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Pharma profits hit in US this quarter

Sohini Das / Ahmedabad 30 Oct 16 | 01:22 AM

The US market has been the cause of worry of some of the major pharmaceutical players this quarter, dragging their net profit and revenues.

While some of the firms like Gujarat-based Torrent Pharmace??uticals and Alembic Pharma had launched limited competition drugs in the US market in the corresponding quarter last year, some others like Dr Reddy's Laboratories and Cadila Healthcare have seen US revenues dip due to pressure on the generics market.

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Ahmedabad-based pharma giant Torrent Pharma, the Rs 6,600-crore flagship company of the Rs 18,300 crore Torrent Group, posted a 59.3 per cent year on year (YoY) drop in its profit after tax (PAT) for the second quarter of the current fiscal to Rs 207 crore as its US business fell 54.7 per cent. Overall revenues saw a drop of 15.5 per cent on a YoY basis.

Torrent's US revenues fell from Rs 712 crore in Q2FY16 to Rs 332 crore in Q2FY17, at a time when its Brazilian business grew by 20 per cent and its German business clocked a 14 per cent growth.

A Torrent Pharma spokesperson clarified that in the second quarter last fiscal, the company had launched a new product in US which had limited competition. The company had launched mental health drug generic Abilify (Aripiprazole) in the US last year during the quarter that had He also added that the research and development spend to had almost doubled (rose 94 per cent) to Rs 111 crore during the quarter.

A Mumbai-based analyst pointed out that the US sales for the company had also dipped in first quarter, in the range of around 50 per cent or so. The domestic business of Torrent, however, is expected to continue to post 10-15 per cent growth thanks to integration with the Elder Pharma portfolio. During the quarter the domestic formulations business recorded revenues of Rs 496 crore for Q2FY17, a growth of 12 per cent on a yoy basis.

Q2FY17 Performance of Pharma companies Company            PAT (Rs cr) YoY drop (%) Revenue (Rs cr) YoY drop (%) US revenue drop (%) Torrent Pharma    207 59.3 1,429.0 15.5 54.7 Alembic Pharma 119 58.6 879.0 13.5 38* DRL   295 59.0 3,585.7 10.0 13%** Cadila Health    338 29.0 2,427.1 0.5%# 1.5% * International formulations; ** North America; # YoY rise

Another Gujarat-based company Alembic Pharma too had launched generic Abilify in the US last year during the same quarter. Taking out the revenue growth due to the launch of the drug in the US last year, the Vadodara based company posted 58.6 per cent drop in net profit for the quarter ended September 30, 2016 to Rs 119 crore. The company's net sales also dipped by 13.5 per cent to Rs 879 crore for the quarter under review. The international formulation business on the whole dropped 38 per cent to Rs 352 crore during the quarter.

Another pharma major that witnessed US sales drag its revenues during the quarter is Hyderabad based Dr. Reddy's Laboratories (DRL), which saw a 59 per cent yoy fall in consolidated net profit for the second quarter this fiscal. Of this, north America, which roughly contributes nearly 45 per cent of its total business, saw a 13 per cent drop in revenues. It was, however, up by about 4 per cent on a quarter on quarter basis.

"All major businesses have shown sequential improvement over the previous quarter with revenues growing 11 per cent and EBITDA by 61 per cent. We have made considerable progress in our remediation efforts and continue to work on addressing concerns of the regulators," G V Prasad, co-chairman and CEO said in its filing.

Analysts at Reliance Securities say that DRL's results were below its estimates due to price erosion in key products in the US, especially for generic Valcyte and generic Vidaza. Reliance also felt that the overall price erosion was lower compared to the first quarter this fiscal and that DRL expects to launch generic Gleevec in the fourth quarter of the fiscal.

The company has also already requested the USFDA for a re-inspection of its facilities (Srikakulam, Mriyalguda & Duvvada) after having taken remedial action.

Another drug major Cadila Healthcare which posted a 29 per cent drop in its consolidated net profit for the quarter even as its total income increased marginally to Rs. 2427.1 crore mainly driven by pressure on the US generics market.

Sarabjit Kour Nangra (VP Research- Pharma, Angel Broking) said, “Cadila Healthcare, posted results lower than expected on net profit and sales front mainly driven by pressure on the US generic market."

Angel Broking's analysis showed, the formulation business sales stood at (Rs 1,988 crore, up 3.2 per cent yoy), mainly lead by the US (Rs 988.8 crore) which dipped by 1.5 per cent dip yoy. Indian formulations, however grew by 8.8 per cent. India Infoline pointed out that US sales posted a decline of 1.5 per cent YoY on account of substantial price erosion in HCQS (hydroxychloroquine).

Cadila Healthcare too has already requested the USFDA for re-inspection of its Moraiya plant as remediation is completed. Reliance Securities pointed out that the company has done site transfer for Toprol-XL & Lansoprazole to SEZ facility.

"Management expects large number of approvals post-USFDA clearance. Management expects to make over 40 filings in FY17 (estimates). Cadila Healthcare looks forward to getting seven ANDA approvals by December 2016 and some additional approvals in Q4FY17," said a Reliance Securities report.

?On the other hand, for biotechnology major Biocon, ?one of the highlights of the Q2 was the? ?tentative USFDA approval for the cholesterol treatment drug Rosuvastatin calcium tablets?, which marks Biocon’s entry into the US generics market?. ?

Interestingly, the company is expecting future growth to come from biosimilars and not from US generics.  

I?t has ?reported a consolidated net profit of Rs 146.7 crore for the second quarter? as against a ?net loss of Rs 10.6 crore for the corresponding period of the previous fiscal?. ?It consolidate?d? revenues grew ?19 per cent. ?

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