The 2.2% drop in the Indian pharmaceutical market in August is no surprise given that the covid-19 pandemic has put anti-infective sales on the slow track. This could weigh heavily on the pharmaceutical sector, especially as the valuations of most pharmaceutical stocks have been on the rise in recent times. The Nifty Pharma index slipped about 2.3% last week against the 1.2% drop in Nifty.
The increased concern for hygiene during the pandemic and the reduced mobility of people have slowed the spread of infectious covid-19 in recent months. This led to a decline in sales of other anti-infective, respiratory and antimalarial drugs, which were between 11% and 20% year-over-year in August, according to data from AIOCD AWACS, an organization of ‘pharmaceutical market research.
Also, as this column noted previously, patient visits to hospitals and clinics have fallen, which has reduced prescription production. Volumes fell about 2.9% in August, which is not very encouraging for pharmaceutical companies.
The price increases have been decent, which is encouraging. IPM data shows price increases were around 4.4% year-over-year (year-over-year), while new launches represented growth of around 2.5%. % year-on-year.
Another positive point was sales of acute therapy. The heart, vitamins and antidiabetics fared particularly well, growing from 2% to 11%.
A few companies have grown faster than the pharmaceutical market. “Glenmark increased 1.8-fold year-on-year in anti-infective, mainly due to sales of Fabiflu (a covid-19 drug). JB Chemicals grew 18.3% year over year due to strong adoption of cardiac therapy (50.9% of its therapy mix). Ipca saw good y-o-y traction in pain / analgesics (22.5%) and cardiac (16%), ”Motilal Oswal Financial Services said in the client note.
Cipla sales increased 7.4% year-on-year. Other frontline companies such as Lupine, Sun Pharmaceutical and Dr Reddy’s Laboratories saw sales decline 2% to 5% year-on-year.
As anti-infective growth has been slow and valuations are strained, sector stocks may be constrained in the coming months. The current price-earnings multiple of the Nifty Pharma Index has fallen from 26 times at the start of 2020 to 33 times currently.