Why does the Pharma sector continue to rally?

Today, the pharmaceutical sector saw a rise in its stocks, and here’s why:

On February 6th, 2024, the Interim Government initially approved the deregulation of non-essential drugs, which meant these drugs would no longer be subject to strict regulations outlined in the Drug Act of 1976. However, this decision faced a setback when a petition filed in the Lahore High Court led to a temporary halt, or stay order, against the deregulation.

Under the Drug Policy of 2018, medicines are categorized into two types: essential and non-essential. Prices for these drugs are set by the government and are linked to the Consumer Price Index (CPI). Essential drugs can see a price increase of up to 7%, while non-essential drugs can increase by up to 10%. Last year, there was a one-time increase of 14% for essential drugs and 20% for non-essential drugs for a period of one year.

📢 Announcement: We're Moving to Discord – Join Us There! 

Hi everyone! 👋

To improve your experience and offer additional features, we’re moving our community from WhatsApp to Discord!

Here’s what you’ll get on Discord:

✅ Research Reports Channel – Access a regularly updated compilation of valuable research reports
✅ PSX24/7 Bot – Ask anything about the PSX and get instant insights powered by KSEStocks historical data
✅ Organized Channels – Separate spaces for discussions, news, reports, and more
✅ Better Notifications – Control what you see and when
✅ Smoother Interaction – Easier to follow and participate in conversations
✅ Organized trading ideas - trading ideas that you can discuss and keep track of

Join now 👉 https://discord.gg/FP8vvMKW

The current pricing formula involves a calculation based on various factors such as the cost of active pharmaceutical ingredients (API), excipients, packaging materials, and mark-ups for both locally manufactured and imported drugs.

However, as of April 2nd, 2024, the Lahore High Court lifted the stay order against deregulation, citing discussions with the elected Government. Yet, a final decision from the Government is still pending.

If this deregulation is approved, it could greatly benefit the pharmaceutical sector. Companies would be able to increase prices of non-essential drugs and introduce new products, potentially leading to higher profits.

Don't miss:

• Which cars are driving the rally in auto stocks?
• Is DGKC going to Rs. 240?
• Why TPLP could go higher.

In particular, companies like AGP and SEARL (TSL Pharma Universe) stand to gain from this decision. AGP, with its mix of essential and non-essential drugs at 40% and 60% respectively, could be the primary beneficiary.

This development brings hope to the pharmaceutical industry, signalling potential growth and increased profitability in the future.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →