The pharmaceuticals industry continues to be marred by negative news flow, especially on the

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US Food and Drug Administration front. The latest has been the seizure of drugs at Sun Pharma’s US subsidiary by the regulator for non-compliance of cGMP practices. This followed the inclusion of Ranbaxy’s Paonta Sahib facility in the Application Integrity Policy (AIP) in February. This has primarily led to under-performance of the BSE healthcare index compared with BSE Sensex by 30 per cent year-to-date.

Given the uncertainty involved with the sector, we would like to advise investors to take exposure to only those companies which have gone through the US FDA inspection process without any reservation or where the company’s manufacturing facility has already been subjected to stringent audits from their customers.

Accordingly, we are bullish on Cadila Healthcare, Piramal Healthcare and Ipca Laboratories. We believe Cadila Healthcare is on the cusp of scaling new orbits in the export front. Piramal provides exposure to both strong domestic formulation business and long-term structural growth in the contract research and manufacturing services (Crams) space.

Further, Ipca Laboratories seeks to leverage its active pharmaceutical ingredients capabilities to create a sturdy business in the regulated and emerging formulations market.

The author is the Research analyst (pharma) of Angel Broking