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Sun Pharma, Dr Reddy's, Divi's, other pharma stocks in high demand on Molnupiravir nod

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Most pharma stocks including Sun Pharma, Dr Reddy's, Lupin, Laurus, Torrent Pharma and Aurobindo Pharma gained on Wednesday, after regulator DGCI allowed the use of Merck's Molnupiravir pill for emergency use in India for the treatment of COVID-19.

Sun Pharma, Dr Reddy's, Divi's, other pharma stocks in high demand on Molnupiravir nod
Pharmaceutical stocks like Sun Pharma, Dr Reddy's and Divi's were in high demand on Wednesday, a day after the government approved the use of Merck's Molnupiravir pill and two vaccines for emergency use in the country. Molnupiravir is an anti-viral pill used in the treatment of COVID-19.
The regulatory nod for Molnupiravir comes amid concerns over the Omicron variant of COVID-19. Many states in the country have brought in restrictions to curb the spread of the pandemic.
Sun Pharmaceutical, Sun Pharma Advanced, Dr Reddy's Laboratories, Divi's Laboratories, Cadila Healthcare, Laurus Laboratories and Biocon were among the prominent gainers in the space, closing 2-11 percent higher.
Lupin, Cipla, Torrent Pharma, Aurobindo Pharma, Alkem Labs, Ipca Labs, Syngene, Gland Pharma, Natco, Glenmark Pharma, Alembic and Natco Pharma gained up to two percent.
On the other hand, Strides Pharma Science and Indoco Remedies declined almost one percent each.
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"The emergency use authorisation of COVID vaccines Corbevax and Covovax along with Molnupiravir for restricted use has boosted the appetite for most pharma stocks," said Aarzoo Zakir, Research Analyst at Geojit Financial Services, told CNBCTV18.com.
"The drug will be manufactured by 13 Indian pharma companies to treat adult patients with a risk progression of the disease as Molnupiravir inhibits the replication of multiple RNA viruses including SARS-CoV-2," she said. Zakir described the development as "an important milestone in the renewed battle against the coronavirus".
On Tuesday, regulator Drugs Controller General of India (DGCI) gave nod to manufacture and market Molnupiravir for restricted emergency use in the country for treatment of adult patients. Oral anti-viral Molnupiravir has already been cleared by the UK and US drug regulators.
The Omicron variant of COVID-19 might not lead to a large demand for Molnupiravir, Nimish Mehta, Founder and Director at Research Delta Advisors, told CNBC-TV18. The initial enthusiasm with the drug has faded post Phase III results, he said. 
Several pharma companies have announced plans to launch the pill under their respective brands.
Earlier this year, a slew of drug makers including Dr Reddy's, Aurobindo Pharma, Cipla and Sun Pharma signed non-exclusive voluntary licensing agreements with Merck to make and supply Molnupiravir in India.
Sun Pharma, for instance, will market the pills under the brand Molxvir in the country, and Torrent Pharma under Molnutor.
Good time to invest in pharma stocks?
Pharma and healthcare stocks are in favour with increasing cases of Omicron in India, Yash Gupta, Equity Research Analyst at Angel One, told CNBCTV18.com.
The pharma sector has seen good consolidation for the last six months, he said.
"We have seen a continuous increase in Omicron cases in metro cities like Mumbai and Delhi. As the cases increase, we will see more COVID-related testing... Raw material prices have also cooled off from highs. Several companies have passed on the increase in the prices," he said.
"It is a good time to buy largecap pharma stocks as we expect good numbers in Q3," Gupta added.
He recommends buying three stocks now:
StockRecommendationTarget price
Sun PharmaBuy970
Metropolis HealthcareBuy3,600
Dr Lal PathlabsBuy4,050
"We believe that an increase in COVID testing in India will have a positive impact on the companies' revenue and margins," Gupta added.
The Nifty Pharma index is up 9.7 percent in the past 12 months, as against the Nifty50's return of 23.1 percent.
IndexReturn (%)
Nifty5023.1
Nifty Pharma9.7
Nifty Healthcare17.7
Here's how some of these pharmaceutical stocks have fared:
StockOne year return (%)
Sun Pharma41.9
Cipla12.9
Divi's21.9
Alkem21.2
Torrent16
Gland65.7
Laurus59.1
Eris27.6
Ajanta34.5
Suven7.4
Biocon-21.4
Aurobindo-19.6
Dr Reddy's-6.7
Lupin-4.6
Cadila-3.3
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