Pharma companies expected to report stable performance for Jan-March quarter

Factors such as the impact of price cuts from the National List of Essential Medicines (NLEM) revision will be watched closely. Margins of around 22 to 23 percent, supported by improved raw material and logistic cost pressures are expected. Quarter on quarter (QoQ) stability in drug pricing is something that one could expect.

Dr Reddy’s Laboratories (DRL), Natco, Cipla, Zydus Life are all key beneficiaries of Revlimid generic. Sun Pharmaceutical Industries is likely to see continued traction from sales in the specialty business. One should watch for the impact from the IT security incident, Halol import alert.

Commentary from Lupin on Spiriva generic launch and Aurobindo Pharma on the injectables business will be watched closely.

Biocon should be aided by full integration of the Viatris’ biosimilar acquisition.

Domestic growth is expected to be steady for the likes of Torrent, JB Chemicals, Alkem and Glenmark.

Active Pharmaceutical Ingredient (API) companies are likely to see improved demand aiding revenue, realizations could continue to be pressured due to excess capacity. Margins like pharma companies will be aided by the overall decline in raw material as well as freight costs.

From the API companies a QoQ recovery in Divi’s Laboratories’ margins will be closely watched on a sequential basis.

Diagnostic companies should see mid-single digit revenue growth QoQ with margin sustaining anywhere between 24 and 26 percent for Dr Lal Pathlabs and Metropolis.

Hospitals could possibly report stable to better occupancy sequentially due to factors such as stable surgical revenue, and increase in medical tourism.

Specifically, in the hospital space for Apollo Hospital, the progress on Apollo 24/7 will be watched quite closely.

Vishal Manchanda, Pharma Analyst, Systematix Group believes that diagnostic and hospital space is structurally well poised for growth.

He is expecting around 3-4 percent growth in topline in Divi’s Laboratories on a QoQ basis and about 100 basis points (bps) improvement in margins.

According to him, people are waiting for DRL to get more large approvals in the US.

“People want to see what is there beyond Revlimid and that is where the larger rerating stands,” he said.

“Specifically in case of Revlimid, the market share and sales do not correlate very well. So we are not very sure how Revlimid behaves for DRL but there is a possibility Revlimid might show a dip in case of DRL. Otherwise DRL, ex-Revlimid, business is doing well,” he said.