The beginning of the new financial year did not augur well for pharma major Novartis with the company’s seven year long court battle for a patent on its cancer drug Glivec getting rejected by the Apex Court on Monday.
Stock recovers
The stock hit a 52-week low of Rs 558.1 immediately after the Supreme Court verdict.
However, it managed to recover to end at Rs 587.95, a fall of 1.81 per cent from its previous day’s close on the BSE. The stocks of petitioners – Natco Pharma and Cipla – closed higher by 5.44 per cent and 1.20 per cent at Rs 452.40 and Rs 384.30 respectively.
Sarabjit Kour Nangra (VP- Research), Angel Broking, said: “Novartis AG lost the battle for getting its blood cancer drug patented in India and to restrain Indian companies from manufacturing generic drugs. We believe that the event will have a neutral impact on the industry dynamics and the growth of the industry will not be impacted. Also, while the MNCs will be cautious in terms of product launches, it will not deter them from launching the products. It can be viewed as teething problems in terms of implementation of the new patent law. For domestic companies, it would mean freedom to launch me-too products.”
“Moreover, with generic being a major proportion of the overall market, the growth of the Indian markets will not change because of the judgment,” she added.
The sentimental impact on the Novartis stock aside, pharma stock analysts believe that the judgment might have a profit rub off effect on other domestic pharma companies such as Lupin, Sun Pharma and Dr Reddy’s.
A pharma analyst said: “MNCs, however, will now think twice before launching a patented drug in India from its parent company. So their launch impetus is likely to slow down compared to before.”
“We have an underperform rating on Glaxo but are bullish on Lupin, Sun Pharma, Dr Reddy’s and Cadila.
“Though pharma stocks have been a good defensive bet overall, the future outlook on these stocks depends on how the regulatory environment pans out in terms of the drug pricing policy and the Brazil market, which has recently shown a sluggish performance. The economic recovery in the US, which forms the main market for several pharma stocks, will also influence the outlook,” he added.
manisha.jha@thehindu.co.in