Bitter Pill

Many major pharma stocks, seen as safe bets in the worst of times, have seen their market caps slip in the past year. Is pharma losing its sheen on the bourses?

- E. Kumar Sharma

JUST PAST 10 AM ON SEPTEMBER 20, 2016, Cadila Healthcare had informed the stock exchanges that it had entered into a partnership with Takeda Pharmaceuticals of Japan to develop a Chikungunya vaccine. The stock price immediately shot up by 6 percent, taking its market capitalisation to ₹40,238.20 crore. But in just 10 days, it slipped to ₹39,721.20 crore – lower than the ₹43,010.50 crore clocked on October 1, 2015. (However, in the BT 500, which ranks companies based on a year’s average market cap, Cadila’s valuation rose 5 percent.)

But Cadila is not alone. Many large pharma companies saw their market caps slip over the past one year, raising doubts of whether the famed defensive sector on the bourses, had lost its sheen. In the BT500, Sun Pharma, the biggest player from India, saw its market cap slide by 3.8 percent from ₹201,259 crore to ₹193.570 crore during the period. Dr. Reddy’s was down 9 percent from ₹60,104 crore to ₹54,579 crore. The market cap of Cipla, which earns nearly half of its revenue from the domestic market unlike many others with more export revenues, too, declined 13.6 percent from ₹52,696 crore to ₹45,533 crore. Glenmark, arguably the only Indian company that has held on to its new drug research for close to 15 years, remained stagnant at around ₹24,100 crore; Lupin, too, did not flutter.