See pharma upcycle for next 2-3 years, expect mid to high teens earnings growth: Morgan Stanley

“As far as the pharmaceutical sector is concerned, what we are looking at is next two-three years of big earnings upcycle,” said Sameer Baisiwala, India Pharma and Property Analyst at Morgan Stanley, in an interview with CNBC-TV18.

“It could be mid-teens to high-teens sort of earnings growth,” he added.

He expects two to three large launches in the US market including inhalers. “For the last three years, Indian companies haven’t had any major launches in the US. This is going to change and is already underway. We have seen two-three large launches and there are many more which are going to come over the next two-three year period. Some of the notable ones are inhalers like Spiriva by Lupin or Revlimid,” he opined.

“Pharma sector is now trading at 25-28 times March FY22 PE,” he stated.

Baisiwala expects the Indian pharma companies to grow. “US market is a very large market and India accounts for roughly about 40-45 percent of volumes in the US. The generic industry has been very instrumental in bringing down the US and the global cost of medication significantly. So, at the end of the day, it is all about cost and price. I do expect Indian companies to continue to grow, markets are very large- it could be the US, non-US, and within India also, we expect volumes to double every seven years. That is a sort of growth that we are looking at even for the domestic market. There is a fair bit of opportunities and room for everyone to grow,” he explained.

In terms of vaccine opportunity, he further mentioned, “It is a very fluid situation at the moment, how the procurement is happening, what is the pricing, it is a fairly dynamic industry every second month or so. India has a long way to go for vaccination. We don’t know how the virus is going to shape up, my guess is at least for the next two years, the vaccination should continue. To that extent, there is going to be a fair bit of action in this space.”

“Based on the latest retail pricing, it looks to me that there is a decent amount of fair margins which is there for the manufacturers, for the distributors, and for the dispensers,” he shared.