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PHARMA Q2FY22E PREVIEW: ELEVATED PRICE EROSION COULD IMPACT BUSINESS IN US

believe that ease in RT/PCR tests will remain intact, while demand for core Acc=Accumulate / UR=Under Review tests may increase with digitalization in diagnostic segment. Similarly, as vaccination ratio improves, less impact is expected from newer COVID wave....

IPM is gradually gaining ground around core products, as non-COVID portfolio led the Aug-21 growth. We expect encouraging trend to continue as COVID cases remains low with more than 50% of total adult population vaccinated (at least one dose of vaccine). Low spread of Covid wave-3 will augur well for IPM to maintain healthy growth of its core portfolio in 2HFY22E. The growth trend of parameters like volume, value and new products of IPM were highly balanced in Aug-21, which again indicates normalization in the industry. Similarly, falling trend of COVID-portfolio sales in past three month...

Amongst top therapies Anti-Infectives, Cardiac, GI, anti-diabetic and VMN grew 14.2%, 13.3%, 11.5%, 9.6% and 9.2% YoY in Jul-21. Increased pace of vaccination and slowing of wave-2 of Covid-19 led to normalised IPM growth month-on-month. Growth maintained the momentum in Jul'21 with strong contribution from high growth therapies influenced by COVID products. The key reasons for such growth are (i) increased percentage of vaccinated population with more players entering into COVID vaccine segment (ii) ease in travel restriction and less likelihood of another...

We expect the companies under our pharmaceutical coverage to clock 38.8% (YoY) earnings growth base effect. Currency appreciation could improve the top line by 1.8% on a YoY basis. Overall, our pharmaceutical coverage would post Revenue/EBITDA/PAT growth of 14.2%/23.8%/38.8% YoY in Q1FY22. We expect the EBITDA margin of our coverage universe to improve by 176bps YoY, led by We expect Aurobindo Pharma's revenues to grow by 5.6% YoY to INR 61.6bn. US sales are expected to decline due to Natrol divestment and price erosion. The EU is expected to grow faster YoY supported by currency tailwinds and a lower base. EM and ARV to grow at a steady pace. The company's EBITDA margin to decline by 49bps due to higher R&D; spends and other expenses. PAT...

On the companies front, three out of 12 companies are likely to report 15%+ YoY growth. Key monitorables are: Lupin, likely to register above 21% growth amid one-off US$50 million licensing income and strong domestic growth. Amid lower base, Sun Pharma and Apollo Hospitals are likely to...

EBITDAM to bounce back at normalized level on the back of increased revenue traction and cost optimization (R&D;). largely led by lower base and volume up-tick on the back of increased domestic demand. In base, sales were impacted due to logistic issues and lack of regulatory guidelines/infrastructure on RT/PCR tests. Unlike strict lockdown restriction in last year, there are better recoveries and lesser logistic issues of global economies in 1QFY22....

Domestic Business (Covid-19 products) Drives Growth while US Business Delivers Flat Growth. Top Picks: Gland Pharma, Lupin and Solara.

Amongst top therapies anti-Infective, Cardiac, GI, anti-diabetic and VMN led IPM growth by 141.9%, 31%, 47.7%, 20.2% and 59.8% YoY in May-21. IPM growth in last few quarters remained below our expectations but with rise in Covid-19 cases since March'21 and limited lockdown restrictions, there was robust market share growth led by pick-up in overall volumes. We believe key reasons for such growth are (i) re-opening of doctor's clinics and noncovid hospital services supporting volume growth (ii) increase in patient footfall leading to new prescription (NRx), (iii) increased demand for Covid19 related precautionary products, (iv) sign of recovery in demand of acutetherapy products and (v) low base in Apr-May FY21 due to first wave. Amongst top therapies, anti-infective showed a sign of recovery and...

Amongst top therapies anti-Infective, Cardiac, GI, anti-diabetic and VMN led IPM growth by 141.9%, 31%, 47.7%, 20.2% and 59.8% YoY in May-21. IPM growth in last few quarters remained below our expectations but with rise in Covid-19 cases since March'21 and limited lockdown restrictions, there was robust market share growth led by pick-up in overall volumes. We believe key reasons for such growth are (i) re-opening of doctor's clinics and noncovid hospital services supporting volume growth (ii) increase in patient footfall leading to new prescription (NRx), (iii) increased demand for Covid19 related precautionary products, (iv) sign of recovery in demand of acutetherapy products and (v) low base in Apr-May FY21 due to first wave. Amongst top therapies, anti-infective showed a sign of recovery and...