Pharmaceutical companies are likely to report good results for the March quarter. Analysts are expecting sales to grow 10-15% and net profit by over 35%, compared with the same period a year ago, partly due to a low base effect. The March 2009 quarter had seen sales and profits get affected by the global economic slowdown. The impact was particularly felt by Indian pharmaceutical companies with overseas operations.
Strong growth in the domestic market is another positive factor, as retail sales are estimated to have risen by around 17% in 2009. Indications so far are that growth will be high in 2010 too. Large Indian players who were focused on the US and European generic markets have turned their attention back to the domestic market.
Multinational pharmaceutical companies are chasing the same domestic market. They are launching new products, beefing up their marketing infrastructure and also adopting new strategies such as tapping rural markets. These strategies are getting them more market visibility but the impact on their financial performance has been more gradual.
Among the big Indian companies, the US generic market will drive sales growth though Food and Drug Administration (FDA) action against a few companies still remains unresolved. Ranbaxy Laboratories Ltd is expected to see US revenue from generic Valtrex continue to reflect in both sales and profitability. Dr Reddy’s Laboratories Ltd is expected to see revenue from its US generics business grow while its European business is expected to stabilize. But year-on-year sales is expected to decline due to a high base, because of generic Imitrex sales reported in the year ago quarter.
Graphic: Yogesh Kumar/Mint
Sun Pharmaceutical Industries Ltd will benefit from revenue from the launch of generic Eloxatin in the US market. Lupin Ltd and Cipla Ltd are expected to see margins improve due to a better product mix. Among the smaller companies, Glenmark Pharmaceuticals Ltd and Biocon Ltd are expected to report good results.
While the March quarter for pharmaceutical companies will be a good one, investors will be keen on hearing management commentary about the outlook for the year ahead. That should set the tone for stock valuations.
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