Pharma stocks rally up to 4%, but will Trump order really have minimal impact?
Shares of
pharmaceutical companies
rallied up to 4% on Tuesday as investors expect that
US President Donald Trump
's executive order will have minimal impact on US generics.
Dr Reddy's
shares were up around 4% while
Granules
,
Glenmark
,
Lupin
,
Divi's Lab
, and
Aurobindo Pharma
were trading around 3% higher.
Nifty Pharma index
itself rose around 2% even when Nifty fell around 0.5% amid profit-booking post Monday's rally, which saw the benchmark indices making the sharpest single-day gain in the last 4 years.
"As far as the impact on Indian pharma companies is concerned, we foresee very limited impact. Based on our interaction with companies, the generics pricing spread is thin across developed nations, and hence, the scope of reduction in prices is expected to be limited on the US generics portfolio," brokerage Motilal Oswal said.
Trump's order says that the drug prices in the US should be aligned to the prices in other developed countries. Trump intends to take action against pharmaceutical manufacturers charging higher prices to Americans while providing steep discounts to other wealthy nations but analysts say there is uncertainty on how successfully the executive order is eventually implemented.
An earlier attempt by the Trump 1 administration in 2020 to implement a similar order for lowering pricing was defeated in various courts
"The order is more inclined toward innovator pharma companies, which might be having pricing disparity on medicines sold in the US and other developed nations," Motilal said, adding that it estimates a very limited impact of the executive order on US generics.
Nomura, however, warned that If the executive order is implemented, it will have a negative impact on branded and specialty drug sales.
"In our coverage universe,
Sun Pharma
has the largest exposure to branded sales in the US. We estimate that US specialty sales are at ~USD1036mn (FY25F) for Sun Pharma. The largest product Ilumya (FY25F US sales of ~USD570mn) is largely supported through Medicare Part B, which possibly accounts for 50%+ of the sales of the company, in our assessment. The listed price of Ilumya in the US is ~4x that in other developed countries, in our view. Therefore, the implementation of lower pricing can have a significant negative impact on revenues and earnings, in our view," Nomura said.
As generics are priced at only a modest discount (~30-40%) to the brand prices, the brokerage firm said it is not likely to have a negative impact on typical commoditized generics with more than five players in the market.
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Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Undo He added that both India and the EU are in active discussions to find solutions to make business smooth for companies of both sides. 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