India Ratings and Research’s (Ind-Ra) pharmaceuticals coverage universe saw moderated revenue growth in 2QFY22 compared to 1QFY22. Overall, the top line grew 7.3% yoy and 2.8% qoq in 2QFY22 (1QFY22: 16.1% yoy and 8.6% qoq), led by robust growth in domestic formulations (acute and non COVID-19 related therapies) and rest of the world (RoW, excluding US) business. However, US (price erosion and de-stocking across channels) and active pharmaceuticals ingredients (APIs; higher base in 2QFY21) businesses reported a subdued performance during 2QFY22.

Healthy Growth in Domestic Formulation Business to Continue: Given the lower base in FY21 and higher growth delivered in 1HFY22, Ind-Ra expects the Indian formulations business to grow more than 15% yoy in FY22. During 2QFY22, Ind-Ra’s coverage companies in the domestic formulation business reported lower growth of 16.8% yoy than 41.9% yoy in 1QFY22 due to a lower contribution from COVID-19 related therapies. However, the overall growth was healthy due to strong show (yoy) in some of the acute therapies (anti-infectives: 24.1%, gastro-intestinal: 18.9%, respiratory: 36.0%, analgesic: 28.3% and gynaecological: 18.0%). With the easing out of the lockdown restrictions, Ind-Ra believes that medical sales representatives returned to their normal activity levels which would increase marketing and travel expenses.


Healthy Growth in Domestic Formulation Business to Continue: Given the lower base in FY21 and higher growth delivered in 1HFY22, Ind-Ra expects the Indian formulations business to grow more than 15% yoy in FY22. During 2QFY22, Ind-Ra’s coverage companies in the domestic formulation business reported lower growth of 16.8% yoy than 41.9% yoy in 1QFY22 due to a lower contribution from COVID-19 related therapies. However, the overall growth was healthy due to strong show (yoy) in some of the acute therapies (anti-infectives: 24.1%, gastro-intestinal: 18.9%, respiratory: 36.0%, analgesic: 28.3% and gynaecological: 18.0%). With the easing out of the lockdown restrictions, Ind-Ra believes that medical sales representatives returned to their normal activity levels which would increase marketing and travel expenses.

Figure 2
Therapy-wise 2QFY22 Performance

(INR million)

2QFY22

1QFY22

4QFY21

3QFY21

2QFY21

1QFY21

4QFY20

3QFY20

2QFY20

1QFY20

Anti-Infectives

63,283

71,043

47,732

55,120

50,925

34,917

48,331

52,755

54,261

42,218

Cardiac

53,204

58,181

52,400

52,288

51,007

47,685

48,884

45,809

44,688

43,650

Gastro Intestinal

51,285

51,092

44,478

43,429

42,863

36,495

38,594

39,086

42,535

39,605

Anti Diabetic

39,393

40,699

37,841

38,118

37,091

36,205

36,644

35,570

35,308

34,001

Vitamins

38,613

42,359

33,549

35,462

35,864

28,628

29,381

30,976

32,757

30,508

Respiratory

32,935

32,774

26,484

29,572

24,204

21,437

31,679

31,832

26,330

21,351

Analgesics

31,075

28,577

25,516

25,726

24,218

20,050

23,785

25,418

25,933

23,035

Derma

27,787

24,276

27,027

27,537

25,275

20,649

23,527

25,547

25,169

22,987

Neurology

24,930

24,106

23,877

23,440

22,453

21,345

22,243

22,016

21,771

20,856

Gynaecological

20,798

19,699

19,467

18,226

17,584

15,417

17,374

17,617

18,281

18,037

Hormones

7,744

8,502

6,957

7,182

6,786

5,934

6,710

6,910

6,696

6,161

Anti-Neoplastics

7,181

7,986

7,239

7,820

7,425

6,462

7,131

7,534

7,392

7,490

Ophthal

6,887

6,311

6,256

6,215

5,927

5,273

6,063

6,505

6,579

6,542

Urology

6,069

6,083

5,545

5,662

5,475

4,695

4,860

4,951

5,030

4,828

Others

19,924

18,752

18,174

19,783

18,832

15,835

17,965

19,093

19,167

17,243

IPM

4,31,108

4,40,439

3,82,542

3,95,579

3,75,930

3,21,025

3,63,171

3,71,618

3,71,896

3,38,514

Source: AIOCD-AWACS, Ind-Ra

 

Figure 3
Strong Show by Acute Therapies

yoy growth

2QFY22

1QFY22

4QFY21

3QFY21

2QFY21

1QFY21

4QFY20

3QFY20

2QFY20

1QFY20

Anti-Infectives

24.3%

103.5%

-1.2%

4.5%

-6.1%

-17.3%

10.6%

10.1%

13.9%

6.1%

Cardiac

4.3%

22.0%

7.2%

14.1%

14.1%

9.2%

15.4%

9.6%

11.4%

10.2%

Gastro Intestinal

19.6%

40.0%

15.2%

11.1%

0.8%

-7.9%

8.1%

7.3%

10.6%

5.2%

Anti Diabetic

6.2%

12.4%

3.3%

7.2%

5.1%

6.5%

12.8%

8.2%

13.9%

11.8%

Vitamins

7.7%

48.0%

14.2%

14.5%

9.5%

-6.2%

8.4%

8.7%

11.1%

8.2%

Respiratory

36.1%

52.9%

-16.4%

-7.1%

-8.1%

0.4%

17.8%

13.5%

13.4%

6.6%

Analgesics

28.3%

42.5%

7.3%

1.2%

-6.6%

-13.0%

7.6%

9.4%

12.4%

7.5%

Derma

9.9%

17.6%

14.9%

7.8%

0.4%

-10.2%

4.7%

6.8%

8.4%

6.9%

Neurology

11.0%

12.9%

7.3%

6.5%

3.1%

2.3%

10.0%

8.4%

10.1%

7.9%

Gynaecological

18.3%

27.8%

12.0%

3.5%

-3.8%

-14.5%

3.2%

6.5%

6.8%

7.0%

Hormones

14.1%

43.3%

3.7%

3.9%

1.3%

-3.7%

10.9%

11.3%

13.0%

9.1%

Anti-Neoplastics

-3.3%

23.6%

1.5%

3.8%

0.4%

-13.7%

-2.8%

5.2%

3.7%

6.2%

Ophthal

16.2%

19.7%

3.2%

-4.4%

-9.9%

-19.4%

1.8%

6.2%

8.7%

9.1%

Urology

10.8%

29.6%

14.1%

14.4%

8.9%

-2.8%

11.6%

10.8%

16.0%

13.9%

Others

5.8%

18.4%

1.2%

3.6%

-1.7%

-8.2%

9.4%

11.0%

14.9%

6.7%

IPM

14.7%

37.2%

5.3%

6.4%

1.1%

-5.2%

10.1%

9.1%

11.6%

7.8%

Source: AIOCD-AWACS, Ind-Ra

 

US Generic Business to Turnaround: Ind-Ra expects the US market to grow over the near to medium term, based on new launches and calibrated R&D investments approach towards complex molecules which could witness a lower impact of price erosion than plain vanilla oral solid products. Ind-Ra covered companies’ US generic business however reported flattish yoy growth in 2QFY22, attributed to a mid-to-high single-digit price erosion in the US generic market coupled with a lower number of abbreviated new drug application approvals, and channel de-stocking. Large inventories were liquidated due to covid- led uncertainties.

Figure 4
US Business: 2QFY22 Performance

US (USD million)

2QFY22

2QFY21

1QFY22

YoY (%)

QoQ (%)

Aurobindo Pharma Ltd (IND AA+/Stable)

402

376

364

7.1

10.5

Sun Pharmaceutical Industries Ltd

363

337

380

7.6

-4.5

Dr. Reddy's Laboratories Ltd (IND AA+/Stable)

256

248

236

3.3

8.6

Cadila Healthcare Ltd

203

231

197

-12.2

3.0

Lupin Ltd

194

189

181

2.3

7.0

Cipla Ltd (IND AAA/Stable)

143

142

141

0.7

1.5

Glenmark Pharmaceuticals Ltd (IND AA-/Positive)

102

102

107

0.4

-4.4

Gland Pharma Ltd

90

79

96

13.6

-5.7

Alkem Laboratories Ltd (IND A1+)

83

85

82

-2.4

0.7

Granules India Ltd. (IND AA-/Stable)

69

64

61

7.8

12.4

Alembic Pharmaceuticals Ltd

47

79

50

-40.1

-5.8

Torrent Pharmaceuticals Ltd (IND AA/Positive)

38

44

36

-13.0

6.6

Strides Pharma Science Ltd (IND A+/Stable)

34

55

41

-38.1

-17.2

Ajanta Pharma Ltd

26

21

23

26.1

15.3

Marksans Pharma Ltd (IND A/Positive)

23

22

19

3.3

20.3

Total

2,073

2,073

2,013

0.0

3.0

USD/INR

73.8

73.9

73.7

 

 

Source: Company, Ind-Ra

 

Weak Growth in API Business: Ind-Ra has seen API stocking in 1HFY21 on account of COVID-19 related supplies and key starting materials supply disruption in the past quarters, leading to API companies’ revenue growth declining 9.6% yoy (1QFY22: 2.4%). However, companies are seeing stability in raw material pricing which will reduce the volatility in gross margin.

 

Figure 5
API Business Performance

API (INR million)

2QFY22

2QFY21

1QFY22

YoY (%)

QoQ (%)

Dr. Reddy's Laboratories Ltd

8,372

8,505

7,540

-1.6

11.0

Aurobindo Pharma Ltd

7,806

8,290

8,119

-5.8

-3.9

Laurus Labs Ltd

5,270

5,710

5,494

-7.7

-4.1

Sun Pharmaceutical Industries Ltd

4,358

5,104

5,149

-14.6

-15.4

Solara Active Pharma Sciences Ltd

4,020

4,270

4,060

-5.9

-1.0

Ipca Laboratories Ltd

3,597

3,810

4,144

-5.6

-13.2

Glenmark Pharmaceuticals Ltd

3,354

3,213

3,040

4.4

10.3

Lupin Ltd

2,678

3,739

2,459

-28.4

8.9

Alembic Pharmaceuticals Ltd

2,390

2,630

2,790

-9.1

-14.3

Shilpa Medicare Ltd (IND A+/Stable)

1,906

1,741

1,297

9.4

46.9

Granules India Ltd.

1,900

2,547

2,237

-25.4

-15.1

Neuland Laboratories Ltd (IND A-/Stable)

1,753

1,617

1,507

8.4

16.4

Cipla Ltd

1,720

1,890

3,020

-9.0

-43.0

Cadila Healthcare Ltd

1,340

1,597

1,355

-16.1

-1.1

Natco Pharma Ltd

763

1,997

616

-61.8

23.9

Total

51,227

56,661

52,826

-9.6

-3.0

Source: Company, Ind-Ra

 

Healthy Growth in RoW Sales to Continue: Ind-Ra expects the RoW markets to witness volume growth in double digits in the coming quarters, as the vaccination drive accelerates in these markets. The RoW business sales grew 13.5% yoy in 2QFY22 against 12.5% yoy in 1QFY22. 

US Price Erosion and Higher Raw Material Cost Impacted EBITDA Margins:
Ind-Ra expects EBITDA margin to fall to around 20% in FY22, based on continued higher marketing costs (lockdown easing; reached pre-covid-19 levels) and higher raw material costs (China issues and rise in freight cost). Ind-Ra witnessed flattish yoy EBITDA growth in 2QFY22 while EBITDA margins declined 164bp yoy to 22.6% (1QFY22: 23.7%). 


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Analyst Names

  • Krishnanath Munde

    Associate Director
    India Ratings and Research Pvt Ltd Wockhardt Towers, 4th Floor, West Wing, Bandra Kurla Complex, Bandra East,Mumbai - 400051
    +91 22 40001768

    Monil Furia

    Analyst
    +91 22 40001794

    Abhishek Bhattacharya

    Senior Director and Head Large Corporates
    +91 22 40001786

    Media Relation

    Ankur Dahiya

    Manager – Corporate Communication
    +91 22 40356121