Between 2005 to 2015, the pharma sector was one of the best performing sectors with stocks creating big wealth for the shareholders. Then came a spate of US FDA inspections and observation and a number of companies witnessed a sharp decline in performance. Over the next few years, stocks underperformed as companies went into introspection and course correction. Some of them have been able to make a comeback both in terms of operations and product portfolio. While there are some risks present in the system but given the fact they have come into under owned category, any positive news may have higher positive impact.
There was a time when having MNC stock was a must have in one s portfolio. They reason, they were very liberal at giving bonuses, dividend payments were good and given the fact some of them actually owned the best of the brands, they had seen a secular growth, which meant they were also able to deliver decent returns to shareholders. After the IT bull of 2000, as a new set of Indian companies took the centerstage, a number of MNCs stocks lost their shine at least on the street. Will they ever again get the tag of “ a must have” in one s portfolio ?. We take a look at 5 MNC pharma companies.
There are some sectors which are able to face bears in a better way. The reason, the operating matrix of those sectors is such that rising interest rates and other economic headwinds have little impact on their working because they are taking care of a need which is very basic in nature and if spending has to be done on that, it cannot be postponed. Pharmaceutical companies come into that category. This is not to say that there was a phase of almost 7 years that pharma stocks became under-performers. That was a very different reason, most of which have been taken care of. So there is a good chance that this time pharma stock will be able to tackle bears in a much better way.
Both, in terms of bottomline and stock price performance, pharma stocks had been under pressure for a long time. Partly this under performance was due to over valuation at which these companies were trading since 2015. Also stocks came in the overowned category for both the institutional and retail investors portfolio. Last but not the least, close to 2014, USFDA inspections became both more in numbers and stricter, many companies which assumed that they can take care of anything, got a rude shock. After all the head and tailwinds, many companies which had changed their focus, fruits are visible in terms of them moving into new markets and better financials.