Nifty Pharma, Healthcare Snap Two-Day Fall Post Jefferies' Outlook

Nifty Pharma and Nifty Healthcare snapped their two-day fall and rose on Tuesday, following a report by Jefferies on its takeaways from its tour of pharma companies across Delhi, Mumbai, and Hyderabad.

The report which has made several significant observations stated generic names are adopting different strategies to mitigate price erosion and mentioned that non-price metrics are being given due importance for supplier selection, unlike in the past.

According to Jefferies, CDMOs said they were not banking solely on 'China+1', but were bullish on the outlook. "Hospitals are looking to add new geographies once the home turf is well protected," it said.

According to the brokerage, Zydus Lifesciences Ltd., Lupin Ltd., and Dr Reddy's Labs are among the firms adopting different strategies in the US.

Indian generic firms with meaningful exposure to the US market are adopting different strategies to avoid price erosion, the brokerage said. It noted that the most common approach was to continuously move up the value chain by pursuing more complex products, ranging from injectables, inhalers, liposomes, transdermal drug device combinations, and complex API products (HAP, peptides) etc.

"The other route is to move towards large molecules and biosimilars where price erosion is more gradual unlike plain vanilla small molecules," Jefferies said. "Both approaches should lead to a concentrated product portfolio which occasionally may result in volatility."

In addition, select companies build their US business targeting one-off opportunities where spare capacities are available, and firms have regulatory approval for a wide variety of products to cash in during shortages. "Except Sun Pharma, no other company plans to pursue a specialty strategy for the US in the near term," it said.

On the Biosecure Act, the brokerage said Indian CDMO firms have a mixed view on the Act and 'China+1' benefit accrual. Several have denied any change in business operations/client interests in the past 12-18 months due to such factors. "However, nearly all of these CRO/CDMO firms believe the outlook is strong medium term," it said, noting factors for strong outlook are movement of molecules to higher clinical stages, and commercialisation opportunities in GLP-1/peptides, more capabilities to offer by Indian firms, and overseas presence.

In hospitals, for new geographies, all options are on the table, including OSM buyout, and greenfield expansion, the brokerage said. Single specialty hospitals believe they can hold their forte even if multi-specialty hospitals enter their arena as they provide better and efficient care to patients vs multispecialty hospitals, which are better suited for surgeries and areas of cardiac, neuro, critical care etc.

In Nifty Healthcare, which was up 0.2% at 10:00 a.m., Glenmark Pharma, Syngene International, and Apollo Hospitals were among the top gainers, while Dr Reddy's Labs, Zydus Lifesciences, and Aurobindo Pharma fell the most. Nifty Pharma was up 0.1% at 10:02 a.m.