 "Local growth a challenge for pharma companies")
Muted domestic sales are expected to pull down revenue growth of Indian pharma companies at a time when their US businesses are facing the US Food and Drug Administration’s (USFDA)’s fire. Most large companies generate 20-40 per cent of revenues from India. The ban on fixed drug combination (FDC) and other products coming under price control have added to concerns.
After April that saw the sector post its weakest growth in the past two years, May was only marginally better. April saw 3.5 per cent growth in the Indian Pharma Market (IPM), according to AIOCD Pharmasofttech AWACS data, whereas May growth was modest at 7.7 per cent.
Analysts at Religare Institutional Equities say the uncertainty over FDC ban, and enlarged NLEM (new list of essential medicines) and Wholesale Price Index-linked cuts have pulled down growth. Volumes too have been sluggish.
Dr Reddy’s Laboratories’ sales, which had fallen 1.5 per cent in April, improved in May, growing 4.5 per cent, but lower than IPM growth. Hence, Dr Reddy’s, which had given weak revenue forecast for the quarter ended June, could see more challenges.
Cipla and Cadila Healthcare, for whom domestic market accounts for 40 per cent of revenue, have also seen low growth. Cipla’s India sales increased 2.1 per cent in April and 6.4 per cent in May, while Cadila’s stood at 1.5 per cent and 4.6 per cent, respectively. For Cipla, steady domestic sales are essential, given uncertainties in the international arena because of increased costs for setting up own front-end operations. Cadila, too, faces challenges in the US because its plant is under USFDA scanner.
Sun Pharma, which has the largest market share after consolidation with Ranbaxy, faces a similar situation. Its domestic sales were up only two per cent in April and May. It’s forecast of 10 per cent growth in revenues in FY17 has already disappointed the Street.
Contributions from products launched by Lupin and Sun Pharmaceutical in the March quarter in the US will be crucial. Glenmark’s India growth of 4.5-4.7 per cent looks steady, but is lower than the market trend. The June quarter performance of companies, thus, may not be impressive. The uptick with the start of monsoon rains (diseases typically rise) will be crucial to local growth.
