‘Keep Margin of Safety in Pharma Stocks’
ETMarkets.com: The $20-billion Indian pharmaceutical industry is going through a phase of prolonged crisis. The recent spate of regulatory scrutiny, warning letters and Form 483s from the drug regulator of the biggest export markets — US and Europe — has resulted in complete loss of faith for investors.
What are Warning Letters About?
An increasing number of Indian pharma firms have come under the k n i f e o f US Fo o d a n d Dr u g Administration (FDA) due to lack of trained staff and cleanliness at their manufacturing units.
A warning letter is a notification by the USFDA to a company for violating its rules and regulations. The BSE Healthcare index is down over 19% in the past one year, while individual stocks have lost as much as 40% in the same period.
How to Invest?
timesinternet.in “In pharma, our stance is to buy after the pain rather than before the pain. We are looking at businesses that go through huge price corrections because of warning letters and where we see that as a non-fatal problem. The recovery should come in a year or two,” said Rajeev Thakkar, CIO, Parag Parikh Financial Advisory Services.
“The basic principle of having a lot of margin of safety needs to be diligently practised when it comes to investing in pharma,” said Sachin Shah of Emkay Investment Managers.