Pharmaceutical and healthcare businesses are expected to report high growth in the June quarter, owing to a low base in India and robust recovery in acute categories such as COVID-19-related therapies.
In value terms, the Indian pharma industry grew 37.2 percent in Q1FY22, aided partly by the COVID-19 portfolio. Meanwhile, these businesses may see stable US revenues on a sequential basis with improvement in volumes of injectables and new launches offset by price erosion.
Domestic volumes for the Indian pharma companies during the quarter grew 23 percent, while prices and new introductions grew 6.5 percent and 7.7 percent, respectively.
Domestic brokerage firm ICICI Securities expects pharma companies’ India business to grow in high double-digit. It forecasts the EBITDA margin at 22.5 percent (+70 bps YoY) led by revenue growth and cost control measures.
Hospitals would continue to report recovery in occupancy levels while Diagnostics will report a healthy YoY rise on a low base.
“Overall, we expect our coverage universe to report 16.6% revenue and 20.2% EBITDA growth,” ICICI Securities said in a report.
Meanwhile, US sales of pharma companies are expected to remain flat QoQ in Q1FY22.
“We expect Alkem, Cadila, Dr Reddy’s, and Aurobindo to show QoQ growth in US sales led by injectables and new launches. Other companies would post flattish to marginal decline in a stable environment due to lack of new launches,” the brokerage said.
It expects relatively better results from Cipla as key products in the US grow and benefit from COVID-19 drugs in India; Alkem Laboratories with a strong recovery in the acute portfolio; Glenmark Pharmaceuticals with strong favipiravir sales and Divi’s Laboratories led by strong demand for APIs from India.
Diagnostic companies would report strong growth on a low base and a high number of COVID-19 tests, it added.
Going ahead, key factors to watch out for during management commentary would be growth outlook in India for the industry and respective companies, update on restart of USFDA inspections and price scenario in base US business, and traction in specialty products.
Further, the pharma companies’ outlook on demand and growth in emerging markets with and sustainability of the recovery in diagnostics and hospitals, would also be in focus, as per the brokerage.
Among key risks, ICICI Securities mentions adverse outcomes of USFDA inspections, currency volatility, and the inclusion of more products under NLEM in India.
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