New launch pipeline likely to power Astrazeneca’s growth

Higher share of patented products, scope for margin improvement, and chronics portfolio are positives

Astrazeneca Pharma India has been the best-performing multinational (MNC) pharma stock with gains of 130 per cent over the past year. While the late-stage Covid-19 vaccine being developed by its parent has caught investors’ fancy, it is unlikely to benefit the listed Indian subsidiary.

The growth trigger for the company is its presence in therapeutic categories, such as the diabetes, respiratory, cardiovascular, and oncology segments. These segments are not only large in revenue terms but also are growing at a faster rate than the overall pharma market. For example, diabetes medication, which account for 38 per cent of the company’s revenues, is the second-largest category in the Indian pharma market with sales of over ~14,400 crore.

The segment grew at just under 12 per cent in FY20, as compared to the overall market growth of about 11 per cent. The company has a strong portfolio of oral antidiabetic products in sub-segments which are witnessing healthy growth rates. The top brands of the company in this category are Forxiga and Oxra, which accounted for over 22 per cent of sales.

The other big segment for the company is cardiovascular, which includes its singlelargest brand Brilinta — used in reducing the chance of a heart attack. While the company lost exclusivity in sales of the drug in October 2019, it remains the market leader in terms of value.

As is the case with its parent, the oncology portfolio, which accounts for 23 per cent of sales, is among the fastestgrowing segments for the company. Led by Tagrisso and Lynparza brands, sales in this segment grew 168 per cent last year. The company, which recently got approval to import and market cancer drug Olaparib, will be looking to tap its global oncology pipeline and expand its offerings in the country.

Given the large chronics portfolio, low exposure to drugs under price control, and new launches, it is expected to outperform the pharma market growth. Even in FY20, the company posted growth of 14.2 per cent, against sector growth of 10.8 per cent. Analysts at B&K Securities expect the company to post 12-14 per cent growth over the next few years, led by launches in key categories.

They also expect margins to improve to 20 per cent (FY20 margins at 13 per cent), given that marketing investments should reflect in sales growth and there should be gains from operating leverage.