Pharma cos strong performance may continue in Q2

UR Associates has come out with its report on pharma sector.  The research firm says the Q1 FY13 performance of pharma companies was strong driven by revival in domestic market performance, strong exports to the emerging markets and exports further aided by rupee depreciation. Expect the strong quarterly performance to continue in Q2 FY13 too.

Expect strong quarterly performance on the cards:

Most of the large pharma companies are expected to demonstrate domestic growth of 15%-20% driven by chronic segment and revival of acute segment. The strong domestic performance will also help in bettering their margins as the domestic market is a branded generics market with higher EBITDA margins compared to the developed markets which are pure generic markets.

 The US will continue to be the largest export market. However, leaving aside the first-to-file and limited competition drugs, the other drugs are expected to face pricing pressure leading to lower sales and shrink in operating margins. The exports to the emerging markets like Africa, UAE, Russia and Eastern Europe are expected to grow strongly this quarter leading to overall boost in exports.    

The currency fluctuations are also expected to aid the performance of the companies significantly this quarter. The average exchange rate for the quarter is Rs 54.9/USD compared to Rs 49.6/USD in the same period last year. The 10% currency depreciation will further buoy the export performance of the companies. 

Many of the pharma companies including Aurobindo Pharma, Ranbaxy, Dr. Reddy's etc. have foreign currency loans. The net profit of these companies will appear better because of the mark-to-market gains on these foreign loans as the rupee appreciated by 4.4% during the period July 01, 2012-September 30, 2012. 

Overall we expect another strong quarterly performance with the revenues growing by over 20% and the margins maintained at the same level or slightly better compared to last year. However, the performance of the core US segment needs to be carefully watched.

Pfizer  to challenge Indian ruling overturning cancer drug patent:

US drug giant Pfizer will appeal against an Indian ruling overturning a patent for a cancer drug, saying the decision raises questions about intellectual property protection in India. Indian generics heavyweight Cipla opposed the granting of the domestic patent for Pfizer's Sutent, which is used to combat liver and kidney cancer. The patent office's decision went to the heart of India's patent act, which says a patent cannot be granted for a drug unless changes make it significantly more effective and innovative. "The patentee (Pfizer) has miserably failed to demonstrate any improved activity" warranting a patent, the patent office said in its decision. "The invention that is claimed in the patent does not involve any inventive step and hence (is) not patentable," Nilanjana Mukherjee, senior patent officer, said. But Pfizer managing director Jazz Tobaccowalla said the company believes the ruling "undermines intellectual property rights in India". "We will vigorously defend our basic Sutent patent," the Pfizer executive said in a statement, adding the company would appeal against the ruling to India's Intellectual Property Appellate Board.

Cipla  `s anti-malaria drug receives WHO pre-qualification:

Drug firm Cipla said an anti-malarial drug developed by Drugs for Neglected Diseases initiative (DNDi) has received pre-qualification from the World Health Organisation (WHO). The Mumbai-headquartered firm is manufacturing the fixed dose combination drug of Artesunate and Mefloquine (ASMQ FDC) under a technology transfer agreement with Neglected Diseases initiative (DNDi). This Cipla-manufactured ASMQ FDC is the first artesunate-mefloquine FDC to be prequalified by WHO and is recommended for the treatment of malaria. `Pre-qualification` is a process under which drug companies have to fulfill certain WHO-stipulated conditions to become eligible to supply vaccines to UN procurement agencies globally.

Pharma cos to see Q2 PAT growth of 28% :

Pharmaceuticals firms are expected to post good numbers during the second quarter (July-September) aided by currency tailwind, says an IDFC Securities Research. The research report claims that profit after tax (PAT) growth during second quarter for leading pharma companies would be around 28% driven by translation gains on forex liabilities, considering a 5% rupee appreciation on a quarter-on-quarter basis. Rupee depreciation on a year-on-year (yoy) basis is around 20%. Aided by that, the IDFC report expects a strong growth of 22% (yoy) in revenues.

Sun Pharma  gets board nod to raise up to Rs 80 billion:

According to the company, the proposal would be put for shareholders' approval during the annual general meeting scheduled on November 8. The funds would be raised at an appropriate time "through domestic/international offerings including to Indian or foreign institutional investors/foreign mutual funds/overseas corporate bodies/foreigners/other foreign parties/Indian financial institutions/alternative investment funds/qualified institutional buyers/companies/individuals"it said.