Pharma stocks continue to have a smooth run on the bourses as a number of drugs go off-patent in the near future.

It is estimated that $55-65 billion worth of drugs would go off-patent in the next five years.

The general belief is that domestic pharma companies, with their chemistry skills and low-cost manufacturing, have an edge in the business.

The leading ones, like Ranbaxy Laboratories, have successfully developed non-infringing processes and are honing their legal skills.

For marketing, the smaller companies are entering into alliances, while the larger ones already have their own networks.

In the last three months, Cipla has surged 28.57 per cent, from Rs 705.65 on June 2 to a high of Rs 905.95 on August 26. The Delhi-based Ranbaxy has jumped 36.92 per cent in the period to Rs 927.70.

Interestingly, volumes have shot up. The Ranbaxy counter saw traded volume surge from a mere 90,977 shares in early June to 441,000 shares on Tuesday.

The Hyderabad-based Dr Reddy's Labs has added 24.31 per cent to its share price in the last three months, to Rs 1,109.85 on Tuesday.

Fulford (India), a multi-national pharma company hit a 52-week on Tuesday at Rs 412.90. The stock has almost trebled from Rs 105.50 on June 2 to Rs 412.90 on Tuesday.

Matrix Labs has vaulted from Rs 470.10 on June 2 to Rs 725.80 on Tuesday, up 54.39 per cent. Second-tier stocks are on the upswing too.

"The Indian companies enjoy a competitive advantage in a growing generics market. With $50 billion in drugs going off patent in the United States in the next four years, the Indian companies are leveraging their cost competitiveness and chemistry to exploit this opportunity," according to J M Morgan Stanely's India Strategy report.

"In FY2005, we expect the Indian companies to file 60 abbreviated new drug applications, a fifth of total generic applications in the US. The leading two, Ranbaxy and Dr Reddy's, are already filing about 18-20 ANDAs a year. The Indian firms enjoy even higher visibility in the APIs business. They had a share of 37 per cent of the DMFs filed with the US FDA in the latest quarter (April-June)," a SSKI report added.

Generics, with $42 billion in annual sales, constituted 10 per cent of the global pharma market in 2002.

The generics market is likely to reach $60 billion in 2005, growing at an annualised 10-12 per cent compared with 15 per cent over 1996-2001.