Domestic demand, pro-generic regime boost sales.
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Strong domestic demand, growing preference for generics worldwide and favourable rupee-dollar exchange rate helped the pharmaceutical sector post 11 per cent sales growth for the quarter ended June 2009, compared with the same period a year ago.
While pharma was among the few sectors that managed to expand its revenues in the June quarter, it would have grown at a higher rate but for the wide divergence in performance within the sector.
The contract research and manufacturing services revenues of companies such as Dishman Pharma, Divi’s Laboratories and Piramal Healthcare came under pressure, the exceptions being Jubilant Organosys and Biocon, which managed to post decent growth. The growth picture for the rest of the pack too was bogged down by the USFDA intervention in Ranbaxy Laboratories and Sun Pharmaceuticals.
The earnings picture too was equally divergent. While most companies bettered their net earnings helped by higher sales and lower crude price, forex gains led by favourable currency movements too helped. For instance, in the case of companies such as Piramal Healthcare and Ranbaxy Labs, there may have been a sharper fall in profits (losses in the case of Ranbaxy) had it not been for forex gains (as compared with forex losses in the same quarter last year) and extraordinary items.
US generic push
On the whole, the sector appears to have benefited from the pro-generic regime driven by the healthcare reforms across the key markets of US, Europe and Japan.
Among the companies that managed to clock a better-than-average growth in sales, higher contributions from US appears to have been a commonality.
While Lupin’s US business reported an impressive 35 per cent YoY growth, Dr Reddys and Cadila Healthcare posted a 42 per cent and 81 per cent growth respectively in the above segment compared with a year ago numbers.
Cipla too put up a strong show, largely helped by the 29 per cent growth in export formulations. That was not however, the case with the rest.
Continuance of the slowdown in the USFDA approvals leading to fewer products launches and exclusivities appear to have kept the rest of the pack from delivering high US sales. Glenmark Pharma’ US revenue declined by 9.9 per cent during the quarter, as the US sales of exclusive Trileptal suffered due to a sharp price erosion. While the fallout of the USFDA ban on Ranbaxy saw the company’s US revenues plunge by 41 per cent, the recall of products by US-based Caraco Pharma, Sun Pharma’s subsidiary, resulted in the latter’s lacklustre export performance. But for that, Sun’s export formulations continued to grow at a fast clip.
The strong domestic push that some of the companies enjoyed appears to have been another commonality. Helped by presence in key therapeutic areas, branded drugs and strong marketing franchise, companies such as Lupin (22 per cent), DRL (9 per cent), Piramal Healthcare (26 per cent) and Cipla (11 per cent) posted impressive revenue growth in their domestic businesses.
Ranbaxy’s 21 per cent growth in domestic sales helped it maintain its second position in the market with a share of 4.9 per cent.
Sun Pharma, an otherwise strong performer in the domestic arena, posted a yearly decline in sales led by supply chain fillings in the fourth quarter of last year.