Is it time to buy Pharma stocks that have lost 50%
28 Mar 2016
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The S&P Healthcare index, which had risen over 6 per cent in 2015, lost the momentum in 2016. The index cracked over 15 per cent so far this calendar and select pharma stocks have lost close up to 50 per cent in the same period.
Stocks that have seen double-digit drop include names like Sharon Bio (down 52 per cent), Syncom Formulations (down 51 per cent), Marksans Pharma (down 50 per cent), Orchid pharma (down 42 per cent) and Wockhardt (down 38 per cent), among others.
The whole pharma sector has been under pressure largely on account of concerns over the USFDA and profit booking. Most experts said regulatory hurdles are going to be the biggest overhang for the sector and, hence, investors should remain selective.
Most of the pharma stocks corrected after outperforming the market in last five years and even valuations of some of the big names became expensive. But after the recent correction, investors can look at accumulating them on declines.
It is time to accumulate pharma stocks and within pharma you have a complete choice from domestic pharma names to generic companies to discovery companies.
The healthcare sector continues to have a good run and valuations that had become stretched in many stocks are now looking attractive. The earnings potential for most of the top pharma names remains stable. But the worries for the sector is far from over, say experts.
Most of the largecap companies are staring at stagnation as far as US market growth is concerned. Even back home, the health ministry earlier this week, in a notification issued on March 12, prohibited manufacture, sale and distribution of 344 fixed-dose combinations (FDCs) with immediate effect.
Many of the largecap or midcap companies are very much in a stagnation as far as the US market growth is concerned. As a thumb rule if you see that any company nearing $1 billion US revenue, definitely its growth will be impacted.
One of the reasons for that could be the base impact. Moreover, there are many big midcap or largecap names which are facing problems because of regulatory issues and that is definitely not positive in terms of increasing US sales.
Investors planning to stay invested for 3 to 5 years can buy pharma stocks