Torrent Pharma turns towards Brazil, Germany as share of US biz halves

Share of US biz in revenues down from 40% in FY16 to 21% in FY17; Brazil, Germany grow 38% & 25%

As US business slows down owing to stiff competition and subsequent price erosion in the generic space, drug major Torrent Pharmaceuticals has turned its attention to other geographies like Brazil and Germany. In fact, Torrent's US business dipped 49.6 per cent during 2016-17, and its share in the company's overall revenues fell from 40 per cent last year to 21 per cent in FY17.

In comparison, Torrent has done well in Brazil and Germany. Its Brazil business, which was languishing in FY16 (posting a 17 per cent degrowth), grew by 38 per cent in FY17. The German business too posted a 25 per cent growth in revenues for the fiscal.

The company clearly enhanced its focus on the other international markets after the US started showing clear signs of slowdown with the slowing sales of generic Abilify, an anti-psychotic drug. Torrent along with Alembic, Hetero Labs and Teva Pharma had received the USFDA nod to market generic Abilify (aripriprazole) in multiple strengths and dosage forms around April 2015.

The company's US sales had received a significant boost following the launch of the limited competition product.

However, in 2016-17, the US business started showing signs of slowdown with the revenues falling by 51 per cent in the third quarter of 2016-17.This dragged Torrent's financials. For the full year 2016-17, Torrent Pharma's PAT was down 46 per cent to Rs 934 crore, while its Ebitda was down 46 per cent to Rs 1,596 crore. The revenues for the full year FY17 stood at Rs 5857 crore, down 12 per cent.

Torrent understandably enhanced its focus on markets like Brazil and Germany which were doing well relatively.

A company official said that while the overall Brazilian market has grown by 14 per cent, Torrent has managed to grow by 22 per cent in the market. "We took up some restructuring operations in Brazil and we got approvals for two products there," he added.

Torrent launched Olmecor (Olmesartan), a hypertension drug, in  Brazil in September and an anti-depressant drug Loredon in February. It would launch six drugs in the country by 2020.

Torrent did well in both the geographies in the fourth quarter; when the Brazilian business clocked an 81 per cent year on year growth and the German business grew by 43 per cent.

A company official said, "One cannot give up on a market like US, but yes, we have also increased focus on other international markets." Torrent plans to launch eight to nine product launches planned in the coming months.

The share of other international markets in Torrent's revenues is around 10-12 per cent at the moment. A company spokesperson declined to give any future guidance on how much this share could grow by 2020. Analysts, however, feel that even by conservative estimates the share of international markets apart from US would touch 20 per cent of Torrent's revenues by 2020.

Analysts said that the US market would face a lot of pricing pressure and would be highly competitive in FY18. Consolidation of channel partners is believed to be one of reasons behind the pricing pressure.

"The Brazilian market has stabilised in terms of currency fluctuations, and Germany too is doing well among other European markets. Torrent's focus thus is logical," said a Mumbai-based analyst.

Meanwhile, the domestic formulations have also shown marginal improvement at 8 per cent year-on-year growth and the recent acquisition of women healthcare brands from Novartis is likely to plug in therapy gaps in the domestic market.
A company spokesperson said that the company expected to grow faster than the market growth rate in the domestic formulations space.