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Pharma firms are expected to report a strong performance in the June quarter. Not only are domestic formulation sales likely to be high, driven by contribution from covid treatment drugs, even US sales growth is expected to be helped by the low base of last year.

The sharp uptick in domestic formulation sales and improved prospects in US generics is expected to drive 12% year-on-year (y-o-y) growth in aggregate sales in Q1FY22, according to analysts at Motilal Oswal Financial Services Ltd (MOFSL). The Indian pharma market (IPM) had grown 37% y-o-y and 15% sequentially in Q1. The growth was driven by sales of covid treatment drugs and other drugs. The recovery in acute therapies like gastro, anti-infectives, antibiotics and chronic therapies are expected to help these firms post strong growth.

While Q1 may see extraordinary growth led by covid drugs, the domestic pharma market is seeing a growth rebound as well
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While Q1 may see extraordinary growth led by covid drugs, the domestic pharma market is seeing a growth rebound as well

MOFSL expects a y-o-y growth of 60% each in domestic formulations sales for Glenmark Pharmaceuticals Ltd, Cipla Ltd and Cadila Healthcare Ltd. The addition of the Wockhardt portfolio and better traction in chronic therapies is expected to drive 50% y-o-y growth for Dr Reddy’s in Q1, as per MOFSL.

Analysts at Centrum Stock Broking Ltd also believe Cipla and Dr Reddy’s to post the highest growth in the domestic market. They expect other large firms to deliver growth above 25%. Investor interest on multinational companies remains high, thanks to their domestic focus and strong branded portfolio. Centrum expects Abbott India Ltd and Pfizer Ltd to post strong double-digit growth.

While Q1 may see extraordinary growth led by covid drugs, the domestic pharma market is seeing a growth rebound as well. The IPM growth on a trailing 12-month basis remained strong at 11.7%. Notably, forward prospects are looking decent as the September quarter is a seasonally strong one, with acute segment sales catching pace.

Centrum said distributor channel checks indicate that demand continues to be high and with the ebbing of the second wave, the industry is preparing for the anti-infective season.

“The India formulations business offers multi-decade double-digit growth as higher per capita income, awareness and health insurance penetration will increase pharmaceutical consumption," analysts at Emkay Global Financial Services said.

As the domestic formulations market remains important, US sales growth remains key for driving the performances of many Indian pharma firms.

Improved prescription flow in the US is providing traction to specialty and respiratory products sales and is positive for many Indian pharma firms.

Analysts at MOFSL expect the y-o-y growth trajectory in US sales to reverse its downtrend and deliver 6% y-o-y growth in June quarter. Lupin and Sun Pharma are expected to record 27%/24% y-o-y growth in US sales for the quarter.

Since 1 April, the Nifty Pharma index has risen almost 18%, beating the 6.4% return in the Nifty 50 index.

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