Alembic Pharma falls in the red

There is no official report as such which one has seen from the US Govt but there are reports that a legislation has been passed wherein the it has made it mandatory for all active pharmaceutical ingredients (API) to be manufactured locally. This means API exports from India to USA will be banned. The new norms require all medicines purchased by the US government to be sourced from local companies, a move that will impact even US subsidiaries of Indian companies, which will now have to manufacture locally.

One does not yet know if this is indeed true but this could impact the Indian pharma companies, especially if the ban is from immediate effect. This is unlikely to happen and most of the major pharma companies do have a facility in USA. And many companies might rush to set up shop there.

Alembic Pharma is the top loser currently, the stock price reacting to this news, down currently 10.5% at Rs.567 levels and this is after having hit an intra day low at Rs.514.35. Alembic, like most other pharma companies, earns a major chunk of its income from APIs thus the fear that this ban will effect it badly; it does not have any facility in USA. In fact its fantastic performance for Q3FY16, wherein it posted a massive 281% (YoY) jump in consolidated net profit at Rs.269 crore on a 81% rise in revenue was thanks mainly on account of its exports to USA. It had stated that its US business continued to outperform on the back of its anti-psychotic drug.

During the quarter, its international business grew 248% with APIs registering a 24% growth and Indian branded business growing 15%.