Pharma outlook for 2023 | Cipla, Sun, Gland top picks for Bernstein

Bernstein has said that 2022 was a tough year for the Indian pharmaceutical space, largely it is back to basics in 2023, which includes ongoing price erosion to manage in the US complex generics to rescue a couple of companies in the US market and secular return to volume growth in India.

Bernstein expects margins to improve after what was a rather flattish 2022. The sector could start seeing some changes such as improving cash flow for companies participating in Revlimid generic, higher capital allocation and OPEX spend in India.

Sector valuations, according to the firm, are back to 10 year averages on a P/E as well as an EV to EBITDA basis.

Cipla, Sun Pharma, and Gland Pharma are their top picks.

IIFL’s outlook for pharma 2023 remains mix. US generic market continues to be challenging according to them as well. So the firm is estimating high single digit to low double digit price erosion.

According to IIFL, regulatory risk for export focused companies has risen. Domestic Indian market is probably going to clock around 10 to 11 percent growth and domestic focus formulation companies will continue to outperform. For IIIFL, top picks include Sun Pharma, JB Chemicals as well as Torrent Pharmaceuticals.

Most Pharma companies, barring the likes of Sun Pharma and Cipla have underperformed the benchmark indices in 2022. Even the Nifty Pharma index has witnessed a drop of close to 10 percent this year while the Nifty 50 index is managing to hold on to positive territory for now.

So, what is the way forward in 2023? The ability to withstand price pressure in the US which would be fueled by key drug launches in the US such as Lupin’s inhaler drug Spiriva generic, Cipla’s cancer drug Abraxane or Biocon’s biosimilars insulin aspart and Bevacizumab and continued sales for Sun Pharma specialty biz. 2023 will also be marked by companies undertaking remediation to solve outstanding USFDA issues and taking steps to fuel growth in other markets such as India and even China.

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