Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Pharma: Recovering from the lows of 2009 - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 19, 2011

    Pharma: Recovering from the lows of 2009

    In the past 2 years, the Healthcare index has outperformed the BSE-Sensex by 8%. The table below shows that that BSE Healthcare Index gave returns of 133%, while the BSE Sensex gave returns of only 125%. Among Indian pharma stocks, the top two in the list were Cadila Healthcare and Dr. Reddy's Laboratories. If one would have invested in any one of the two, the investment would have been worth 4 to 5 times today. Sounds amazing, but who knew this would happen?

    Obviously the stock returns have been backed by a strong business performance by both these companies. Let us check the few main pointers due to which the companies performed exceptionally.

    Dr. Reddy's Laboratories

    1. Last two years have seen strong recovery in the domestic formulations business and the restructuring of this business has also helped.

    2. The company has launched 'Sumatriptan' with an exclusivity window in 2009 which substantially bolstered sales and profits.

    3. Decent profit in 2010 after writing off its goodwill and intangibles for Betapharm acquisitions.

    4. Strategic partnership with GlaxoSmithKline to develop and market select products in emerging markets outside India

    5. Leading pipeline of ANDA & DMF filings globally with a lot of focus on niche products with limited competition.

    6. The global generics business, which accounts for 73% of revenues, witnessed an 8% YoY growth for the third quarter of FY11.

    Cadila Healthcare

    1. Cadila has a high exposure to lifestyle segments and has achieved around 20% YoY growth for the last 10 years. This is fastest among its peers.

    2. The US generics business grew at a robust pace during FY09 and FY10 led by growth in its existing business and new product launches.

    3. Consumer business of Cadila which is around 10% of its revenues continued to grow above 25%

    4. Although sales and profits from its JV with Nycomed witnessed some pressure due to generic competition for its drug 'Pantoprazole', the company began to generate revenues from its JV with Hospira. In the last 3 years, Cadila's return ratios and margins have continuously improved due to strong growth in sales and ramping up of its overseas businesses.

    5. Further it has acquired small companies outside India which is helping them to grow.

    6. Domestic business accounts for a large proportion of total sales for Cadila, which reduces currency risk as compared to other companies.

    Returns of select pharmaceutical companies
    Company Name Returns from 2009 lows
    Cadila Healthcare 381%
    Dr. Reddy's Laboratories 317%
    Ranbaxy Laboratories 248%
    Lupin 229%
    Biocon 223%
    Novartis 154%
    Piramal Healthcare 145%
    Pfizer 132%
    Sun Pharmaceutical 124%
    Aventis 123%
    Glenmark Pharmaceuticals 114%
    Glaxosmithkline Pharmaceuticals 72%
    Cipla 47%
    B S E Healthcare Index 133%
    BSE-Sensex 125%
    *Some of the companies in the above list are not a part of BSE Healthcare

    What to expect?
    The first nine months of FY11 have been tepid for Dr.Reddy's as Betapharm has continued to face pricing pressure in Germany and also due to poor revenues from its custom manufacturing business. That said, the US generics business has been growing at a strong pace, which is an encouraging sign. This business is expected to be the key growth driver going forward as the company has a slew of niche and limited competition products in its portfolio.

    For Cadila Healthcare, too, the key growth drivers will be its US business, the domestic business and its JV with Hospira. Although, pricing pressure in the global generics market and volatile foreign currency movements are the key challenges that Cadila faces.



    Equitymaster requests your view! Post a comment on "Pharma: Recovering from the lows of 2009". Click here!


    More Views on News

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    The Power of 5 Minutes (The 5 Minute Wrapup)

    Jun 16, 2017

    Here's what you can expect from The 5 Minute Wrapup in the coming months and years.

    Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter (Quarterly Results Update - Detailed)

    Jun 23, 2017

    Net Profit lower due to exceptional items in the previous year.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 12:12 PM