Better-than-expected Q4 for pharmaceutical companies, EME, and domestic demand
It is anticipated that strong demand from both local and international developing markets, price increases, and higher currency of specialist items helped pharmaceutical businesses to report strong top and bottom line growth in the fourth quarter of FY24.
The top 16 pharmaceutical firms may have reported 9.8% sales rise year over year and an astounding 34.1% increase in PAT (profit after tax) in Q4FY24, according to ICICI Securities.
Several experts are also optimistic about the industry. For example, according to a KRChoksey Research research, price hikes, the introduction of new products, and growth in both the chronic and acute categories should propel Sun Pharma, Cipla, and Zydus Lifesciences to market-beating performance.
“Until a few quarters ago, the chronic segment lagged behind the acute segment. However, now both segments are growing.” Pharma research company IQVIA has estimated the chronic market share at 38% as of December 2023. Unnati Jadhav, research analyst at KRChoksey Research, told FE that the rise in the chronic sector often leads in improved profitability. Most chronic conditions fall under the heart, anti-diabetes, and central nervous system (CNS) categories.
“The US business is expected to exhibit moderate growth as the operating environment remains presumably benign,” said an analyst at Yes Securities. Most firms, particularly those with a chronic emphasis, expect their company in India to expand by 9–11% annually, whereas those with an acute focus may only see mid-single digit growth.
Specialty goods and sophisticated generics, on the other hand, should assist pharmaceutical businesses in boosting their profit margins. Broker Prabhudas Lilladher predicts that businesses like Divi’s and Zydus Lifesciences would experience increases in their quarter-over-quarter margins, helped by improved product mix and increased sales of gRevlimid, a generic form of the cancer medication Revlimid.
The rising volume share of complicated generics, biosimilars, and specialty goods in the market is predicted to somewhat counterbalance the expected rise in competition intensity for normal ANDAs (abbreviated new drug application) in the US. In light of better product mix and new product launches, we anticipate Lupin, Aurobindo Pharma, Granules India, Divi’s Labs, Dr. Reddy’s, and Cipla to report robust profits growth, according to a KRChoksey Research research.
The pharmaceutical businesses are anticipated to gain from the reduced expenses as well. According to ICICI Securities, for example, the cheap cost of inputs is expected to boost 16 companies’ gross margins by 130 basis points (bps). In addition to operational leverage, companies are further streamlining their R&D spending, which might result in an overall increase of 190 basis points in the EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin, according to an ICICI Securities analysis.
