Everyone wants to live long. To live long, apart from doing, yoga, exercises etc, one of the things we need is medicine. Though, Ayurveda, Homeopathy offer medicines in their own form, It is the allopathy or the medicines, that we have in consultation with our doctors, to get rid of their ills, which has bulk of its share.That is where the pharma companies, come into picture. These companies, do a lot of research, develop a drug, get the approval of authorities concerned and sell it to us. This is a big industry and the current global business is around 1.2 Trillion US dollars. ie close to 7 lac crore rupees.
The Indian market is estimated to be 36 billion USD. Of late we hear that the pharma sector is not doing well and the share prices have come down anywhere around 50 to 70% from their two year highs. Let us understand, what is happening in the industry.
Though it is a big subject by itself, I shall try to make it simple to understand. I call it as the MAGIC
Before we see the MAGIC in detail, basically the pharma and chemical companies do manufacture any one or more of the following categories.
a. GENERICS. When a drug is invented, normally the company that invents applies for a patent and the period of patent is valid for about 7 years. Till that period, no other company, can copy or produce that drug. After the expiry of the patent period, it is open and other companies can manufacture same or similar drug. The drug then moves into Generic category. Generic drugs are those drugs after the expiry of the patent period.
b. API – Active pharmaceutical Ingredient. is the main drug itself, where the active portion of the drug is present. Almost every pharmaceutical company is having API manufacturing.
c. CRAMS – Contract Research and Manufacturing Services, is an outsourcing activity where the company engaged does the work for another company in research or manufacturing. This is similar, to Foxcon making electronic components for mobile phones and assembly
d. Biosimilars. A biosimilar (also known as follow-on biologic or subsequent entry biologic) is a biologic medical product which is almost an identical copy of an original product that is manufactured by a different company. Companies like Biocon, Dr Reddys are investing heavily into this activity.
Having understood the basics, the Pharma sector has the MAGIC issues.
M- Margins. Majority of the sale of products come from Generics and there is heavy competition and there are also price regulations by the governments. Indian companies, with majority of sales in the US is struggling against competition and Pricing.
A- Approvals Any new drug, needs to be approved by the regulator and the major agency doing this is FDA or US FDA. US food and drug administration. A company has to make ANDA ie application for new drug approval and after getting that only, they can sell the drugs.
G- Geography. The market in which the pharma company present is also important and determines the sales, regulations approvals and margins. Currently majority of the sales is from US and Europe and US is the major market for Indian Pharma companies.
I – Inspection. Normally approvals and Inspections are a combination. However, Inspection is an ongoing activity. The regulators, check the manufacturing companies for quality, process compliance and data integrity. These inspections are periodical and based on the report, they can even prevent the companies from manufacturing till the noted issue is resolved to the regulators satisfaction.
C – Currency. Since the business is from different markets, the currency rate, fluctuations and they in turn affect the net profit of the companies. Un hedged forex can swing the margins.
Currently anyone or all of the above ILLS are plaguing the pharma industry. So what is there for us an investors?
Having mentioned about the sector, it is an industry where there is high entry barrier for competition and new companies to enter the sector. The skills required are also of high order and difficult to acquire easily. The companies are there for long haul and there are no fly by night operators. The quality of the management is very important.
a. Many companies are working hard to adhere to the compliance and overcoming any deficiency observed.
b. The data integrity and systems are improving.
c. The managements are committed and we have seen that some of the companies, who were issued observations like DR Reddys, Wockhardt, Divis Labs are already have got clearances.
d. This is an industry which is for long haul and This is suitable for those investors, who can with stand oscillating pressures .
Do choose the company and stay invested. If you cant chose the company, go for a pharma fund through the mutual fund route
Do contact me for any clarifications.
One of the most entertaining sport is Football. The 90 minute game has the most viewership across the globe. Brazil, the Five times world champions have been struggling in the last season and crashed out of the world cup. Now with the new coach Tite, the team is playing superbly well. Tite has truly transformed the team.
Read this link http://bit.ly/2wQH6U2
Role of a coach.
Coach in any team is the most important man. He is the one, who works out the strategy for the team, identifies the right talent and the best man for the best job. He not only knows the team but also the competition, environment, rules of the game. He is the GO TO man as far as anyone in the team is considered.
Role of a Captain
He leads the team and is one of the talented players. He is instrumental, in implementing the strategies of the coach. He works in tandem with the coach. It is impossible for any team to be successful unless the two integrate well.
After Dunga left, Tite had taken it upon himself to build the Brazilian team and results are so far very good. Players also love to work with coaches like this.
Take the case of Saina Naiwal, who parted with his coach, Gopi chand, has not been having a good run ever since. Recently she has expressed to go back to work him, as her coach. Good players, who want to succeed don’t have inhibitions and Saina, I hope will overcome her bad patch and be successful.
read this link http://bit.ly/2xdbxEf
Similarly, For an investor, no doubt he is he decision maker. But every investor needs a good coach. A coach, who guides and works with the investor, is known as financial advisor. The advisor, helps the investor to formulate his goals derived from his dreams, assesses his risk profile and guides to invest in the right instrument. Like the Coach in any game, it is not a one time activity but an ongoing activity, till the goals are achieved. This may involve, training, skilling, providing psychological support during troubled times and reworking the strategies, as and when required.
Do you have dreams?
Do You have goals?
Do you have a strategy?
DO YOU HAVE A COACH?
You are the Captain, for you money! But with an advisor, you can make your money do WHAT YOU WANT.
I would love to be your coach. Captain are you ready?
Do contact me
There are quite a few IPO which are now available for subscription in the next one week and they are
a. Eris Life scriences, which is open since 16th and closes on 20th
b. CDSL, which is a depository and subsidiary of BSE opens for subscription ON Monday and closes on 21st.
c. GTPL Hathway Limited is also open in the coming week from 21st to 23rd.
In addition to the above, we have other IPO which are likely to hit the market like
SBI life Insurance
HDFC Life insurance as the Max merger has not gone through
the details of PSU sale are given in the link for you to have a look. There will be also offer for sale of shares in select companies.
Should you Invest in IPO?
A Common question in every one’s mind is, Is it good to invest in IPO?
Is it the right time?
As you all know, the markets are at an all time high with the sensex over 31 k and enough liquidity is there in the market and currently there is no sight of the market coming down drastically or correcting itself. One is thinking twice to invest in the current market. IPOs provide an opportunity for you to invest.
How the IPOs which came earlier have fared?
Look at the image below and see the performance of the various IPO which came about since April 16 and most of them have given decent returns.
How much you need to invest?
Most of the IPOs require anywhere between 14k to 15k per lot and you can investment more in multiples of the minimum lot size.
Who should invest?
Both short term investors and Long term investors can consider investing. Short term investors can look to take listing gains.
Where as long term investors can choose the IPO on fundamental strength and invest.
What happens if the listing price is lower than the IPO price?
It is possible you need to hold and should have the ability to hold. Take IPO like ICICI pru life insurance from the listing price of 335 it went down to 261 and it has bounced back 70% from there and trading around 440
Same is the case with VArun beverages.
Do not borrow money and invest in IPO. You should invest only with your surplus money. Otherwise, on a downturn, you can lose heavily and interest cost on the borrowed amount can be higher.
In case you need any further details do contact me.
What are the forces at play while doing a bungee jump?
There are three main forces at play.
- The gravitational force, which pulls you down as you jump
- The force the spring provides which helps you from not falling and also enables you come up.
- The force or the resistance offered by air.
But for the air resistance, you can keep going up and down. But the air resistance, acts on the spring force and reduces your ascent back every time when finaly the fall and climb ends. The important thing is that when the gravitation force does positive. work the spring does negative work and when the spring does positive work gravitational force does negative work. All the time air resistance does negative work.This is akin to Your Portfolio appreciating or depreciating but inflation always does negative work and erodes the purchasing value. Your portfolio has to do super positive work to over come inflation and grow
click on the link, to read more about the force.This is classic conversion of potential energy to kinetic energy and back. But why we need to know this and what relevance it has got with investing?
Market is a place where people buy and sell goods or services. In stock market, people buy and sell shares or other instruments. There is difference in perception of the buyer and seller and hence exists a price difference. Like three forces exists, In a market there exist a buyer, a seller, and volatility.
Appreciation, depreciation, and inflation.What you buy may appreciate or depreciate in value depending upon the market forces
There are basically two energies on display.
The potential energy, the height from which the jump takes place and the kinetic energy which is either due to the gravity or the spring force. However the level of energy gets reduced for every movement due to the air resistance
Markets see that the stock prices or NAV of a fund, move up and down depending on the energies which is the momentum on selling side or purchasing side. And the air resistance is similar to inflation and does constantly erode growth in wealth.
See how some stocks have done bungee jump in the last one year and Who can do bungee jump?
Anybody can do a bungee jump.
In bungee jump, there is a trainer who guides you and helps you, take the jump and also land safely after you finish your jump.This is similar to an advisor, who guides you through the process of investing and enabling you to reach the goal or the destination. You get to experience the ups and downs and the resistance offered by air. You get to see the world with a different point of view.While staying the course of investing, in order to reach your goal, yet get to see all the risk, volatility, momentum and performance at play.
- Your behavior is controlled and you are disciplined during the jump. If you can exhibit a similar discipline and behavior in investing, you are sure the winner.
- Fortunately, you don’t get to hear any noise during the jump as you are isolated from the media. Avoid noise from the media while investing.
- More importantly, you have to indulge in the activity to gain and like wise, you have to invest to create wealth.
When to Jump ?
You cannot take to bungee jump, whenever you feel doing it. It depends upon the weather, the time of the day, availbility of the trainer etc. Follow the 5W 2h process in all activities you do What, why, where, who, when. How and the new one you add is ” How Much”?
I am your trainer and do contact me for the experience of a bungee jump in investing. Schedule a free introductory call with me on tlk.to/varadha