Sector Performance - Pharma

Pharma: Overall improvement in revenues

• This quarter will see a good improvement in the revenues and profit margins of various pharmaceutical majors as compared with their performance in Q4FY2005. That is because the domestic demand picked up in this quarter; in the same quarter in the previous year the domestic revenues of these companies had declined sharply as a result of de-stocking due to the implementation of VAT. Apart from this, the cost-cutting methods employed by various companies may also result in higher margins. The price erosion in the US markets continues but some of the big pharma firms like Ranbaxy
  Laboratories and Lupin are expected to benefit from the increasing generic opportunities in FY2007 as blockbuster drugs like Pravastatin and Simvastatin go generic during the year.
• For this quarter Cipla is expected to show a 28% growth in its net profit yoy. The growth would be driven primarily by the improvement in its domestic formulation business, a possible increase in the other operating
  revenues and increased bulk drug exports due to the supply of new drugs to its partners in the regulated markets.
• Cadila Healthcare is expected to show a substantial growth of 60% in the bottom line to Rs35.5 crore due to higher margins driven by increased domestic formulation sales and exports to the regulated markets.
• Unichem Laboratories, which is primarily a formulation maker, is also expected to benefit from the rising domestic demand and may show close to 30% growth in its net profit.
• For this quarter, Lupin is expected to show a strong growth in its profit after tax (PAT; over 80% yoy) due to a much better domestic demand for its goods and higher revenues from key molecules like Suprax in the regulated
  markets as the flu season was in full swing during the quarter.
• Ranbaxy Laboratories is also expected to show a 15% growth in its net profit due to better revenues from the Commonwealth of Independent States, Africa and Europe, and higher domestic formulation sales. Also lower costs due to lesser litigation costs, and stabilising research and development expenses are expected to bump up the margins sequentially.
• We expect Orchid Chemicals to show a steady 25% increase in its revenues led by the sale of the key cephalosporins in the US markets. We also expect its PAT to increase by more than 40% yoy (despite a deferred tax write-back of Rs9.7 crore in Q4FY2005 that inflated the PAT to Rs16.6 crore in Q4FY2005).