The rebound of the national pharmaceutical market boosts confidence

NEW DELHI : The NSE Pharma index has rebounded almost 9% since its lows in June. While some of the gains can be attributed to improving sentiment toward equities, the pharma market has also been showing signs of recovery since June after a subdued April and May, albeit off an elevated base.

The Indian Pharmaceutical Market (IPM) rose 14.1% year-on-year in July after posting strong growth of 16.6% in June, according to pharmaceutical market researcher All Indian Origin Chemists and Distributors ltd. The IPI was down 3.3% from a year earlier in May. , after falling 4.8% in April. Overall MPI growth for the quarter was just 2.1% year-over-year.

The impact was visible on the performance of a majority of pharmaceutical companies during the first quarter. Cipla, Lupin, Zydus, Cadila, which derive substantial contributions from the Indian market, saw their sales of domestic formulations fall by 8-17% in the first quarter. Sun Pharma only recorded growth of 2%. The rebound in MPI growth could now boost domestic growth in the July-September quarter for these companies.

The market is a key growth driver, especially in the current scenario where companies exposed to US markets are facing pricing pressure due to increased competition in core businesses.

“The July IPM data provides reassurance on the outlook for the formulations business in India, which accounts for 20-65% of revenue and the majority of profitability for our hedge names,” said analysts at HSBC Securities and Capital Markets. (India) Pvt. IPM remains a priority segment for most Indian pharma names as it offers consistent growth with a healthy margin, the analysts added.

“IPM continues to offer sustainable growth opportunities with attractive margins and returns with much lower required investment compared to export markets,” they said. Unsurprisingly, most companies are focusing more on the Indian market in recent years.

For example, Dr. Reddy’s Laboratories had a large presence in the United States, but also decided to focus on India. In the United States, it is now focusing on molecules and less competitive niche products, having sold loss-making proprietary products. Others are also planning to expand sales and strengthen marketing teams in India.

Gynecology, Respiratory, Pain Management and Dermatology were the main growth drivers for IPM, with year-over-year growth of 24%, 22.3%, 16.9% and 16.7 %, respectively, said analysts at Motilal Oswal Financial Services. This indicates that the chronic and acute segments are growing at an impressive rate, they added.

Among the top 30 companies, Merck India, Natco Pharma, AstraZeneca Pharma India, Intas Pharmaceuticals, JB Chemicals and Pharmaceuticals and Emcure Pharmaceuticals grew (from 20% to 55.6% YoY), which is significantly higher than the growth of IPM in July, analysts said.

Growth in July was driven by volumes (6.4% year-on-year), price increases (6.3%) and new products (1.5%). Inflation-related price growth of products on the National Essential Medicines List also enabled growth.

In the future, products that will no longer be patented will lead to new launches. As expected, IPM saw a surge in generics for MSD’s diabetes drug Januvia (Sitagliptin) after the brand’s patent expired. Overall, analysts are encouraged by the growth in MPI. “We believe that chronicle-focused businesses would have better growth opportunities as covid has now moved to a national level,” said Anand Rathi Research.

Given continued macro headwinds (increasing input and freight costs) and challenges in export markets (eroding prices in the US), trends in the Indian formulations market are critical to the trajectory of Indian corporate profits, HSBC analysts said.

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