MNC pharma brands - Sector Update - MNC Brands to command premium: Centrum

MNC Brands to command premium



We expect MNC pharma companies’ share to go up to 20% in FY15 and 21%
in FY16 in the domestic pharma market due to price increase of 6.3% in
price controlled products in April’14 as well as volume growth. The
eight MNC pharma companies generated 19% revenues in the domestic
market in Q1FY15. These companies have 74 brands (25% of total) among
the top 300 brands indicating strong brand building. These brands have
strong recall in the doctor’s chamber. We expect good volume growth
for the brands which faced price reduction in Sept’13 and July’14.
Pfizer is our top pick among the MNC pharma companies.

$ MNC pharma accounts for 19% of domestic market: As per IMS
MAT-April-June’14 data, the eight MNC pharma companies generated 19%
of domestic revenues thereby occupying a strong position in the
domestic pharma market. We expect this share to go up to 20% in FY15
and 21% in FY16 due to 6.3% price increase in price controlled
products in April’14 as well as volume growth due to price reduction.
These companies have 74 brands (25% of total) among the top 300 brands
in the domestic market.

$ Shift to major MNC brands likely after price cuts: The 74 major
brands of eight MNC pharma companies accounted for 47% of their
revenues. Novartis India’s (NIL) seven major brands contributed ~66%
of its revenues and hence the company has high dependence on its
brands. We expect these brands to drive future growth despite price
control due to their quality and reliability. Some of these brands are
30-40 years old and are well-entrenched in the domestic market. With
the fall in price of some of these brands under NPPP in Sept’13, we
expect a shift from competing brands to MNC brands thereby gaining
volumes.

$ Drug prices revised upward: For price controlled products, pharma
companies have increased prices by 6.3% based on the Wholesale Price
Index (WPI) in April’14. Moreover, 108 brands that came under price
control in July’14 will be eligible for up to 10% increase in price
per annum in July’15. We expect good volume growth for products from
these brands which will partly off-set the effect of price reduction.
The major beneficiaries would be: GSK, Pfizer, Novartis India, Sanofi
India and Wyeth.

$ Pfizer remains preferred pick: Pfizer continues to be our best pick
among MNC pharma companies. It is likely to benefit from the merger
with Wyeth as the merged company would have 14 brands in the top 300
brands. Their key brands Dolonex, Minpress XL, Wysolone, Prevenar 13,
Ativan and Corex Dx have shown over 17% growth and are likely to drive
future growth.  Key risks to our assumptions include additional MNC
brands coming under price control and slower growth in domestic pharma
market.



Thanks & Regards

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