CLSA is bullish on these two pharma stocks
Most pharma companies provided a broad roadmap on the transition to complex generic products while maintaining a calibrated R&D allocation strategy
Brokerage firm CLSA is bullish on pharma stocks due to the promising prospects offered by the sector. In a recently hosted Investors’ Forum 2021 by the brokerage firm, pharma companies presented an upbeat outlook on India, but a cautious outlook on market dynamics for US generics in the near term. Most companies provided a broad roadmap on the transition to complex generic products while maintaining a calibrated R&D allocation strategy. While many expect US FDA inspections to resume sometime next year for Indian sites.
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Citing management commentaries, the global brokerage firm is bullish on Dr Reddy’s and Sun Pharma.
Dr Reddy’s | Rating: Buy | Price target: Rs 5,930
The key pillars of growth (USA, India, EMs and APIs) are progressing well for Dr Reddy’s and it remains confident of achieving an aspirational target of 25% EBITDA (Earnings Before Interest Tax Depreciation Amortisation) margin.
While the pricing pressure in the US is likely to remain elevated in the near term, but the company remains confident of new launches offsetting erosion in the base business. It expects gRevlimid to be approved before the launch date.
Besides the company is investing in manufacturing sites for injectables, biosimilars and digital platforms to support R&D, supply-chain and promotions for branded products.
Sun Pharma | Rating: Buy | Price target: Rs 960
Sun Pharma is confident of ramping up its global specialty portfolio led by key products like Ilumya and Cequa despite incremental competition in key product Absorica. It also touched upon potential of four products in its specialty pipeline and recently in-licensed novel anti-acne product Winlevi which should complement its current derma portfolio and benefit from the existing field force.
The company reiterated that the specialty business is expected to achieve EBITDA breakeven in FY23 and to see significant margin improvement in the longer run. Sun Pharma’s capital allocation policy will be towards building a global specialty pipeline along with further investments in India and select emerging markets.
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