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Generics seen lifting drug firms’ earnings

Generics seen lifting drug firms’ earnings
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First Published: Fri, Apr 18 2008. 12 30 AM IST
Updated: Fri, Apr 18 2008. 12 30 AM IST
New Delhi: India’s leading drug makers should report rises in quarterly earnings on strong generic drugs sales, with the exception of Dr Reddy’s Laboratories Ltd whose profit is seen falling sharply due to one-time gains in last year’s earnings.
Cheaper generic drugs are becoming increasingly popular as governments around the world battle to contain soaring health care costs, but export-driven Indian pharmaceutical firms are facing challenges of stiff pricing pressure in the US.
Analysts are upbeat about the outlook for the sector as drugs with annual US sales of $50 billion (Rs2 trillion) are expected to go off patent by 2010, creating more opportunities for Indian firms to sell cheap copies of branded products.
“We believe that the worst is over for Indian generic firms and expect gradual improvement in their performance over the next two years,” brokerage firm Motilal Oswal Securities said in a report.
An increased focus on the domestic market, which is expected to maintain the 12-14% growth rate of recent years, should help drug makers in the long term, said brokerage house Prabhudas Lilladher.
Ranbaxy Laboratories Ltd, India’s top drug maker by sales, is expected to post a 15.5% rise in March quarter sales when it reports on Tuesday, but higher interest costs and lower other income mean its profit will rise by just 2.3% on year to Rs132 crore, according to a Reuters poll.
Goldman Sachs, which maintains a strong outlook for the sector, estimates average industry sales growth to be 21% this fiscal year, more than its previous forecast of 16%.
Dr Reddy’s is expected to report a 64% fall in net profit, as earnings a year earlier were boosted by one-time gains from a 180-day exclusivity period for the generic version of GlaxoSmithKline Plc.’s anti-nausea drug Zofran.
Sun Pharmaceutical Industries Ltd is expected to report its net profit rose 15% to Rs265 crore, buoyed by sales of oxcarbazepine tablets, a generic form of Novartis AG’s epilepsy drug Trileptal.
Cipla Ltd is expected to report a 39.4% rise in net profit on revenue growth of 9.6%, helped by higher exports.
Pharma stocks have outperformed the main Bomaby Stock Exchange index in a falling market during the January-March quarter, with the health care index falling 13%, versus a 23% drop in Sensex.
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First Published: Fri, Apr 18 2008. 12 30 AM IST