Generic drugs
Comment of the Day

August 29 2013

Commentary by Eoin Treacy

Generic drugs

Eoin Treacy's view

Generic drugs – The generic drug sector is dominated by a relatively small number of countries not least India, Israel and the USA. Heightened currency market volatility is likely to be of benefit to Indian manufacturers since the Rupee's weakness will enhance consolidated earnings for these global businesses.

Among foreign listed Indian generic drug makers Ranbaxy has a listing on London's International Exchange and generates 81% of its revenue from outside India. The share has fallen from $14 to $4 since 2010 and posted a large upward dynamic last week. It is currently unwinding its overextension relative to the 200-day MA but will need to find support at progressively higher levels if recovery is to be given the benefit of the doubt.

Dr.Reddy Laboratories generates 85% of revenues from outside India and has a US listing. The share has fallen from $40 to $32 this month and has at least steadied in the last couple of days.

The US Dollar is close to the lower side of its range against the Israeli Shekel and appears to have found support. Perrigo has an Israeli and US listing. The US listing has been trending higher since 2009 and has returned to test the region of the 200-day MA and the upper side of the underlying range. A sustained move below $115 would be required to question the consistency of the overall advance.

Teva Pharmaceutical's US listing is trading towards the lower side of a two-year base formation.

Mylan and Hospira are some of the USA's largest generic drug makers. Mylan accelerated to an early August peak near $37.50 and is now in a process of mean reversion. Hospira broke out of an 18-month base in June and appears to be forming a first step above it.

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