Pharma sector outperforms in Q4FY12: UR Associates

The results season has finally come to an end and expectedly pharma sector has outperformed many other sectors. The domestic slowdown does not seem to have much effect on the industry as most of the large pharma companies have managed to grow over 20%. Also, the exports growth has been very strong thanks to depreciation of rupee resulting in higher rupee realizations from export sales and also new product launches in the world’s largest pharmaceutical market, US. Sun Pharma, Ranbaxy Labs, Cipla, Divi's Laboratories, Glenmark Pharma and Zydus Cadilla are some of the large pharma companies that have exhibited strong performance in the quarter ended March 31, 2012. Lupin and Dr. Reddy’s Labs had posted not so attractive results due to higher tax outgo in the former case and some one-off impairment charges that dented the net profit figure in the case of later. The strong performance of Indian pharma companies is expected to continue in the present quarter as well as rupee is at an all time low and the companies continue to launch new products in the US market. However, a few of the big one-time opportunities that existed last quarter might not be there in the present quarter. 

Last week the US senate has passed the Generic Drug User Fee Act that is expected to expedite the US FDA’s review of generic drugs and biosimilars. The US FDA is expected to strengthen its team, which will increase its vigilance on foreign drug facilities that supply drugs to the US market and also hasten the process of approval of new manufacturing facilities. The GDUFA requires the generic drug industry to pay $299 million annually in user fees for the next five years beginning this October 1st. 

After a hiatus, Foreign Investment Promotion Board (FIPB) has started clearing FDI proposals in pharma sector. About 25 FDI proposals worth nearly Rs 3,000 crore were cleared across all the sectors. Pertaining to pharma sector, Plethico Pharma’s Rs 490 crore FCCBs, Ankur Drugs’ Rs 40 crore overseas capital raising program, Sun Pharma Advanced Research’s Rs 200 crore rights issue and Mauritius-based Mozart Ltd's proposal to raise Rs 300 crore have received approval.

Sun Pharma Q4 net profit surged 85.3%
Sun Pharma consolidated sales grew 59% to Rs 2,330 crore during the quarter and its operating profit margins jumped to 43% resulting in net profit surge of 85.3% to Rs 820.21 crore. The domestic business, at Rs 877 crore, contributed 37% to overall sales, growing 49% y-o-y in the quarter. For FY12 and even after adjusting one-offs, the core business growth of 21% beats the industry growth of 14%. This trend should continue as Sun, which launched 22 products during FY12, plans to launch 30 others in FY13. Thus, analysts see domestic business growing 18% in FY13. Sales outside US grew 31% y-o-y to $65 million. Taro, its Israel-based subsidiary, clocked in a sales growth of 35% y-o-y at $145 million and continued driving growth in the quarter. US supplies of anti-cancer product, Lipidox, provided impetus, with US sales of $202 mn growing 66% y-o-y in the March quarter. While there are concerns over Lipidox’s temporary supplies and Taro’s ability to drive growth in FY13, Sun’s prospects remain strong. Taro’s growth is coming on the back of the price hikes undertaken for some products and may not sustain, say analysts. Also, sales of Lipidox, which contributed 10 per cent to US sales in the quarter, may drop as Sun was shortlisted by the USFDA for supplying the drug till shortage persisted. Positively, while Taro and Lipidox may not be growth drivers in the coming days, Sun has a strong Para-IV product pipeline in the US. Of this, anti-cancer Eloxatin and anti-psychotic Lexapro are to be launched on an exclusivity basis in FY13.