Friday July 15, 2011

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By Sam Devraj  ( Assistant Editor )

Drug sales grow: A technician displays tablets at a facility

MID-SIZED Indian drugmakers are expected to post steady to strong revenue growth in April-June, riding healthy domestic and overseas demand. But their profits are likely to shrimp, because of operational costs.Companies like Lupin, Cadila Healthcare, Glenmark Pharmaceuticals and Aurobindo Pharma would see sales growth of between 15 to 20 per cent for the first quarter, analysts said.Margins are likely to decline about 200 basis points for the healthcare sector primarily because of the high base effect and higher operational costs, analysts said.“We expect margins to contract by 177 basis points as the growth on the revenue front is unlikely to offset increase in raw material and SG&A (sales, general and administrative) cost,” Sushant Dalmia, sector analyst at Pinc research, said.While sales in the domestic market would rise about 15 per cent on an average, the US market might see even higher business growth, analysts said.The BSE healthcare index, which rose 6.21 per cent in April-June, has outperformed the wider index that fell 3.08 per cent over the same period.“The US generic business would drive the growth for most companies as there is recovery seen in the world’s top drug market,” Siddhant Khandekar, analyst at ICICI Securities, said.For Indian mid-sized drugmakers, on an average, US generics business constitutes about 35 to 40 per cent of their overall sales and has higher margins compared to domestic and unregulated markets.“Although, the margins growth would be muted in the quarter, companies like Cadila, Lupin, Indoco Remedies and Glenmark would continue to post upward profit numbers on better mix of high-margin products.”Lupin and Cadila Healthcare are expected to report 17 per cent and 20.5 per cent sales growth respectively for the June quarter while Indoco Remedies and Aventis Pharma would see revenue rising 21.1 per cent and 10.3 per cent respective, Angel Broking said in a note.

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