Domestic drug portfolio a key driver of Ajanta Pharma's growth prospects

Industry beating growth along with high US sales are keeping analysts positive on the company's earnings prospects

Shares of Ajanta Pharma have rebounded well gaining close to 16 per cent since the start of August. The rebound is led by growth in the company’s domestic drugs portfolio, thanks to its continuous focus on specialty segments, improving market position and enhanced field-force productivity.

The company’s domestic sales, which contributed a third to overall revenues, had grown 9 per cent during the June quarter. However, the pace of growth at end of the June quarter was 16 per cent, much ahead of the Indian Pharma market’s growth of 10 per cent. Analysts, referring to IMS MAT data, say that the same is being driven by strong year-on-year growth in four key therapeutic segments namely cardiovascular, ophthalmology, dermatology and pain management, all of which are growing ahead of the market. The cardiovascular segment had faced some headwinds earlier, but is now reporting improved performance.

Analysts thereby are more confident on the company’s growth outpacing pharma market moving forward too. Those at Reliance Securities say that domestic business is expected to grow 11 per cent annually over FY19-21, as against Indian pharma market’s estimated growth of about 8-9 per cent, led by new launches and volumes.

What’s more, the company’s US business is also expected to grow by 25-30 per cent, helped by a small base and new drug launches. The company has been continuously building a strong pipeline and it is expected to file 10-12 new products every year coupled with 6-7 new drug launches. At the end of June quarter, the company had commercialised 28 new products in the US market.

Moreover, as the company is concentrating on improving its branded-generics business in Africa to offset lower institutional revenues in the Asia business, more manpower and product launches are expected to fuel growth which is pegged at 12 per cent annually, Anand Rathi Securities. Africa contributed about 29 per cent to sales, while Asia added 21 per cent to revenues during the June quarter, and are important for the company’s prospects.

Overall, even as the street will remain watchful on currency movement and improvement in Africa sales moving forward, analysts feel that the company’s focus on domestic growth is keeping them positive on Ajanta Pharma’s prospects.