Will restructuring US biz turnaround this pharma player?

Pharmaceutical player Wockhardt has been on traders radar lately after a 12 per cent rise in the last four sessions after the company announced restructuring of its US business.

In a regulatory filing, the company said it is closing down its manufacturing facility in Illinois, USA and will continue its business in the United States through contract manufacturing alliances for its products sold in North America.

The drug maker also said that the new arrangement is in the interest of the company as it will help avoid the manufacturing and quality management cost completely resulting in significant savings in operating and overhead costs.

Shares of Wockhardt rallied about 12 per cent to Rs 258.50 in the last four days, whereas the counter has gained about 20 per cent in the last month.

Kranthi Bathini, Director - Equity Strategy, WealthMills Securities, said that the US unit was not giving favourable results to the company and investors and shutting it down to save the cost is a prudent approach for a debt-ridden company.

"The company has ample patents but the company needs recurring income to make a strong comeback," he added. "The valuations are attractive but the stock is best suited for investors with a high-risk appetite."

The company will relieve all the workers and staff who were directly engaged by our US subsidiary in its plant in connection with the manufacturing process in a phased manner and full compliance with the applicable local laws.

For the quarter ended June 30, 2022, Wockhardt’s US business clocked revenues of Rs 74 crore, as compared to Rs 102 crore in the same period last year. The US business contributed 12 per cent of its global revenue.

The Mumbai-based pharma player reported a widening of its net loss to Rs 75 crore for the June 2022 quarter with an income from operations at Rs 652 crore.

On a technical basis, brokerage Anand Rathi suggested buying Wockhardt with a target price of Rs 279 and a strict strop loss of Rs 243.

The counter confirmed higher top and higher bottom formation on the daily and weekly chart after heavy correction, said Anand Rathi. "Last week, we witnessed a major breakout in the stock and that too with significant volumes."

Till the stock is trading above that mother candle, we expect further upside and that too with faster momentum, the brokerage added.

According to the latest shareholding pattern, late Rakesh Jhunjhunwala held 30,00,005 equity shares or 2.08 per cent in the company as of June 30, 2022.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)