Within the pharma space, the predominantly US facing companies still are struggling with price erosions and USFDA audit related problems. The added uncertainty of USFDA actions and subsequent export ban/restriction type of problems will continue to dog the industry. In my view, the golden period of higher returns from US generic market is over atleast for near future. Companies can benefit from a few shortages here and there, but the overall picture is murky.
Companies having a bigger basket of products and multiple USFDA manufacturing facilities are far better placed than the rest. But finding value in these names will be difficult. Companies like Sun, Cipla etc at best I think can be compounders.
If one can find out smaller companies growing at a fast clip and having lower dependence on the US markets, then there can be a case at looking at these names.
The reason I personally don’t want to go heavy on pharma space is that there are a lot of tailwinds and opportunities in other sectors and from time to time these sectoral bets provide good hunting grounds.
For someone closely tracking the pharma space and monitoring developments, a basket approach with a few good companies like Sun, Alkem, DRL, Cipla, Cadila etc might work and might provide market agnostic returns.
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