How did pharma companies fare in US in the September quarter

Sun Pharma, which saw price pressure in its US arm Taro, reported a steady performance due to its speciality portfolio of drugs such as the psoriasis drug Illumya or eye drug Cequa. Similarly, Dr Reddy's and Cipla were aided by sales of the cancer drug Revlimid generic. Alembic, which experienced double-digit price erosion, reported over $50 million of sales was aided by a one-off opportunity.

Price pressure, along with inflation, weighed on most companies’ margins. Aurobindo Pharma reported a multi-quarter low of 13.7 percent. Alkem Laboratories reported a drop of over 400 basis points in gross margins, in fact, lowering its guidance for FY23E to 15 percent compared to 16 percent earlier.

It was also a particularly tough quarter for Divi's Laboratories, whose core business decline resulted in the margin slipping below 35 percent. Sun Pharma, Dr Reddy's Laboratories and Cipla’s operating performance were, however, resilient, led by select drug and portfolio performances in the US.

Some companies such as Dr Reddy's and Cipla are likely to continue to benefit from sales of the cancer drug Revlimid generic, with Zydus and Natco gaining from a bad US flu season. Investors will also pin their hopes on new launches that will help combat price erosion, for example, inhaler Spiriva generic for Lupin, cancer drug Abraxane for Cipla and biosimilar Insulin Aspart and Bevacizumab for Biosimilar.

Another important factor that might be linked to product launches and the overall US performance is the US regulatory challenges, as the USFDA action on some companies' plants could impact launch momentum.

Regulatory action to follow includes Sun’s Halol facility, Cipla’s Goa plant, Lupin’s Tarapur, Mandideep facilities, Biocon’s Malaysia facility, Glenmark’s Monroe and Baddi plant.