Sales by Indian drugmakers are set to show an average rise of 26% for the third quarter of FY 2014, ending December 2013, according to new forecasts from Bank of America Merrill Lynch.
The bank is also expecting Indian drugmakers to report rises in profit after tax of around 40% for the quarter, plus growth in earnings before interest, taxes, depreciation and amortisation (EBITDA) averaging 37%. Major drivers for this fast growth include continued momentum in the US, strong growth in RoW (rest of world) markets, higher currency realisation and strong margin traction, it says.
Indian drugmakers’ domestic market sales are also forecast to show some recovery in volume, reaching double-digit growth “after two quarters of dismal performance due to trade channel disturbances,” says the study. It expects price cuts for products included on India’s National List of Essential Medicines (NLEM) to have had only limited impact during the quarter, because most firms had already raised the prices of non-NLEM products.
For individual companies, the report forecasts particularly strong advances during the quarter for Aurobindo Pharma, Dr Reddy’s, Lupin and Sun Pharma, while growth at Cadila, Glenmark and Ranbaxy will be “moderate,” it says.
Other new forecasts, from Kotak Institutional Equities, are for drugmakers to report year-on-year core profit increases averaging more than 15% for the quarter. The highest increases will be at Sun Pharma, with net profit growth up 45%, and Dr Reddy’s, rising 33%, says Kotak, which expects this growth to be driven mainly by continuing strong generic launches in the US and the currency benefit, and that these will offset continued slow growth on the domestic market.
Meantime, a new report from Business Monitor International (BMI) says that India’s large population and substantial unmet medical needs represent strong commercial opportunities for drugmakers, but that the government is impeding the sector’s development, mainly through extensive bureaucracy and poor policy planning.
Some of the problems for industry relate to the regulation of clinical trials, pricing of patented and essential drugs, generally low government involvement in healthcare and foreign direct investments (FDI), says BMI.
- India’s Department of Industrial Policy and Promotion (DIPP) reported this month that FDI in the pharmaceutical sector soared 86.5% to a value of $1.08 billion during April-October 2013, from $580 million reported for the same period of 2012.
DIPP has been calling for tighter controls on FDI following concerns at the number of takeovers by multinationals of Indian firms making “rare and critical” medicines, but this proposal has been rejected by the government.