Domestic pharma sales pick up pace in Nov, but fortunes remain stock-centric
The surge in domestic pharmaceutical sales in November may have been encouraging, but sparked modest investor interest in pharma stocks, as was seen from the flat close of the Nifty Pharma index.
Sales rose 14% year-on-year (y-o-y) in the month, led by an increase in anti-infective and respiratory therapies, according to data from market research firm AIOCD Awacs.
It must be noted that November has been the best month in more than 32 months, shows the AIOCD Awacs data. In October, revenue growth had been soft at 5%, while volumes had declined.
The growth in November was driven by volumes, which increased 5.9%, followed by a 5.7% rise in prices, and new products that were up 3%. The growth is on the back of a lower base from a year ago, when sales grew by about 7%.
Analysts said the volume growth data was encouraging. “The pick up in volumes is the highlight after a negative volume growth of about 2.7% in October. Overall volume growth has been better this year. Additionally, Indian pharma companies outperformed multinational companies, which happened for the first time in the last six months. The domestic pharma market continues to remain strong,” notes Kunal Dhamesha, pharma analyst at SBI Capital Markets Ltd.
While this year’s growth has been on the back of a lower base, a few firms managed to better market growth rates. Dr Reddy’s Laboratories Ltd posted the highest y-o-y growth at 28%, while Lupin Ltd and Sun Pharmaceutical Industries Ltd each reported 15% growth.
Given the extended monsoon season, sales of anti-infective and respiratory drugs grew the fastest in November. Besides, analysts expect the domestic market to continue to do well as lifestyle diseases are on the rise.
A positive is that the growth was broad-based across categories. Respiratory and anti-infectives grew at about 20% and 17%, respectively, y-o-y. Gastrointestinals also clocked a growth rate of about 15% y-o-y.
However, risks to the domestic pharma market could come from a revision in the National List of Essential Medicines. This constitutes about 10% of the domestic pharma market. Another factor to watch for would be growth rates post the acute season. Sales growth could tend to slow down in the coming months.
The pharma market penetration is still considered low in India, even as the affordability of drugs has been rising. However, the game seems to be shifting in favour of firms that have a strong domestic formulations portfolio. In short, the action is likely to become more stock-centric.
Source : livemint