Top 2 Pharma Stocks To Buy As Suggested By ICICI Securities

ICICI Securities, a domestic brokerage company, has issued a buy call on the shares of Dr Reddy's Laboratories (DRL) for a target price of Rs 5,359 and J B Chemicals and Pharmaceuticals Ltd (JBCPL) for a target price of Rs 1,963. These two stocks in the pharmaceuticals sector have a good potential upside, according to the brokerage.

ICICI Securities has said "Novartis AG has entered into agreements with Dr.Reddy's Laboratories (DRL) and JB Chemicals & Pharmaceuticals (JBCPL) for their cardiovascular combination of Valsartan and Sacubitril in India. The combination of Valsartan and Sacubitril is a cardiovascular molecule, which is indicated for heart failure patients with reduced ejection fraction. The molecule's patent which is currently held by Novartis is set to expire in CY23. As per AIOCD data, the molecule grew at 38.4% CAGR over FY19- 21. Several brands for this molecule are being sold by Novartis (Vymada) itself and other companies in partnership with Novartis including Cidmus, Azmarda and Neptaz (Mankind Pharma)."

The brokerage has claimed "DRL will acquire the Cidmus brand (currently marketed by Lupin) for a cash consideration of US$ 61mn (~Rs4.76bn). At sales of ~Rs1.4bn (IQVIA MAT Feb'22 data), the acquisition is valued at ~3.5x MAT Feb'22 sales. DRL intends to enhance the reach of the product into tier-1 and tier-2 markets in the country. The acquisition is another step in the company's ambition of breaking into the top 10 cardiac players in the IPM."

According to the brokerage "JBCPL will acquire the Azmarda brand (currently marketed by Cipla) for a cash consideration of ~US$ 32.5mn (~Rs.2.46bn). As per IQVIA MAT Feb'22 data, Azmarda recorded sales of ~Rs768mn and has entered the top 300 brands in the month of Feb'22. The acquisition is valued at ~3.2x MAT Feb'22 sales and is expected to be funded through debt (primarily) and internal accruals. Azmarda is expected to further strengthen JBCPL's presence in the cardiology segment in India. The deal is expected to complete within two weeks, subject to customary closing formalities."

For the above two stocks, ICICI Securities feels delay in launching new products, slowdown in India growth, regulatory hurdles and currency volatility as the key risks.