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

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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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 accept any liability whatsoever arising from the use of any of the above contents.