The S&P BSE Healthcare index rose a paltry 3.3% in the September quarter, signifying that investors did not have much to cheer for. The domestic pharmaceutical market remained a tough one, although better than in the preceding quarter.
A recovery was visible from the price cuts on drugs under price control, inclusion of more drugs in its ambit and the lost sales due to the ban on fixed drug combinations.
The market grew 12.6% in the September quarter, according to data from pharma market research firm AIOCD Pharmasofttech AWACS Pvt. Ltd, compared with 6.7% in the June quarter. Volume growth, too, was healthy at 6.7%, compared with a decline of 1% in the June quarter.
Sun Pharmaceutical Industries Ltd reported a 11% increase in its India sales and Dr Reddy’s Laboratories Ltd a 14% rise. Cipla Ltd’s domestic sales rose 21%, while those of Lupin Ltd went up by 12.1%.
On the international front, it was a mixed quarter. The outstanding issues related to non-compliance with the US Food and Drug Administration (FDA) rules continued in the September quarter. On the brighter side, the current quarter has seen a few companies get drug approvals.
In the US generic market, Lupin’s sales declined 8.7% in dollar terms on a sequential basis, and Dr Reddy’s reported a 4% rise in rupee terms, while Sun Pharma reported a 9% decline in dollar terms. Some companies benefited from sales revenue from new launches but, overall, drug makers said they continued to experience pricing pressures in their base business.
Demonetisation is expected to have a limited impact on the pharmaceutical sector. Firstly, chemists and government hospitals were allowed to accept old notes till last week. This has ended now and some impact on sales will be visible, partly as the trade channel may limit offtake due to the liquidity crunch. The impact is likely to be temporary, however. Apart from the effect of demonetisation, if the industry can successfully resolve pending issues on the USFDA compliance front, it can provide a boost to investor sentiment.
Last week, drug makers got a reprieve as the ban on fixed-dose combinations was overturned by the Delhi high court. If the government chooses to appeal this verdict, the final word will come from the Supreme Court. It is better to wait for that outcome than to celebrate prematurely.