more drugs in a fixed proportion. The expert panel appointed by government has banned popular drugs such as Vicks Action 500 Extra (Paracetamol, Phenylephrine and Caffeine) and cough syrup Codex (Chlorpheniramine maleate, Codeine Phosphate, Menthol Syrup).
Around half a dozen codeine-related fixed combinations were part of the government’s banned drugs list. Codeine, a sleep-inducing and analgesic drug, is an opiate derived from morphine, and sometimes leads to abuse.
“The pharmaceutical industry is so much frustrated and angered over the government decision. We are not against ban, but we stand against the way it was handled," said D.G. Shah, secretary general, Indian Pharmaceutical Association (IPA). Codex, marketed by Pfizer, has been sold across the globe including highly regulated markets and there’s no justification for a ban in India, Shah said.
According to Shah, if the government adds another 500 combinations which are in the list, the industry will lose about ₹ 10,000 crore annually. The Indian pharmaceutical industry is pegged at ₹ 98,000 crore.
Early this week, companies like Abbott India, Macleods Pharmaceuticals, Pfizer India, Procter and Gamble Hygiene and Health Care (P&G), Glenmark Pharmaceuticals, RB India, Piramal Enterprises and Alembic Pharma got interim stay on the ban from the Delhi high court. The next hearing of the case is on 21 March.
On Thursday, Wockhardt Ltd and Laborate Pharmaceuticals also won a stay order from the Delhi high court against the government ban.
According to the latest data released by pharmaceutical research company AIOCD Pharmasofttech AWACS, Abbott Healthcare is likely to suffer a loss of ₹ 485 crore, MacLeods Pharma of around ₹ 370 crore and Pfizer to the tune of ₹ 368 crore.
“This is a significant financial impact to companies. Some of the well-known brands have been included in the mix along with some truly irrational brands. The intention is good but the government will have to find a way to segregate the bad from the good," said Sujay Shetty, leader - pharma life sciences, PWC India.
On Tuesday, Pfizer India said that the prohibition of the Corex drug is likely to adversely impact the company’s revenue and profitability. Corex recorded sales of ₹ 176 crore for the first nine months of the fiscal year ended on 31 December 2015.
Another banned cough syrup brand Phensedyl, marketed by Abbott, accounts for around 3% of Abbott’s $1 billion India revenue.
The shares of Abbott India Ltd fell by 21.4% year-to-date.
Other pharma companies like Sharon Bio Medicine Ltd fell 54%, Syncom Formulations India 50%, Claris Lifesciences 36%, Orchid Pharma 35%, Vimta Labs 35%, Anuh Pharma 35%, Sequent Scientific 33%, SMS Pharmaceuticals 31%, Ipca Laboratories 29%, Nectar Lifesciences 28%, Alembic 28%, Strides Shasun 20%, Natco Pharma 19%, Cipla Ltd fell 19%, Novartis India 19%, Unichem Laboratories 18%, Merck Ltd 17%, Aurobindo Pharma 17%, Divi’s Laboratories Ltd 14%, Glenmark Pharmaceuticals 13%, Torrent Pharmaceuticals 10%, while Biocon and Lupin fell 10% each year-to-date.
The BSE Healthcare Index is down 9% so far this year.
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