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The Indian pharmaceutical industry is approaching a period of mixed performance with a particular slowdown expected in the growth of branded drug formulations. This comes from a report released by Systematix Institutional Equities which highlights various trends across the sector.
Overall Market Growth Predictions
For the companies covered in the report, analysts are predicting a median year-on-year (YoY) revenue growth of around 12% along with a 5% growth on a quarter-on-quarter (QoQ) basis. Despite these numbers, the outlook for the branded pharmaceutical sector remains conservative by pointing towards a slower pace of growth.
Outperforming Companies on the YoY Scale
Some companies, including Dr. Reddy's Laboratories, Zydus Lifesciences, Lupin, and Mankind Pharma, are expected to perform better than others in terms of YoY growth. These firms are anticipated to see stronger financial results compared to their industry peers despite the broader challenges facing the sector.
IPM Growth Rate Declining
However, the overall growth for the Indian Pharmaceutical Market (IPM) is expected to slow down with projections indicating around 8% YoY growth. One of the key reasons for this slowdown is the low drug price inflation which is closely tied to the Wholesale Price Index (WPI). The WPI currently sits at close to 0%, a sharp drop from the 12% experienced last year which is impacting revenue potential.
Sun Pharma's Strong Performance
Sun Pharma is one of the companies showing resilience in this challenging environment. Its domestic business is expected to show modest growth in the mid-single digits. However, it is the company’s U.S. operations that are set to benefit significantly, mainly due to its increased market share in the generic version of the drug Revlimid (gRevlimid). For Sun Pharma, its revenue, EBITDA, and Profit After Tax (PAT) are expected to grow by 7%, 15%, and 16% QoQ respectively. On a YoY basis, these numbers are even more impressive with growth rates of 12% for revenue, 31% for EBITDA, and 38% for PAT.
Contract Research and Manufacturing Services Leading Growth
A notable trend in the industry is the strong performance of the Contract Research and Manufacturing Services (CRAMS) segment. This part of the business is expected to grow faster than generics which is driven by increased demand for contrast media. Although the quarter is expected to remain relatively flat overall, the YoY figures paint a more positive picture with revenue growth expected to reach 10% while EBITDA and PAT are projected to increase by 23%.
While certain companies in the Indian pharmaceutical sector are expected to perform well, the overall growth of the market is slowing. Factors such as minimal drug price inflation and a Wholesale Price Index are contributing to this decline. However, the CRAMS segment and specific companies like Sun Pharma are likely to drive growth within the industry.
Growth Projections for Indian Pharmaceutical Companies
The Indian pharmaceutical sector is witnessing significant growth with various companies showing promising projections for their businesses both domestically and in the U.S. market. Here’s a detailed look at the anticipated performance of some key players in this industry.
Cipla's Steady Growth in India and the U.S.
Cipla's operations in India are expected to experience a solid increase, projected to grow at a high single-digit rate. This growth is largely attributed to the recent launch of the generic version of Lanreotide, which has gained traction since its introduction last quarter. In the U.S., Cipla's business is expected to remain stable with year-over-year (YoY) revenue growth estimated at 5%. Additionally, earnings before interest, taxes, depreciation, and remuneration (EBITDA) and profit after tax (PAT) are also projected to grow by 5% and 11%, respectively.
Dr. Reddy's Anticipated Double-Digit Growth
Dr. Reddy's Laboratories is set to see robust growth in its Indian market are primarily driven by a new distribution agreement with Sanofi Healthcare regarding its vaccine offerings. This partnership is expected to enhance their sales significantly. However, the company's performance in the U.S. market is predicted to remain flat on a quarter-over-quarter (QoQ) basis. Overall, revenue is expected to increase by 2% QoQ and 13% YoY, while EBITDA and PAT are projected to rise by 6% and 9% QoQ.
Zydus Cadila's Mixed Performance
Zydus Cadila is forecasted to achieve mid-single-digit growth in its domestic branded formulations. However, its sales in the U.S. may see a slight decline on a sequential basis. The wellness segment of the company is anticipated to grow modestly but may experience a QoQ drop due to seasonal factors. Despite these challenges, Zydus expects impressive YoY growth figures: revenue is projected to rise by 20%, EBITDA by 79%, and PAT by an astonishing 107%.
Lupin's Promising Domestic and U.S. Sales
Lupin is expected to witness mid-to high-single-digit growth in its domestic business, boosted by consistent contributions from generic Spiriva along with new product launches such as gProlensa and gOracea in the U.S. For the year, Lupin anticipates a revenue increase of 12% with EBITDA climbing by 38% and PAT soaring by 64%.
Mankind's Recovery and Export Growth
Mankind Pharma's sales of domestic branded formulations are projected to grow in the low double digits, indicating a recovery in its consumer business. The company also expects its exports to increase significantly. Year-over-year figures for Mankind show promising growth projections: revenue is expected to rise by 14%, EBITDA by 17%, and PAT by 21%.
While each company faces unique challenges and opportunities within both domestic and international markets, the overall outlook for India's pharmaceutical sector remains optimistic as these firms adapt and innovate in response to market demands.
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