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Pharma sector to post double-digit revenue Q1 growth: Analysts

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Mumbai: India’s top drug companies are likely to end a period of slow growth, with analysts predicting a double-digit revenue expansion for the just-ended quarter. A report by brokerage firm Jefferies predicts Indian pharma companies to report 15 per cent growth in revenue in the April-June quarter, the fastest in the past three years, while ratings firm Icra forecasts their revenue to expand 11-13 per cent in fiscal year 2020.

They estimate the companies to have benefited from exclusive drug launches, new approvals and, for some, a recovery in India business.

On the profitability side, Jefferies predicts a 10 per cent year-on-year profit growth after tax. Market cap of leading Indian drug makers like Sun Pharmaceutical Industries and Dr Reddy's has collectively seen a $1 billion reduction in the past two years, as companies battle stringent regulatory actions from authorities in the US, along with price erosion and tepid drug launches in its most profitable market.

But things might be finally turning for better for drug makers, despite underlying challenges. Jefferies said it expects the US business to be a mixed bag, with some companies faring better than the others over their exclusive drug launches.

Domestic growth, it said, would “likely moderate across companies”. Sun Pharma, which had seen a slowdown in the last two years due to regulatory action, is expected to post a recovery on the back of its increased drug filings and a possible ramp up of specialty drug Ilumya.

Cipla, which has been trying to make its mark in the US market, is expected to report a 16 per cent revenue increase with the launch of the generic version of hormone drug Sensipar. Icra, which tracked 21 drug companies, said moderation in pricing pressure, new launches, consolidation benefits and currency benefit would support their US growth. “For the US market, companies witnessed positive growth momentum at 21.3 per cent Q4FY2019 and 10.7 per cent FY2019 Vs -13.1 per cent in FY2018,” said Gaurav Jain, the vice-president of corporate ratings at Icra.

The firm expects the base business growth for the Indian pharma industry to remain at 11-13 per cent in FY2020 and the credit metrics of leading companies to remain stable in view of future growth prospects in regulated markets and relatively strong balance sheets.

“The capital structure and coverage indicators are expected to remain strong despite pressure on profitability and a marginal rise in debt levels given inorganic investments.

The key sensitivity to Icra’s view remains productivity of R-D expenditure, increasing competition in the US generics space and operational risk related to increased level of due diligence by regulatory agencies,” it said.




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