Q4 results preview: Growth recovery for pharma after a muted first half

The revenue from operations declined to ~69.7 bn for the fourth quarter against ~71.3 bn during the same period last year
Aided by the US market, which is on a recovery path, the Indian pharma sector is expected to report a second consecutive quarter of double-digit top-line growth (in the March quarter).

A rupee depreciation of about 9 per cent year-on-year (YoY), along with stability in pricing, increasing new product launches, and the flu season, have all led to the growth. Analysts at Edelweiss see US sales of Indian pharma majors growing 13 per cent YoY during the quarter in constant currency terms.

Firms like Lupin and Dr Reddy’s Laboratories have seen large product launches including Renexa generics (angina treatment) and Suboxone generics (opioid addition), respectively, that will drive their performance.

Lupin may see generics of acne treatment Solodyn and pulmonary arterial hypertension Adcirca drive its US sales, in addition to the exclusive launch of Renexa generics. The pace of momentum in the US flu season, too, picked up later in the quarter and is likely to benefit Lupin. Among other companies that will benefit are Cadila Healthcare and Natco Pharma, which sell generics of flu treatment drug Tamiflu. 

The base, however, will be high for these companies, given a strong flu season in the year-ago quarter. Meanwhile, there is a shortage of several products in the US, especially injectibles, that could benefit Indian players, points out Ranjit Kapadia at Centrum Broking. 

Players such as Aurobindo may benefit as a shortage of hypertension drug Valsartan will boost the sales of Alkem, Alembic and Torrent, as well as active pharmaceutical ingredient maker Divis Laboratories. 

Though companies are likely to see margin improvement, the inventory write-back by Sun Pharma is likely to impact reported earnings. However, excluding Sun Pharma, analysts at Jefferies expect 19 per cent earnings growth, with Lupin and Dr Reddy’s posting the highest growth.

Among other players, Cipla, too, is likely to meet its US sales guidance. However, analysts believe that a weaker season in India is expected to keep its profitability under check.

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