The Indian Pharma is on its winning streak with a whopping 10.08% returns in just one month (as of 1st August). What is driving the rally? Read on to know!
The US significantly drives growth to two major Indian sectors, information technology and pharmaceuticals. While IT services companies face challenges in the US market, pharmaceutical companies are experiencing a gradual recovery and growth.
The question on everyone’s mind is, what is behind the success of the Indian pharmaceutical industry?
Let’s uncover the reasons behind its recent growth and explore the factors contributing to its remarkable performance.
What’s Happening?
After the recent first quarter earning session, pharma stocks are in the pink of health because the heavyweights in the index have started the first quarter on a positive note.
If we take a closer look at the one-month performance of the indices, as of 1st August 2023, the Indian stock market has been on a remarkable journey, with the Nifty 50 index revealing a return of 2.10% over the past month.
But the true star is the Nifty Pharma sector, which showcased an astonishing and impressive return of 10.08% in just a month!
Why is Pharma in Pink of Health?
Cipla and Dr Reddy’s, the index heavyweights, have announced amazing results in the June quarter, even better than what the D-street was expecting. Their revenues in North America grew well, and the management believes this positive trend will continue.
According to Moneycontrol, the management of Cipla has raised their expected quarterly revenue outlook to a range of $210-$215 million from the previous $190-$195 million. With a 25% increase in US sales, Dr Reddy’s is also looking forward to more growth in revenue numbers.
These two companies’ optimism has increased their stock prices, and this sentiment has also boosted the stock prices of other pharmaceutical companies’ stocks.
The result of these factors is why the pharma index is outperforming.
Speciality Durgs Enhancing Revenues of the Giants
Recently, the US drug market has undergone a transformation, as reported by Moneycontrol. The managements of Cipla and Dr Reddy’s stated that drug shortages and supply chain readjustments are leading to a higher uptake in volume by customers.
According to India Today, Dr Reddy’s had a successful year with 25 product launches, including essential medications like Lenalidomide, a generic version of the cancer drug Remilivid, and Sorafenib. Notably, the company also introduced six new products in the US during the last quarter, significantly contributing to their revenues.
Similarly, Moneycontrol highlights that Cipla’s sales in the US have received a boost from the sales of Lanreotide injection, which is used in treating tumours.
What’s Next?
The US is the biggest and most profitable drug market; hence, the pharmaceutical giants are hooked on making the most of it. But, the rise in pharma is also attributed to the reduced cost of raw materials.
So, factors like the raw material cost, sustained price hikes and the dynamics of the US drug markets will all shape the sector’s future. It will be interesting to see what happens next.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned are for information purposes only. This is not an investment advice.
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