BackIndian pharmaceutical companies gain from easing pricing pressures
Indian pharma firms are trying to sweeten the revenue pie by rolling out new drug application products in USMuch of the future recovery would depend on the consolidation in the US and other overseas businesses, which is likely to be slow
PremiumThe June quarter results of Indian pharmaceutical firms were encouraging, reflecting that the top companies are on a path to recovery.
First quarter FY20 revenues of 10 leading pharma firms rose by about 13.3% from the year-ago quarter. They also focused on cost control, which resulted in Ebitda margins expanding by 98 basis points year-on-year to 20.7%. Ebitda is earnings before interest, taxes, depreciation and amortization. Net profit of these companies rose 22.7%.
The slightly better performance comes following easing headwinds in the US generics market. The high-pricing pressure that marred the firms’ growth in the US seems to be softening, note analysts.
A good thing is that channel and distribution partners in the US have been consolidating, leading to some easing in pricing. Besides, Indian pharma companies are trying to sweeten the revenue pie by rolling out new drug application products in the US. A stable currency and new drug launches compensated for some of the generic price erosion.
Some pharma companies have also been bagging one-off sales, which helped bolster revenues. “The results have been a mixed bag for pharma companies. However, the key trends were the pricing pressure in the US remains moderate, i.e., from low to mid-single digit. Performance of Indian pharma companies have also improved in the US with multinational companies moving out of non-viable products, which has seen one-time business opportunity for Indian pharma companies as well as due to frequent shortage of plain vanilla generic drugs in US," says Krishnanath Munde, pharma analyst at Reliance Securities Ltd.
The domestic business has been a mixed bag as well. Revenues of some pharma companies grew in low-double digits, particularly Glenmark Pharmaceuticals Ltd, Sun Pharmaceutical Industries Ltd and Lupin Ltd. However, it’s the branded-generics business that has been the counterbalance for these companies. Growth in the generic-generic business, where there is less pricing power, has been slow, but has still kept margins healthy.
Thankfully, the impact of the Jan-Aushadhi stores has not been much in the past quarter, but could pose some competition going ahead. Largely, the management commentary for the domestic business has been optimistic, with most pharma firms expecting revenue growth of about 10%.
Much of the future recovery would depend on the consolidation in the US and other overseas businesses, which is likely to be slow. Besides, since drug development and launches differ from company to company, that would be a key factor to watch out for from an investment perspective.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
