Asian shares are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.4% while the Hang Seng is also up 0.4%. The Shanghai Composite is trading up by 0.1%. US stocks closed little changed on Tuesday after President Donald Trump announced he was withdrawing the US from the Iran nuclear deal signed three years ago.
Back home, India share markets opened the day on a negative note. The BSE Sensex is trading down by 55 points while the NSE Nifty is trading down by 9 points. The BSE Mid Cap index and BSE Small Cap index opened the day down by 0.2% & 0.1% respectively.
Sectoral indices have opened the day on a mixed note with metal stocks and information technology stocks witnessing maximum buying interest. While, energy stocks and banking stocks have opened the day in red. The rupee is trading at 67.08 to the US$.
In the news from the pharma sector. As per an article in a leading financial daily, Lupin's joint venture, YL Biologics (YLB) with Japanese drug maker Yoshindo - has submitted a New Drug Application (NDA) before Japan's drug regulator to sell biosimilar of Etanercept. The drug is used for treatment of autoimmune disease Rheumatoid Arthritis.
Autoimmune disease occurs when immune system mistakenly attacks our body.
A biosimilar is a product that is very similar to a biological product already approved by regulators such as the US Food and Drugs Administration (USFDA). Biological products could be produced through biotechnology in a living system, such as a micro-organism, plant cell or an animal cell.
With generic drugs witnessing pricing pressure in key markets such as the US, domestic pharmaceutical firms have been focusing on niche drugs and biosimilars where the margins are better.
Reportedly, Lupin has been a late entrant to biosimilars and is trying to catch up with its rivals spending millions of dollars on developing biosimilars.
Etanercept - the company's major biosimilar push is being developed targeting highly regulated markets such as US, Europe and Japan, unlike other Indian drug makers who test waters in India and emerging markets before looking at developed markets.
Etanercept, the biosimilar version of Pfizer's Enbrel, had global sales of US$11 billion in 2017.
The ex-US market for Etanercept is estimated at US$ 4 billion in Japan and Europe along with other regulated and emerging markets.
After significant investment in biotechnology R&D division over the years, this is the first biosimilar for regulated markets developed inhouse at Lupin and the first ever complex fusion protein like etanercept in regulated markets by an India pharmaceutical player.
Lupin said that the filing opens up other key markets like Europe, Canada, Australia, the Middle East, South East Asia and Latin America for this product within the next 12 to 18 months.
Lupin share price opened the day up by 0.1%.
One shall note that, Biosimilars and Biologics are burgeoning sectors. Also, major scientific and technological advances, coupled with socio-demographic changes and increasing demand for medicines will revive the pharma industry's fortunes in another 10 to 20 years.
But given the complexity of biologics, will Indian companies be able to break some ground in this space?(Subscription Required). Going forward, whether the monetization of biosimilars prove to be a big growth driver for the company will be the key thing to watch out for.
Speaking of pharma sector, did you know the BSE Healthcare Index is down 20% over the past three years? During the same period, the BSE Sensex is up 21%.
The BSE Healthcare Index has underperformed the Sensex
And this was a sector they called 'evergreen'.
Have Investors boarded a plane that's about to crash? Or is it just turbulence on the way to a smooth and safe landing?
It's important to understand the core issues. Regulatory problems for pharma companies have increased over the past few years. The frequency of visits as well as quality expectations have increased a lot.
While we expect the pain to continue in the short-term, the long-term picture still looks bright.
Stricter norms and pricing pressure will ensure only quality players remain. Companies with strong R&D facilities and quality compliant plants will have an edge over the others.
Moving on to the news from the IPO space. Non-banking finance company (NBFC) Indostar Capital is all set to launch its initial public offering (IPO) today.
On Tuesday, the company raised Rs 5.5 billion from anchor investors by allotting 9.7 million shares to 24 anchor investors at the upper end of the IPO price band of Rs 570-572 per share.
The issue closes for subscription on Friday.
Indostar Capital Finance is a non-banking finance company (NBFC) registered with the Reserve Bank of India as a systemically important non-deposit taking company.
It is primarily engaged in providing structured term financing solutions to corporates and loans to SME borrowers in India. It recently expanded its portfolio to offer vehicle finance and housing finance products.
The IPO comprises fresh issuance of shares worth Rs 7 billion, besides, an offer-for-sale involving up to 20 million shares.
Proceeds of the fresh issue will be used to augment capital base to meet future capital requirements.
The promoters and the existing shareholders will dilute up to 30% of their ownership through the public issue.
The company is 42.3% owned by the private equity fund Everstone Capital, while ACP Libra owns 16.35% and Beacon India PE owns 10.8%.
To know more about the company, you can read our IPO analysis of IndoStar Capital Finance (requires subscription).
Speaking of IPOs, the demand for IPO's had reached sky-high levels last year.
One shall note that, more than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.
A merit-based selection primarily including valuation, business, and management quality is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not.
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