Cadila saw its earnings growth stagnate in FY11-13 but grew at a fast pace during FY13-15 as its US generic pipeline strengthened and approval rate picked up. US sales grew at a compounded annual rate (CAGR) of 49.2 per cent in FY13-15, translating to an earnings CAGR of 32.7 per cent. The US business now contributes a little more than 40 per cent to overall revenue. US sales grew from Rs 1,570 crore in FY13 to Rs 3,554 crore in FY15 and the pace has been strong this year, too.
In the September quarter, US revenues at Rs 1,004 crore grew by 25 per cent over a year. Its anti-malarial product, hydroxychloroquine, has been driving US sales in the recent past. Volumes continue to increase in the existing business and there is traction in recent launches, too. Though there is some competitive pressure now in hydroxychloroquine sales, analysts expect near-term growth to be driven by key launches like Asacol HD (anti-inflammatory) and Toprol XL & Prevacid (gastro drugs).
Analysts at KR Choksey expect US revenues to clock a CAGR of 34 per cent in FY15-17. The rate could be better if Cadila’s Moraiya (in MP) factory, currently under the US drug regulator's scanner, gets faster clearance. In the domestic market, the company had seen its sales growth soften in recenty ears, partly due to implementation of a new drug pricing policy. India sales (40 per cent of overall revenue) had only a 7.3 per cent CAGR in FY13-15. This should pick up as new products are added. In the recent quarter, the domestic formulations business grew 10.4 per cent to Rs 751 crore.
The company launched 12 new products, including line extensions, in the quarter, similar to the June one. Sovaldi (a Hepatitis-C product, launched in March) is expected to see annual sale of Rs 70-80 crore and is a market leader with a share of nine to 10 per cent. Analysts expect a CAGR of 12 per cent in domestic sales during FY15-17.
Overall, the company is well placed to grow from here on. US clearance of the Moraiya facility, approval for big launches and pick-up in domestic growth momentum could lead to a re-rating of the stock.