Shares of pharmaceutical companies selling cardiac and diabetes drugs in India saw deep cuts on Monday, with MNC drug maker Sanofi India losing more than 10% after the Indian drug pricing authority capped the price at which these companies sell their drugs.
The National Pharmaceutical Pricing Authority (NPPA) capped the prices of 108 diabetes and cardiac drugs under the auspices of the Drug Pricing Control Order, which amounts to approximately R5,500 crore or 6% of the India Pharmaceutical Market (IPM). The government body has evoked the rules under Para 19 under which it can regulate the ceiling price of any drug under ?extraordinary circumstances? in ?public interest.?
The listed companies whose top line is expected to suffer under the development are Sanofi India, Abbott Healthcare, Ranbaxy Laboratories and AstraZeneca Pharma India, according to industry body AIOCD-AWACS.
Sanofi India said in a statement that the NPPA ?shocked and disappointed? the pharmaceutical industry by issuing a price control order, ?without any consultation and participative dialogue with any industry associations.?
Among other losers were Zydus Healthcare (-5.7%) and Torrent Pharma (-1.5%). Cadila Healthcare, Merck, and Pfizer all ended with near 1.5% losses.
The BSE Healthcare index ended down 62 points or 0.53% at 11,667.07. In contrast, the Sensex ended at 25,006.98, down 17.37 points or 0.07%.
The ceiling price will reduce the end-market sales of the impacted products by R640 crore, 11.5% of the sales of the impacted products, said Saion Mukherjee, analyst, Nomura Financial Advisory and Securities (India).
?The companies most impacted are Sanofi India, Emcure, Zydus Cadila, Abbott Healthcare and Ranbaxy. For our coverage universe we estimate Ebitda is likely to be affected by 0-2.5% and net earnings by 0-4%. Though the impact is limited, the move by the NPPA has increased the risk of additional controls in the future,? Mukherjee said in a research note.
