Pharma: All eyes on March 2013 growth rate

Sun Pharma, Dr Reddy's lab, Cipla, Alembic top picks in the domestic space

Extreme cold conditions, especially in north India, impacted the growth of the key antibiotic segment in the first two months (January and February) of the March 2013 quarter. As a result, the Indian pharmaceutical industry reported a lower overall growth rate of 9% in the first two months of 2013, as compared to the 16% growth recorded in the preceding two months (November and December 2012), as per Karvy Institutional research.

The winter season is considered as a healthy season by the Industry where the sales remain sluggish. Thus, while January 2013 saw a growth of 9.8% year-on-year, February 2013 recorded a y-o-y growth of 7.4%, excluding bonus and other sales boosting schemes by the industry.

The growth rate of the chronic segment, however, has been satisfactory, feel analysts. Analysts at Karvy observe that the segments showing a strong out-performance on y-o-y basis include anti-diabetics (18.1%), cardiac care (15.9%), dermatology (13.8%), and multi-vitamins (14.3%) and gastro-intestinal, or the GI segment, which clocking in a growth of 14.5%.

The cardiac care and anti-diabetic therapies have outperformed throughout the year and marked a growth in excess of 15% in the first 11 months of the last financial year. The anti-diabetic drugs have grown at a brisk pace of 17.3%, while cardiac care drugs at 15.2%.

HEALTHY GROWTH

Given this backdrop, companies such as Sun Pharma that have a strong chronic product basket grew at a much faster pace of 18.4%.  Lupin and Glenmark, too, have grown at 12.9 and 13%, respectively in the domestic market. Amongst the mid-caps, Zydus Cadila reported a strong 25.5% growth driven by volumes prices and new launches.

However, companies such as GlaxoSmithline that have a strong acute range mainly led by antibiotics disappointed – growing at just 4.2% in the first two months of 2013. Alembic, the Macrolide (anti-biotic) power house of the country, grew a measly 7.3%. Ranbaxy, on the other hand, posted 10.6% growth.

Sun Pharma, which is the top pick of most analysts tracking this space, stands out amongst peers as it has grown at more than 15% during the two months as well as 11 months of the financial year. Apart from Dr Reddys Laboratories, Cipla, Torrent Pharma and Alembic Pharma are the other favourites, says Rahul Sharma, an analyst at Karvy Research.

Though Dr’Reddy’s has not seen outstanding growth, analysts remain upbeat on the company as its dermatology segment is growing at 14.5% on a y-o-y basis with a major contribution from its gastro-intestinal segment that grew at 12.7% y-o-y in February 2013. Though the growth of the chronic portfolio segment still has to catch up, analysts say that the introduction of new products will be the main growth driver for the company.


Cipla, too, has seen just 8.1% growth in January – February 2013. However, analysts say its GI segment is showing growth of 13% with a higher contribution from the products in the acute segment given the new product launches.

For Alembic, GI, gynecological and the cardiac segments have been growing significantly over the last one year. Though the anti‐infective segment remains a major revenue contributor with a 38.4% revenue share (degrowing by 1.5% in February 2013 as per MAT data), the growth has been mainly driven by price and new products. However, brands as Gestofit (gynecology product) and Rekool (GI product) have shown double digit value growth rate for the 11-months of the last fiscal.

For Torrent, analysts expect a volume growth and new products to be the main drivers. High growth of the chronic therapy products, despite a high base, is also key factor to keep a tab on.