Domestic pharma market rebounds: UR Associates

Last week Cipla, Glenmark, Dishman Pharma and Ipca Labs were some of the major pharma companies that announced their quarterly results. The good news from the results announced so far is that the domestic pharmaceutical market has rebounded after a slowdown last year. While the chronic segment was growing strongly, the growth in the acute segment stagnated last year. However, in Q1 the growth has again rebounded as evident from the growth in Indian business of major pharma companies including Dr. Reddy’s (19% YoY), Lupin (25% YoY), Cipla (30% YoY), Glenmark (24% YoY) and Ipca (19% YoY). Majority of these companies have higher contribution of acute drugs in their domestic drug portfolio and increased sales of acute therapeutic portfolio has resulted in strong overall domestic business performance.

While the core export growth (growth excluding one-time opportunities like exclusivity sales) is not very strong in Q1 marred by increased competition in the US market resulting in pricing pressures, it is the domestic market performance that has been a savior for these companies and made their quarterly performance appear stronger. Moreover, since Indian market is a branded drug market the operating margins are much higher compared to the pure generic US and Western European markets which has resulted in improvement of their overall EBITDA margins. Also, the improvement in margins is aided by the rupee depreciation which lead to better margins from export sales.

In the coming quarters, the performance of our pharma companies will depend heavily on their domestic business success as the export growth may not as be as strong as last year. All the pharma companies have been actively launching new products in the domestic market both in the acute and chronic segments and have ramped up their medical representative field force quite significantly over the last couple of years. Hence, if they continue to replicate this performance in the domestic market, one can be optimistic that the sector will continue its strong overall performance and pharma companies would continue to be one of the favourites for the investors.

FDA approves first generic versions of Singulair to treat asthma, allergies- The US FDA approved the first generic versions of Singulair (montelukast sodium) for use in adults and children to control asthma symptoms and to help relieve symptoms of indoor and outdoor allergies. Montelukast is in a class of medications called leukotriene receptor antagonists. It works by blocking the action of leukotrienes, substances in the body that cause the symptoms of asthma and hayfever (allergic rhinitis). Apotex Inc., Aurobindo Pharma, Endo Pharmaceuticals, Glenmark Generics, Kudco Ireland Inc., Mylan Inc., Roxane Laboratories, Sandoz Inc., Teva Pharmaceuticals Inc., and Torrent Pharmaceuticals have gained FDA approval for generic montelukast tablets. Apotex, Aurobindo, Endo, Kudco, Mylan, Roxane, Sandoz, Teva, and Torrent have received approval for chewable tablets. Teva has received approval for the oral granule form.

Sun Pharma considering buying German drug firm Stada Arzneimittel AG- Sun Pharmaceutical Industries Ltd, India’s largest drug maker by market value, is looking for acquisitions in Europe, including a possible takeover of German generic drug maker Stada Arzneimittel AG. Sun has sought to raise about $1 billion for a European deal, said one person familiar with the matter, who asked not to be identified as the process was private. Stada, based in Bad Vilbel, Germany, has a market value of about €1.4 billion ($1.7 billion). A spokesman for Sun said the company wasn’t in talks to buy Stada. A spokesman for Stada declined to comment on a potential deal. Sun, controlled by billionaire Dilip Shanghvi, has about $927 million of cash reserves and may seek acquisitions to broaden its geographic breadth or enhance its presence in the US.

Ranbaxy , Gilead in deal to make generic antiretrovirals- Ranbaxy announced that it has entered into an in-licensing agreement with Gilead Sciences, Inc. to promote access to high-quality, low-cost generic versions of Gilead’s HIV medicine emtricitabine (FTC) in developing countries including single tablet regimens containing emtricitabine, and fixed-dose combinations of emtricitabine co-formulated with other Gilead HIV medicines. Under the new agreements Gilead will provide a technology transfer for the manufacture of emtricitabine, together with funding to assist with investment in process improvements to reduce manufacturing costs. US World Health Organization guidelines recommend emtricitabine, as well as tenofovir disoproxil fumarate (TDF), as preferred components of first- and second-line HIV therapy. Emtricitabine is marketed by Gilead under the brand name Emtriva®, and a fixed-dose combination of emtricitabine and tenofovir disoproxil fumarate is made available under the brand name Truvada.

Cipla hits 52-week high on robust Q1 earnings; domestic sales rebound- Cipla reported a 52% increase in net profit to Rs 4,010 million from Rs 2,530 million in the same quarter of last financial year. "India's second-largest pharmaceutical company by revenue, turned around its domestic business after a long slumber as the company declared a 30% growth in domestic sales for the quarter ended June 2012," ET reported. Cipla's revenues for this quarter were at Rs 18.64 bn, a 24% growth from the previous year. Raw material cost as a proportion of net sales dropped by 490 bps to 38.2% over year-ago levels.

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