It has been a weak Q1 for most pharma companies with six out of 10 companies missing their margin estimates. Margins were weak this quarter due to factors such as price pressure remerging in the US and higher costs due to COVID-19.
Now, Alembic kicked off the earnings season, withdrawing its Rs 50 EPS guidance, along with the likes of Strides Pharma and Lupin, showing a big margin decline this quarter.
The common factor is between the likes of Alembic, Strides and Lupin seem to be weak US sales, resulting in this margin pressure.
Alembic said price pressure was seen in some of their larger products and Sartans, while Strides says US market witnessed double-digit price erosion. Lupin’s US sales came in at $172 million versus estimates of nearly $200 million this quarter.
Sun Pharmaceutical Industries outperformed with a 35 percent year-on-year growth, which was aided by their speciality business.
India sales was strong with most companies outperforming due to the COVID-19 portfolio of sales and a low base. The likes of Cipla says they expect COVID-19 to still comprise of 5 to 7 percent of sales. While most companies are expecting high-teen growth.
However, going forward, the street is watching a few factors and this includes recovery in the US sales margins, price pressure in the US and India sales, as well as the resolution of regulatory issues.
Lastly, the stocks have seen a correction of anywhere between 3 and 30 percent from their 52 week highs and that is reflected in their PEs now with the largest correction in the likes of Alembic, Lupin and Dr Reddy's Laboratories.
Remember, it is important to note that, for Dr Reddy's besides Q1 miss in terms of numbers, it was also the negative news of the subpoena, which really impacted the stock.
(Edited by : Bivekananda Biswas)
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