Pharma companies to sustain strong growth trajectory

Rebecca Aris

pharmaphorum

Pharma companies look likely to sustain their strong growth trajectory with core margins looking likely to remain steady, report analysts at Edelweiss.

"We expect the pharma universe to sustain its strong growth trajectory with core margins likely to remain steady sequentially. We see pressure on earnings due to MTM forex losses (result of a sharp Rupee depreciation) and higher tax rates."

Manoj Garg and Perin Ali, analysts with Edelweiss – in a result preview report

"We expect a revenue growth of 32% YoY in-line with the growth trend of Q4FY12 (at 34% YoY). Growth will be led by the US demand, a seasonally strong quarter in India and continued momentum in emerging markets," the report said.

Higher profitability could be due to high value limited competition launches and exclusivity sales from Lipitor and Ziprasidone. The report suggests that “the pharma sector is in a sweet spot” over the short term owing to the higher growth in domestic market and huge patent cliff opportunities. Looking forward, however, we should remain cautious “as generic players might face growth pressures from shrinking pipeline of patent expiries. Incremental growth will come at lower margins due to an increase in competitive intensity and higher fixed costs. Also, regulatory risks such as impending regulatory issues and drug price control policy have the potential to de?rate the sector.”

The research suggested that preferred companies are those with a strong pipeline in addition to those that offer a differentiated portfolio to sustain growth stating that “Lupin, Cadila and Glenmark are our preferred bets”.

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