Overseas growth gets critical for Torrent Pharma as Unichem drags India biz

While it continues to work on integrating Unichem in its specialty model, Torrent Pharma will focus on overseas geographies like US, Brazil and Germany

Even as it continues to work on the acquired Unichem portfolio, domestic market focussed Torrent Pharmaceuticals Ltd. is now eyeing for growth in overseas markets. Of these, while Brazil, US and Germany are already markets where it has established its presence, the Ahmedabad-based drug firm is looking to build on it with focus on Mexico, UK and other markets.

"Our four large geographies are India, Brazil, US and Germany and we remain focused on these markets with an objective to drive higher market share and a deeper presence. We are also building our business in Mexico, UK and certain RoW markets," a company spokesperson told Business Standard. 

What's more, Torrent believes growth in the generic markets of US and Germany will be driven by new product introductions and gaining market share in its existing covered market. "In branded markets our objective is to continue doing better than the market. In the generic markets of US and Germany, the growth will be driven by new product introductions and gaining market share in our existing covered market," the spokesperson added.

Further, the company is also focused on improving number and complexity of its pipeline products in the US market, with its annual filings focusing on building a diversified portfolio, as per the spokesperson. 

Recently, the company saw its revenue from US business, including that from acquired businesses grow by 21 per cent on a year-on-year (YoY) basis, while its India posted a single digit nine per cent growth in Q4 of FY'19 to Rs 754 crore. Of the other major markets, while Germany saw a muted two per cent growth, Brazil fell by four per cent. 

However, it took a hit on its bottomline by posting a net loss in Q4 on account of an impairment provision of Rs 217 crore on certain intangible assets and goodwill recognised as part of acquisition of Bio-Pharm in US as well as product recall charges of Rs 140 core in the US. 

As a result, Torrent Pharma's focusses on multiple other overseas markets may have been necessitated by the near term impact on its US plans even as its India growth story looks intact. 

Analysts forecast a rather muted growth in its US business while Torrent Pharma's India business is expected to outperform the industry. For instance, as per an IIFL Institutional Equities report, US business is "expected to remain flat in FY'20" owing to Losartan recall and temporary stoppage of one of Bio-Pharm’s products due to facility shutdown. "Additionally, outstanding ‘483s on the Indrad and Dahej facility would also slow down the rate of new product approvals," the report stated. Similarly, an Axis Capital report too estimates a "muted growth in US given impact of Losartan and BioPharm in FY'20".

On the contrary, analysts are bullish about Torrent Pharma's India business with reports from IIFL Institutional Equities and Axis Capital, among others forecasting the domestic growth, which is over 40 per cent of its sales, to outperform the Indian Pharmaceutical Market (IPM). This is despite the company posting a single digit nine per cent growth in its India business, which a Reliance Securities report attributed to "some of the initiatives taken by the company such as discontinuation of low-margin and low value products and hygiene initiatives".

Meanwhile, with the Unichem acquisition, Torrent Pharma is willing to weather some "short term pain" for long term gains in future. "Over the last one year substantial efforts were undertaken to integrate the acquired business with the Torrent specialty model. Our primary objective was to drive growth in the top brands, improve productivity and bring business hygiene. In this process, we have accepted some short term pains for sustainable long term growth," the company spokesperson added.