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Revenue of the leading pharmaceutical companies for the quarter ending June 2013 was primarily driven by the US sales growth with the exception of Cipla. Sun Pharma’s US Sales marked a growth of 31.8%; while Ranbaxy‘s 29% growth in US sales to Rs 770 crore enthused markets given its recent problems with the US FDA.
US and European sales that contribute 46% to Lupin’s overall revenues, growing 29% y-o-y provided impetus to overall revenues as domestic and Japanese sales slumped. Dr Reddy’s, too, had a similar case where US generics sales (38% of overall revenues) growing 37% drove the top-line while domestic revenues, PSAI segment, Russia and CIS region could not grow substantially.
Cipla, that is now trying to grow its base in US, saw export to other geographies grow 27.7% drive its revenues. This was remarkable looking at the high base in the year ago quarter that saw supplies of an anti-depressant drug to Teva pharma drive export revenues.
The companies in general saw their domestic revenues getting affected by the implementation of the new pharma pricing policy. While Dr Reddy’s saw flat revenue growth in the domestic market, Lupin actually saw its sales decline 5% over a year ago quarter. Ranbaxy could see a meagre 6% domestic growth. The reason for Lupin’s decline in domestic revenues was not just limited to pricing policy but also to temporary ban on the sales of drug, Pioglitazone, which contributes well to Lupin’s domestic revenues.
However, Sun Pharma and Cipla bucked the trend of decline in domestic sales. Sun Pharma’s domestic growth at 16.7% was the best amongst peers. Cipla, too, impressed with 11% domestic sales growth adjusted for low base seen in the June’12 quarter. With an impressive all round performance the two companies are the poised for earning upgrades that has already started to fall in.
Outlook
Lupin has become attractive after steep correction of almost 10%. However, the turbulence in the domestic performance will continue in September’13 quarter due to pricing policy issues. The market will also be watchful on how Japanese sales pan out, looking at the 12% decline in Japanese revenues during the June’13 quarter. The decline was on the back of adverse currency movement and lower orders for I’rom.
For Dr Reddy’s market apart from domestic growth market will be watchful of sales in Russia and CIS region. The slow growth in the region was attributed to seasonal factors and high base affect by the company.
Both Lupin and Dr Reddy’s, however, have a strong pipeline of products for the US market that will continue propelling growth.
Ranbaxy’s prospects, on the other hand, will hinge on its ability to turnaround growth in other geographies apart from US. EX-US the growth revenue growth was just 2%. The approval for launch of anti-hypertensive product Diovan and anti-viral Valcyte generics will be potential triggers for the stock.
