Pharmaceuticals & Biotech. share price target

4QFY17 was a disastrous quarter for many Pharma majors, with most of them missing guidance by a wide margin. Although there are arguments that this pain is structural (hence more permanent) in nature, with high pricing erosion in generics products, we believe otherwise.

ICICI Securities Ltd. | Retail Equity Research The Q4 numbers released by Glenmark Pharma and Dr Reddy's have once again showcased continuing (and perhaps worsening) pricing pressure in the US base business. Both the managements indicated high single digit to low double digit price erosion in the US in the backdrop of client consolidation and intense competition, mainly in the oral segment. In a major development, the government has, on record, made its intention to mandate doctors to write generic names of medicines on the...

EBITDA of the I-direct healthcare universe is expected to grow 10% YoY to | 9616 crore. EBITDA margins are likely to grow just 47 bps YoY to 24.3%. Sharp price erosion in the US base business may be offset by US exclusivities and growth in emerging markets. Net profit is expected to increase ~9% YoY to | 5779 crore, in line with the operational performance. On the regulatory front, Divi's Lab's Vizag API plant (unit-II) received USFDA import alert. However, USFDA has exempted 12 APIs from the import alert. Indoco Remedies has received warning letters from the USFDA for its Goa...

The pharmaceuticals sector continues to face headwinds due to 1) fierce competition, 2) shorter time-to-market, 3) expiring patents, 4) slowing sales growth, 5) declining profitability in developed markets and above all 6) continually receiving 483s at their plants from USFDA. Thus they need to find solutions to beat these challenges. Additional woes adding on the domestic front are the regulatory issues which are negatively impacting the near-term outlook. We maintain a cautious view on the sector and recommend being stock specific as 1) plant approvals from the US FDA and 2)key product launches in US continue to directly impact the earnings....

ICICI Securities Ltd. | Retail Equity Research The USFDA has lifted the import alert from Sun's Mohali (erstwhile Ranbaxy facility) facility and removed the same from the Official Action Initiated (OAI) status. This proposed action will clear the path for Sun Pharma to supply approved products from the Mohali facility to the US market, subject to normal USFDA regulatory requirements. The USFDA had taken action against the Mohali facility in 2013 when it ordered the facility to be fully subject to Ranbaxy's consent decree of permanent injunction....

We visited eight pharmaceutical companies in Hyderabad recently. Since growth challenges and regulatory issues bedevil many large-caps, we believe mid-caps may well provide interesting opportunities to investors. We have segregated these companies into three broad categories: (1) Established formulations players, (2) Emerging formulations players and (3) CRAMS players.

ICICI Securities Ltd. | Retail Equity Research Q3 revenues were more or less on expected lines despite higher-thanexpected price erosion in the US and demonetisation impact in the domestic market. In the US, almost all players reported pricing pressure in the base business. However, due to exclusivities, low base and new product launches, some players were able to register strong growth. I-direct pharma universe registered YoY revenue growth of 12% to | 38900 crore, driven by 11% growth to | 11427 crore in the US (select pack) and 10% growth in domestic formulations to | 8079 crore. EBITDA for the universe grew ~9%...

Hindered by various issues recently, the pharma sector is trading at a four-year low valuation (and at par with its 10 year average). Blue chip pharma companies have been beaten down by the concerns around pricing, compliance issues and a fear of shrinking growth in the large US market. In this note, we have tried to distinguish between the truth and hype surrounding these pain points.

S&P; BSE PHARMA index has continually underperformed SENSEX in the last 1/3/6/12-months as the sector continues to face headwinds due to 1) fierce competition, 2) shorter time-to-market, 3) expiring patents, 4) slowing sales growth, 5) declining profitability in developed markets. Thus they need to find solutions to beat these challenges. Additional woes adding on the domestic front are the...

3QFY17E will be a mixed quarter for the Indian pharma sector with some companies expected to deliver good operating performance and a few suffering from regulatory headwinds in the US. As a result, we expect muted top line growth (8%YoY) for our coverage universe in 3QFY17E. EBITDA will decline on a high base of 3QFY16, which includes gAbilify profits during semi exclusivity. Adjusted for gAbilify, the EBITDA growth will also be in a low single digit.