Pharma: Domestic performance continues to be robust

UR Associates has come out with its report on pharma sector.

Lupin, Ipca Labs, Torrent Pharma, Unichem and Alembic Pharma are some the large-cap and mid-cap companies that have announced results so far and most of the companies have demonstrated strong double digit domestic growth. The domestic Q2 growth of Lupin was 18% YoY, Ipca Labs (15% YoY), Torrent Pharma (15% YoY), Unichem (20.7%) and Alembic Pharma (13.0%). Alembic Pharma growth was less compared to peers because of the slower growth (less than 10%) in its acute segment. However, the company’s specialty segment grew at 20%. The strong domestic growth of companies was a result of multiple factors including launch of new products, increase in sales force and their productivity and strong growth of the chronic segment. 

Another interesting observation from the conference call of companies is that most of the companies are expecting that the market based pricing will prevail under the new pharmaceutical pricing policy. They feel that the Supreme Court is not against market based pricing but only wants to ensure that prices of the 74 drugs, which are presently under price control, should not increase after the new pricing policy comes into effect.

Apart from Lupin, all the large-cap pharma companies are still to announce their results and it would be interesting to see how the companies have fared in the domestic and US markets. Lupin US sales grew 18% to USD144 mn. While its branded generics portfolio has grown strongly, its US generic sales have slightly declined in the quarter because of pricing pressure and higher base effect (had higher revenues from exclusivity sales in Q2 FY12). Except Alembic, the US sales growth of other mid-cap companies that have announced sales so far have been strong but of a smaller base. All these companies have small presence in the US market and are looking to expand rapidly with more product launches. Alembic Pharma’s US sales were weak due to price erosion in its existing products, product mix and capacity constraints.

DRL plans Rs 1,930 million purchase of OctoPlus- Dr Reddy’s Laboratories said it has decided to acquire Netherlands-based OctoPlus NV, a specialty pharmaceutical company, for about euro 27.4 million (about Rs 1,930 million) through a public offer. The transaction is expected to be completed by the end of the current financial year, company’s Vice Chairman and Chief Executive Officer G V Prasad said. Prasad said the acquisition gives them the ability to strengthen technological capabilities in the area of drug delivery.

Sun Pharma MD's brother-in-law to buy stake in Telenor- Promoters of Indian pharmaceutical companies are busy with diversifying their businesses into new areas. After Ajay Piramal's investment into Vodafone India, another pharmaceuticals veteran - Sudhir Valia, promoter of Sun Pharmaceuticals and brother-in-law of Dilip Shanghvi, MD, Sun Pharma, is acquiring a significant minority stake in Telenor Group's new Indian entity. Sudhir Valia, brother in law of Dilip Shanghvi has bought 26% in Telenor's India venture in his personal capacity. Sudhir Valia holds about 0.74% stake in Sun Pharma, while his wife Raksha Sudhir Valia holds 1.68% in the largest Indian pharmaceuticals company. Dilip Shanghvi holds 11.16% in Sun Pharma while his wife Vibha holds 0.28% stake. Valia who joined Sun Pharma in 1994, is on the Board of Directors of a number of companies including the US subsidiary- Caraco Pharma.

Overcharging set to cost pharma companies full sales revenue of drug- A drug maker found overcharging will have to shell out the entire sales revenue of the medicine from the date of its launch as penalty, according to a directive issued by the country's drug price regulator. "If a company has not been booked for overcharging for selling the product without price approval, if any, pertaining to the period prior to fixation of the price of the said formulation, the entire sale amount from the date of introduction of the product till issue of the price notification order shall be recovered from the company, treating the entire sale proceeds as 'unauthorised sales'," the National Pharmaceutical Pricing Authority (NPPA) said. The regulator said that action will also be taken in cases wherein the manufacturer and marketing company have failed to take prior price approval for sale of scheduled formulation packs. The NPPA has given state governments the authority to initiate legal action against companies found overcharging. While welcoming the move experts have raised apprehensions over the efficacy of the directive. 

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