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Midcap drug cos to see sales, profit squeeze in Jan-March

Midcap drug cos to see sales, profit squeeze in Jan-March
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First Published: Tue, Apr 19 2011. 03 46 PM IST
Updated: Tue, Apr 19 2011. 03 46 PM IST
Mumbai: Indian mid-sized drugmakers are expected to report sluggish sales growth in January-March as delayed product approvals and rising operational expenses take a toll on profit margins.
Companies like Glenmark Pharmaceuticals and Lupin, which draw a big chuck of revenue from the US genercis business, are likely to see the impact of delays in product approvals, brokerages and analysts said.
Cadila Healthcare and Strides Arcolab are expected to report strong numbers on a better business mix, they said.
“There have been issues related to product approvals for most of the companies and this will definitely impact sales growth in the genercis space,” Siddhant Khandekar, analyst with ICICI Securities, told Reuters over the telephone.
However, this is unlikely to affect Cadila Healthcare and Strides Arcolab as both firms have stronger product baskets, he added.
But added capacity and an expanded field force could eat into the profit margins of some drugmakers, Sushant Dalmia, analyst with Pinc Research said
The overall pharma sector is expected to see sales growth of 11-12% in January-March, brokerages said.
A Reuters’ poll of 18 brokerages shows five of the eight mid-sized pharmaceutical companies posting double-digit profit growth in the fourth quarter.
Companies and estimates
Lupin’s branded business in the US should see an up-stick on the back of a pick-up in prescriptions in both Suprax and Antara brands, Pinc said in a research note, adding Glenmark Phamra would see operating margins remaining flat.
Cadila’s growth would be driven by domestic sales, formulation exports and improved profitability of its foreign subsidiaries, Sharekhan said in a note.
Sales are expected to grow 18% for Aurobindo Pharma, mainly on a 27% growth in formulations, while net profit could drop 4%, ICICI Securities said.
“We expect Strides to post 18 percent growth in sales mainly driven by 30% growth in the specialities business. Ebitda margins will remain flat,” it added.
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First Published: Tue, Apr 19 2011. 03 46 PM IST
More Topics: Midcap | Pharma Cos | Cadila | Lupin | Glenmark |