Covid-19 drugs give a boost to pharma stocks

Covid-19 drugs give a boost to pharma stocks

Last updated: 23 Jun, 2020 | 05:00 pm

Covid-19 drugs give a boost to pharma stocks
  • India’s pharmaceutical industry is now the largest provider of generic drugs globally, supplying over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. 
  • Globally, the race amongst Pharma to find potential medicines and vaccines for the COVID 19 is on. At stake is potentially billions of dollars in revenues given the widespread application.
  • Several Indian pharmaceuticals have signed licensing agreements to manufacture and distribute various drugs which may help COVID-19 patients
  • Important to note that none of these drugs are a ‘Silver Bullet’ solution to fight COVID and their overall efficacy varies on a case to case basis.

Here’s a list of Indian pharmaceutical firms and the current status of their Covid-19 drug manufacturing.

Pharma stocks are on fire

  • Glenmark Pharmaceuticals shares closed 30% higher after the Drug Controller-General of India (DCGI) gave the company approval to manufacture Favipiravir, a potential COVID drug. This makes Glenmark the first company in India to get manufacturing approval for this drug.
  • This drug, first used to treat influenza in Japan in 2014, has been in clinical trials in various countries to treat COVID although only approved for usage in Russia before today.
  • Meanwhile, many firms with an Indian presence have now announced direct or indirect involvement in the manufacturing/ marketing of COVID-19 drugs. These include Jubilant LifeSciences, Hetero Pharma, Glenmark Pharma, Cadila Healthcare, Dr Reddy’s Laboritores, Cipla and Biocon. With the number of cases soaring by the day, more players are expected to announce the manufacture and sale of such drugs. 
  • While the markets are excited by these agreements, there is still widespread scepticism amongst the medical fraternity on the efficacy of these drugs.

Pharma: where can you invest

  • While the pandemic has hurt the businesses of most industries, it has presented a unique opportunity to drug manufacturers. These companies will continue to hog limelight over the next year as the world races to find a vaccine for COVID
  • Irrespective of where the vaccine is first developed, given the massive might of India in mass manufacturing of drugs, a large part of vaccines will be manufactured by one or multiple players in India. 
  • Given this scenario, concentrating bets on one or two stocks will be high risk rather than betting on a basket of stocks. 

Our VGQM model has a Buy rating Cadila Healthcare, Divi’s Lab, Dr Reddy’s and Torrent Pharmaceuticals.