Going strong | Value Research Even though the USFDA created problems for large pharma companies, their smaller counterparts have been doing very well

Going strong

Even though the USFDA created problems for large pharma companies, their smaller counterparts have been doing very well

Going strong pharma

Right on the heels of the resurgent auto sector, pharma follows with the second-highest earnings growth of 16 per cent. The US, the largest market in the world for pharma companies, offered mixed results. On the one hand while large companies like Sun Pharma and Dr. Reddy's face increasing heat from the US Food and Drug Administration (USFDA), smaller ones like Alembic and Torrent are doing very well. A stringent USFDA is not Indian pharma's only headache. Domestic sales softened for a number of players.

Torrent Pharmaceuticals Blockbuster gains

Torrent Pharma tops the pharma sector, with earnings growth of 76 per cent (TTM, YoY). This is higher than even the industry leader Sun Pharma.

Torrent has found its calling in following the expiry of rewarding patents of drugs with annual sales worth $1 billion or more. Torrent has three such drugs - Abilify, Cymbalta and Nexium. Nomura Research says that they can generate excess revenues (in excess of long-term sustainable sales) of about $400 million over FY14-17. It also has five more drugs that are generics of blockbusters, including the infamous Viagra.

Other verticals, however, have not reported stellar performance as in the US. India revenues were flat in the latest quarter (YoY), whereas Latin America and rest of the world reported decline in sales.

The US will continue to drive Torrent's fortunes for some time. Revenues from the US are expected to grow 42 per cent CAGR between FY15 and FY18, says Nomura, pushing the overall annual revenue run rate to 20 per cent. Earnings per share is likely to grow at 43 per cent CAGR in this period.

Alembic Pharmaceuticals Limited-competition gains

Torrent is not the only Indian company raking it in with gAbilify ('g' stands for 'generic') sales; Alembic gives it company. Alembic saw the second highest earnings growth, at 70 per cent, during the last one year.

Limited-competition products are its buzzword. Notable among them are gAbilify, gCelebrex, gExforge and gMicardis, out of which the first two are blockbuster drugs. Alembic has 68 ANDA filings with 30 pending for approval.

Alembic has a strong presence in the domestic branded space, which has seen its contribution to total domestic sales rise from 42 per cent in FY11 to 56 per cent in FY15.

With close to ten annual launches per year, Alembic's US revenues could grow by 53 per cent CAGR between FY15 and FY18, says ICICI Securities. The domestic specialty segment is slated to grow at 24 per cent CAGR during the same period, taking the annual total revenue growth to 22.2 per cent.

Alembic has a clean balance sheet, with the debt/equity ratio of 0.3 and a return on capital employed of 37.54 per cent. Given its growth drivers, it is likely to keep buzzing in the years ahead.

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