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Pharmaceutical Sector Update: Outlook continue to remain a bit muted - IndiaNotes.com
Pharmaceutical Sector Update: Outlook continue to remain a bit muted
Equirus Securities | Published: 22 Nov, 2017  | Source : IndiaNotes.com

Key Takeaways


Outlook for Indian pharmaceutical companies continue to remain a bit muted given multiple headwinds in their core markets of US and India and dwindling margins, with higher R&D investments. This also could be an interesting opportunity to consider select good pharma cos for investment.


Steep price erosion in US continues to hurt as evidenced by recent results


Channel consolidation has driven prices significantly down for generic players and most companies have reported sharp decline in margins, especially for companies where the product concentration is relatively higher. Further, there has been an increased competitive intensity as USFDA has significantly expedited generics approvals for incumbents as well as competitors


Companies are hit by the most recent consolidation - ClarusONE joint sourcing (for Walmart and Mckesson) and WBAD - Econdisc sourcing agreement


Cost control exercises (ex- R&D) also gained prominence this quarter and most companies made strong efforts towards cutting off unwanted flab in operating costs


Domestic market has seen some recovery versus Q1FY18, but inventory levels are way off historical levels and the recovery has only been partial.


Evidence of inventory fill-ups post GST implementation in Q2 FY18, with most companies expecting trade restocking to completely happen through H2FY18


Investments in R&D continue to soar, as most companies look beyond the plain vanilla generics and move up the value chain with investments in complex and specialty products which entail higher costs


New launches are critical for continued momentum in US businesses facing price erosion


Strategic M&A activity remains focused on adding specialty drugs to portfolio - as evidenced by Lupin’s recent acquisition of Symbiomix - and bolstering domestic portfolios with branded product lines

 

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About Equirus Securities

Equirus has built impeccable credential and market standing across domains & has created a niche for itself in its ability to structure and deliver transactions in-line with client’s requirement. It takes pride in being a one stop Investment bank for all financial needs of growth oriented mid market companies. Led by seasoned bankers, they work with the largest and the most reputed investors in the industry. Equirus Securities can be accessed at www.equirus.com


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.