Most Pharma companies, barring the likes of Sun Pharma and Cipla have underperformed the benchmark indices in 2022. Even the Nifty Pharma index has witnessed a drop of close to 10 percent this year while the Nifty 50 index is managing to hold on to positive territory for now.
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So, what have been the highs and lows this year? Let us decipher the year gone by and what we can expect going into 2023.
2022 saw opportunities from COVID-19 dwindling. Case in points were the likes of Serum stopping manufacturing of its Astrazeneca vaccine, Zydus and Dr Reddy's Covid-19 vaccine sales not taking off, Wockhardt’s UK sales falling as supplies to the UK govt dipped and lastly Divi’s Labs seeing dwindling intermediate supply opportunities for Merck’s Covid-19 drug Molnupiravir.
For the US, an important development was a clutch of Indian companies such as Natco, Dr Reddy's and Cipla launching the generic version of blockbuster cancer drug Revlimid generic. Challenges included fierce price pressure in the US continuing with the likes of Lupin exiting certain drugs and Aurobindo delaying its injectable sales guidance of $650 million to $700 million to financial year 2025. It was also a patchy year for USFDA inspections with problems continuing for the likes of Sun’s Halol facility, Cipla’s Goa plant, Glenmark’s Baddi plant.
Price pressure, delayed launches in the US, supply challenges along with inflation weighed on the margin of most companies in the current financial year. Companies like Gland and Divi's saw a sharp margin erosion in the first half, Aurobindo's margin at 13.7 percent in the September period was a multi-quarter low.
2022 was a year of acquisitions in India as companies scouted for growth. We saw companies either buying one or a portfolio of brands such as Dr Reddys & JB Chemicals buying cardiovascular drugs from Novartis or Mankind scooping up Panacea’s domestic brands. Not in the domestic market, but this year was also marked with the $3 billion buyout of global company Viatris’s Biosimilar biz by Biocon.
So, what is the way forward in 2023? The ability to withstand price pressure in the US which would be fueled by ley drug launches in the US such as Lupin’s inhaler drug Spiriva generic, Cipla’s cancer drug Abraxane or Biocon’s biosimilars insulin aspart and Bevacizumab and continued sales for Sun Pharma specialty biz. 2023 will also be marked by companies undertaking remediation to solve outstanding USFDA issues and taking steps to fuel growth in other markets such as India and even China.
Lets leave you with valuations of the companies on a FY24E basis, what they started 2022 with and where they are ending it today.