After opening the day in green, share markets in India have traded on a volatile note and are presently trading below the dotted line. Sectoral indices are trading mixed with stocks in the pharma sector and stocks in the IT sector trading in green. While stocks in the metal sector are trading in red.
The BSE Sensex is up by 115 points (up 0.3%) and the NSE Nifty is trading up by 50 points (up 0.5%). Meanwhile, the BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index is trading up by 0.6%. The rupee is trading at 73.91 to the US$.
In news from stocks in the pharma sector. Dr Reddy's share price is among top losers today as the company said that the US Food and Drug Administration (USFDA) inspected its Duuvada, Viazg facility and issued eight observations for the same.
The USFDA, after the completion of an inspection of the facility, issued eight observations in form 483 to the company.
As per USFDA, observations are made in Form 483 when investigators feel that conditions or practices in the facility are such that products may become adulterated or render injuries to health.
The fresh round of concerns raised by the USFDA inspectors over the Oncology formulations facility comes as a big set back to the company. In November 2015 US FDA had issued a warning letter to the company after finding serious quality related deviations at three of Dr Reddy's manufacturing facilities.
At the time of writing, Dr Reddy's share price was trading down by 2.5%.
Indian pharma companies catering to the US markets are breathing a sigh of relief. After being adversely affected by import bans and the suspension of new drug approvals from manufacturing facilities in the past three years, there has been a sharp pick-up in new drug approvals in FY17.
With an aim to lower the overall healthcare costs in the country, the US Food and Drug Administration (FDA) approved a record 763 generic drugs for the financial year ending 30th September. As per Mint Analysis, Indian pharma companies received 295 approvals accounting for 40% of the overall approvals during the year.
Generic Drug Approvals Hit the Roof
Even the total filings of abbreviated new drug applications (ANDAs) for generic drugs rose to 1,292 in FY17 from 852 in the previous year. While faster approvals expedite the commercialization of product pipelines of domestic pharma companies spurring growth. At the same time, however, it has raised the intensity of competition resulting in pricing pressures. The price erosion has been further compounded by a consolidation among US distributors and the decline in the number of products going off-patent over the past few years.
In other words, acceleration in generic drug approvals is like a double-edged sword. The growth boost can be quickly offset by the ensuing pricing pressures. Pharma companies that invest in creating a pipeline of complex generics or building competencies in alternative dosage forms are better equipped to tackle the changing dynamics in the US generics market.
Therefore, despite a lot of pessimism surrounding pharma stocks on regulatory uncertainty, we have stocks in open positions in StockSelect and have remained bullish on pharma stocks in our long term service, ValuePro.
Moving on to news from stocks in the steel sector. Tata Steel share price is in focus today after the European Union launched an in-depth investigation into the proposed creation of a joint venture between the company and ThyssenKrupp.
ThyssenKrupp struck a deal in June to merge its steel-making business with Tata in response to a flood of cheap Chinese steel unbalancing world markets, with the new venture set to become Europe's second biggest manufacturer of the metal.
The companies had hoped the deal would result in 400-500 million euros ($470-590 million) a year in savings, but the merger has caught the eye of competition officials in Brussels.
The commission is concerned that the merger may reduce competition in the supply of various high-end steels.
An initial investigation raised possible problems over competition in the supply of certain specialized types of steel, including certain types used for cars, food packaging and engineering products such as electrical transformers.
At the time of writing, Tata Steel share price was trading down by 3.9%.
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