U.S. business rescues pharma cos in quarter one

Following the FDC ban, this market fell by 3.9% to Rs 234 crore in the given quarter. Whereas drugs under NLEM grew by 1.6% to Rs 1061 crore, while non-NLEM drugs posted growth of 11.2% to Rs 7677 crore.

Listed pharma companies records robust Q1FY17 shrugging off uncertainties. Pic: Reuters

American operations boosted top- and bottom-lines of pharma companies in India in the first quarter ended June 30, 2016.

An analysis of the results of these companies show that even as their revenues grew by 9.4%, at Rs 35,662 crore, it was boosted by an over 15% growth in the American market. Revenues, from India, grew 7.6% to Rs 7,863 crore.

Domestic growth was impacted by the National list of Essential Medicines (NLEM) and Fixed Dose Combination dispute (FDC).

Going ahead, EBITDA (earnings before interest tax depreciation and amortization (EBITDA) of pharma companies grew by 7.2% yoy to Rs 8579 crore.

In terms of revenue, Natco Pharma and Lupin outperformed the market with 46% and 41% rise, respectively.

Among the other noticeable gainers were, Alembic Pharma, Divi’s Lab, Sun Pharma, Biocon and Ajanta Pharma recording more than 20% growth.

Although, Natco’s revenues were largely driven by robust growth in Hepatitis C medicines, Lupin benefited from exclusivity sales in the U.S.

Siddhant Khandekar and Mitesh Shah, analysts at ICICI Direct, in a report, said, "Despite pricing pressure and client consolidation, which were thought to be significant headwinds post Q4FY16 numbers, most players (barring a few) managed to expand volumes thereby neutralising these headwinds."

Dr Reddy’s, Torrent Pharma and Cipla reported fall in growth mainly due to high base and price erosion in the U.S.

The Indian pharmaceutical market (IPM) grew by 9.5% to Rs 9125 crore in July 20 16 led by price hikes (3.3%), new product launches (3.1%) and volumes increase (3.2%).

Following the FDC ban, this market fell by 3.9% to Rs 234 crore in the given quarter. Whereas drugs under NLEM grew by 1.6% to Rs 1061 crore, while non-NLEM drugs posted growth of 11.2% to Rs 7677 crore.

On volume front, NLEM and non-NLEM saw growth of 11% and 4.2% respectively.

The analysts explained, "Regarding USFDA issues, Indian players have moved on and seem better prepared than 12-18 months ago as reflected in growing number of EIRs by the USFDA for Indian facilities. Indian formulations also did reasonably well despite NLEM, FDC issues."

Going forward

ICICI Direct expects pharma earning momentum to continue on the back of incremental product launches in the U.S. and likely positive outcome from USFDA re-inspections besides normalising of Indian formulations growth.

"We healthcare universe revenue, EBITDA and PAT to grow at a CAGR of 12%, 13% and 17%, respectively, in FY16-18E. Growth will be steered by US (~13% CAGR over FY16-18E) and Indian formulations (~14% CAGR over FY16-18E), “added ICICI Direct.

A total of 431 new brands have been launched in July 2016.

On a moving annual total (MAT) basis, IPM growth was at 10.3% YoY to Rs 1, 00,896 crore. Domestic companies have grown 10.9% while MNC companies have grown 5.0% in July 2016.

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