Pharma firm Strides Pharma sciences has destroyed 58 percent of its investors' wealth just in the last 9 months. The stock fell to ₹393.75 (as of Feb 7, 2022) from its 52-week high of ₹946.80, which hit on April 23, 2021.
An investment of ₹1 lakh in the stock in April last year would have been reduced to ₹42,000 currently.
Pharma stocks, in general, have seen a sharp sell-off in the past few months with stocks like Aurobindo Pharma, Lupin, Alembic Pharma, Cadila Health losing in double digits from their 52-week highs.
The major reason for the sharp decline in Strides Pharma was weak September quarter numbers. The profitability was impacted by price erosion in one of its base products in the US markets as well as a surge in logistic costs.
In Q2, the company reported a consolidated net loss of ₹162.55 crore in Q2FY22 as against a net profit of ₹80.94 crore in Q2FY21. Revenue from operations during the quarter fell by 9.08 percent YoY to ₹721.47 crore.
The logistics costs jumped 135 percent YoY.
In terms of revenue growth, the US saw a de-growth of -17 percent. Among emerging markets, the growth was visible in the institutional business and the Africa business. US demand was badly hit by COVID cycles and price erosion was sharp.
"We continue to face headwinds in our US business. While we have been able to retain volume share on our key products, we continued to witness price challenges in our portfolio during the quarter, magnified by concentration towards acute products," Dr. R Ananthanarayanan, Managing Director & CEO of the firm stated.
Going ahead, Ananthanarayanan stated, "we will start witnessing improvement in our US business starting Q3FY22 and will continue the growth momentum thereon. Given the volatile dynamics, we believe we will only be able to achieve our current year guided outlook for US in FY23."
While there are near-term headwinds, the firm said that it remains optimistic about the US business in the long run.
However, most market experts do not expect the trend to change at least in the next few quarters. Also, the debt level of the firm has been consistently rising, which is another major issue with the firm, they added.
The key remains the firm's performance in the US markets and if that improves in the near future, the stock is likely to perform better.
As per the current situation, analysts and brokerages do not advise buying the stock. They recommend waiting for the firm's December quarter earnings to see if there is any improvement in US sales or positive outlook commentary before investing in the stock.
Strides Pharma Science is a global pharmaceutical company. The company mainly operates in the regulated markets and has an 'in Africa for Africa' strategy along with an institutional business to service donor‐funded markets. The company focuses on difficult to manufacture products that are sold in over 100 countries.