How hydroxychloroquine has become India's unlikely global strategic assest

Date: 13-04-2020

Day: Monday

Is hydroxychloroquine has become India's unlikely new strategy towards global asset: 

Donald Trump has labelled hydroxychloroquine a 'game-changer' in the fight against Covid-19. Indian pharma companies have gained significantly from this.

New Delhi: When the US drug regulator placed Indian generic pharma firm Ipca Laboratories under an import ban on 15 June 2017 after its facility failed USFDA’s routine inspection, not a lot of questions were raised. The US Food and Drug Administration (USFDA) routinely goes after Indian drugmakers, and Ipca, with an annual income of Rs 3,700 crore, isn’t a big fish.But questions were raised on 20 March, when the USFDA peremptorily and somewhat inexplicably lifted the ban, and Ipca Labs happily notified this to the stock exchanges.What brought about this sudden change of heart in the USFDA? The mystery wasn’t as deep as it appeared.                  

How IPCA gained because of Trump

During his 19 March White House corona virus briefing US President Donald Trump declared hydroxychloroquine (HCQ), a seven decade-old anti-malarial drug, as a Covid-19 game changer the world had been waiting for.

Indian companies produce approximately 70 per cent of the global output of this cheap old drug. Until 2014, Ipca Labs held a 60-per cent market share in HCQ supplies to the US. However, after the ban, Zydus Cadila became the largest player with a 32-per cent market share.

After Trump’s announcement and the subsequent lifting of ban, on cue arrived a large US order  Ipca and Zydus Cadila.

Following this, and some early Chinese and French clinical pointers, the Indian Council of Medical Research recommend HCQ as a preventive treatment for health personnel and family members handling Covid-19 patients on 22 March.The India pharma market growth continues on expected lines – high single digit. In the US, we could see marginal benefit coming from USD appreciation and potential increase in stocking at the wholesaler level which should be offset by currency depreciation in emerging markets due to declining crude prices, the report said.

Ipca Laboratories, which climbed over 17 per cent intra-day to a fresh 52-week high, closed flat on Monday mainly due to the steep correction of over 13 per cent in leading indices. Sentiment on the street got a shot in the arm with US FDA making exceptions to its import alert for Ipca’s active pharma ingredients (API) and finished products of hydroxychloroquine sulphate and chloroquine phosphate. Anti-malarial drugs have been highlighted to have potential use in curing Covid-19.

Nevertheless, some of these positives have driven the Ipca Laboratories stock up in the recent past, taking it to a price-earnings multiple of 29.3 times its trailing 12-month earnings. At this price, its stock seems overpriced from the value of the company.