scorecardUS outlook improves for Indian pharma but domestic market under the cloud
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US outlook improves for Indian pharma but domestic market under the cloud

US outlook improves for Indian pharma but domestic market under the cloud
Business3 min read
  • Drug shortages, channel realignment and woes of competitors to aid US business of Indian pharma cos.
  • Dr Reddy’s, Cipla, Zydus and Sun Pharmaceuticals gained from sales of generic cancer drugs in the US.
  • US FDA inspections are in full swing and the accelerating pace of new launches will improve outlook for US business in FY24, say analysts.
The Indian pharma sector has gone through many ups and downs in the last few years – like falling from a Covid-high last year, adding to pricing pressures in its most important market. In the first quarter of FY24 however some of the US market pricing pressures are easing, making up for the slump in domestic sales.

“Q1 FY24 turned out to be a tale of two divergent performances as US delivered across the board beat while domestic business, specifically acute, saw weakness in June. Price erosion came in at high single digit in US versus mid-teens last year reflecting in better US revenue growth and profitability,” said a report by YES Securities.

Drug shortages, channel realignment and financial as well as regulatory woes of competitors seems to have helped curb US market price erosion in Q1 on a quarter-on-quarter, say analysts.

The US market has been dented in the last few years for many reasons including pricing pressures — like supply chain disruptions, and a massive delay in approval of Abbreviated New Drug Applications (ANDAs) leading to fewer generic launches in the US.

However, the ability to launch the generic version of a cancer drug gRevlimid in the US abated some of the concerns. Dr Reddy’s generated sales to the tune of $125 million from this generic in Q1 while Cipla, Zydus and Sun Pharmaceuticals reported gRevlimid sales between 40-60 million.

“We believe the earnings support from gRevlimid is expected to drive the US base business and abate pricing pressure for the coming two years. Moreover, US FDA inspections are in full swing and the accelerating pace of new launches will improve outlook for US business in FY24,” J M Financial.

Lupin and Zydus Life benefitted from exclusive launches of gSuprep and gTrokendi. Darunavir and gSpiriva are other drugs in the pipeline that can boost North America sales of Indian pharma companies.

Stock

Growth levers ahead

Sun Pharma

Specialty performance

Dr Reddys

Revlimid contribution to sustain in 2Q

Zydus Lifesciences

Near-term US outlook promising

Cipla

US base biz at $210- 215 mn hereon: mgmt

Lupin

Attractive launch pipeline

Source: J M Financial

Sun shines in the domestic market

The domestic pharma market seems to see the after-effects of a delayed monsoon, which led to weakness in acute therapies like gastroenteritis which aids seasonal sales in Q1. This trend impacted key players like Dr Reddy’s, JB Chemicals and Alkem.

Alkem however said that there has been no change in domestic sales even in July, August is expected to provide some quality on the same.

Sun Pharma, however, is an outlier with a good performance in the domestic business as it boosted its sales strength along with new launches. It launched 105 new products in FY23 as compared to 77 new launches the year before.

“Sun’s India business has grown at 11% compounded annual growth rate (CAGR) over FY20-23, driven by volume, price and new launches. We expect Sun’s India business to grow at around 10% CAGR over FY23-26,” said a report by IIFL Securities.

$NIFTYPHARMA.NSE Index gave a breakout at at 14900 and retested the same, now ready for a upmove to 15800. Stock to watch for with bullish structures are $CIPLA.NSE $LUPIN.NSE

— (@DhwaniTA) August 28, 2023]]>

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