Pricing challenge in US biz, rich valuations may weigh on pharma stocks

Analysts caution that the trend of low price erosion in US generic medicines seen in 2023 might be reversing, with data from the Centres for Medicare and Medicaid Services showing a significant erosion in 2024. \r

This erosion, especially in oral solid dosage and complex generics, poses challenges for pharmaceutical companies heavily reliant on the US market, such as Aurobindo Pharma, Dr Reddys Labs, and Zydus Lifesciences. Analysts anticipate continued price pressures amid increased USFDA approvals and launches by Indian companies. \r

They advise selectively picking stocks due to stretched valuations and potential downside risks. Some recommend booking profits in companies like Sun Pharma and Divis Labs, while Aurobindo Pharma remains a preferred pick. Lupin, Cipla, and others are rated 'Sell' due to stretched valuations and limited growth prospects. Torrent Pharma, Eris Lifesciences, and Mankind are favored alternatives.