Pharmaceuticals - Domestic Pharma Monthly Review; monthly update:: Edelweiss

Amidst the fast approaching price control policy, market demand remained afloat with 13.6% growth during August; however, it was lower than 15.6% in July and 16.6% and 17.0% reported in May and June, respectively, which points to some slowdown due to poor monsoon. Among acute therapies, anti-infectives reported some recovery with 10% growth, while others such as pain management, respiratory, gynecology continued to post downward trend. August also saw some slowdown in key chronic segments of CVS (15% versus 20-21% in June-July) and CNS (12% from 15-18%). Among large caps, Cadila and Sun Pharma outperformed, while Dr. Reddy’s posted a turnaround with 17% growth against 8-9% reported earlier.  While mid caps such as Glenmark and IPCA continue to deliver strong growth, consistent lower growth in Torrent is a concern.

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Key takeaways from trends during August

·       Domestic pharma market grew 13.6% (ex-bonus) during August, led by 13.1% growth in acute and 16.0% within the chronic segment. We highlight that growth within chronic has come off from 18-20% reported during the previous quarter.

·       Within the acute segment, anti-infectives, pain management and respiratory grew 10%, 9% and 7%, respectively, while derma and multi-vitamins growth came-off to 14-15% from 17-18% earlier.

·       Anti-malaria growth was strong at 37%; however, it was primarily due to switch to high cost treatment on back of increase in incidence of Falciparum malariaversus traditional Vivax malaria where treatment costs were significantly low.

·       Within chronic, while demand for anti-diabetics was strong at 23%, CVS (15%) and CNS (12%) growth was relatively lower.

·       Key outperformers include Sun Pharma (27%), Cadila (21%) and notably Dr. Reddy’s (17%) among large caps and IPCA (22%) and Glenmark (20%) among mid caps.

·       Key underperformers include Cipla (9%), Ranbaxy (8%) and Lupin (12%) among large caps and Torrent (6.6%) and Unichem (7.6%) in the mid-cap space.

·       Within the MNC pack, GSK continues to do well at 19%. Pfizer’s growth of 18% is good, but is not reflective of its primary trend.

With the pricing policy around the corner, there could be short-term disruption due to potential reduction of inventory in the supply chain. While the final policy is not out yet, it is likely to include drugs defined as essential medicines under NLEM 2011 (excluding combinations) and ceiling price is likely to be based on market-based pricing. The pricing formula, if based on weighted average price of brands with more than 5% (as per commerce ministry) or 1% market share( OPPI recommendation), potential impact could be significantly lower (5-8%) than current 10-15% based on PMEAC formula.

Pharmaceuticals - Domestic Pharma Monthly Review; monthly update

Regards,