Multinational drug makers shine
Overcoming of pricing controls via line extensions aiding growth
The growth of over 10 per cent in the domestic pharma market for May, according to data from AIOCD (pharma market research company), has brought cheer to all drug producers.
Most of the large-cap Indian pharma companies, which are facing heat in the US market due to pricing pressures, are likely to get some respite. This is because the improvement in domestic sales will provide some cushion to their growth numbers.
However, the multinational (MNC) companies are the ones likely to gain more from the growth in the domestic market, given that they are largely focused on the domestic market, while Indian peers earn only 3055 per cent revenues from the country’s market.
Companies such as Sanofi, Pfizer, Merck and Abbott had recorded 20-137 per cent growth in net profit during the March quarter, much better than what Lupin, Cipla, Sun, Dr. Reddy’s reported. Street sentiment, too, remains firm on these players.
Abbott India, Pfizer and Glaxo have gained 17-26 per cent in the June quarter so far. However, even as most MNC pharma stocks are trading near 52-week highs, analysts see more gains ahead, given the growth prospects.
MNC players are seeing growth rebound as the impact of price controls on their product range is behind. While lower prices meant strong volume growth after implementation of NLEM (National List of Essential Medicines), pharma companies also added line extensions to aid revenues and profit growth.
For instance, Pfizer added Corex DX, Corex T and Corex LS to its range of cough syrups; others have followed suit. Ranjit Kapadia at Centrum Broking said Pfizer is expected to report better revenue growth in FY19, led by the launch of a series of products such as line extensions under the Corex brand, and the recent launch of acquired products in India.
MNCs also benefit from their strong vaccine portfolio and niche speciality products. Furthermore, the revision of drug prices (which went under price control) linked to wholesale inflation index, and many products now being out of the pricing regime, has also helped.
For Abbott, analysts believe that its presence in the high-margin vaccine segment, the price revision of non-NLEM products, and launch of new products will drive growth.