Analyst corner | Pharma: Expect growth to remain below 10%

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Published: July 16, 2019 2:18:19 AM

Pricing contribution remained steady at 5%, as did new product contribution at 2%. A majority of the corporates saw a y-o-y decline in volumes, as did 12 of the 20 therapies.

Analyst corner, Pharma, growth, market news, pharma industry, DRRD, IPCA, Alembic, Eris, SUNP, NTCPHQ120 market growth stood at 7.9%, the slowest in the past seven quarters and one of the lowest in past five year. (Reuters)

Indian pharma growth moderated further in June to 6.6%, the slowest in the past two years. The moderation has been led entirely by volumes, which declined y-o-y for the second month. Most therapies are now growing in single digits and June saw slowdown even in chronic therapies like CVS/CNS.

Among companies, DRRD saw a sharp acceleration and, along with Intas, was the fastest growing, while Ajanta, Eris and Alembic saw a sharp slowdown and grew slower vs market.

Q120 market growth stood at 7.9%, the slowest in the past seven quarters and one of the lowest in past five year. Most corporates saw a slowdown in growth in Q120, with IPCA, Alembic and Eris seeing the biggest slowdown, while Dr Reddy’s, Glaxo and Sun saw an acceleration. The slowdown over the past two months has been led entirely by volumes, which declined 0.6% y-oy in June and grew just 0.7% in Q120.

Pricing contribution remained steady at 5%, as did new product contribution at 2%. A majority of the corporates saw a y-o-y decline in volumes, as did 12 of the 20 therapies.

Growth moderated across a majority of the therapies. Except dental and urology, all other therapies are growing in single digits. Vaccines, malaria and gastro were the slowest growing therapies in June, while urology and dental were the fastest growing. Eris, Ajanta and Cipla saw the greatest slowdown in growth in June, while Dr Reddy’s, IPCA and Abbott saw the highest acceleration.

We expect the sector to be range-bound for the next 12 months. Earnings could post a cyclical recovery, but structural challenges persist and we expect margins and return ratios to remain below historical levels, even in the medium term. Cyclically, we like SUNP and NTCPH. We remain cautious on LPC.

We expect growth to remain below 10%, going forward. Volume growth remained negative in June at -0.6% vs -0.1% in May. Pricing remained stable and contributed 5% of the growth. In Q120, volumes grew only 0.7%, the lowest in the past seven quarters. More than half the companies reported a y-o-y decline in volumes.

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