DRL, Cipla’s healthy outlook offsets Q4 slip

ET Intelligence Group: Dr Reddy’s Labs (DRL) and Cipla, the two leading domestic pharmaceutical companies in Covid-19 treatment, did not live up to investors’ expectations when they announced their fourth quarter results last Friday. Overall sales of these companies in the quarter to March were lower, given the easing of the pandemic, than in the preceding quarters which were hit by the first wave of corona virus.For DRL, the US business failed to generate growth compared to the previous year partly due to high base effect as well as price erosion. India sales grew 15% over the year-ago level, aided by sales from the acquired business of Wockhardt and new product launches. Strategic decisions of the management taken over the recent years proved effective — right from appointing an expat CEO, reinforcing the business focus on Indian market, investing in digitalisation of business, exiting loss-making businesses, emphasis on cost savings and launching products for Covid treatment, ranging from drugs to vaccines. 82690639In the case of Cipla, the growth numbers were below expectations across all parameters. The company reported a 4% increase in revenue from India business and 17% from the US business. Fourth quarter is a seasonally weak quarter for the company, accentuated by low momentum in sales of Covid drugs. The company is expecting tailwinds impacting the business from the current quarter, driven by a surge in demand for Covid drugs and its core respiratory products becoming part of the Indian Council of Medical Research’s treatment protocol in India and ramp up of its respiratory complex generics in the US.Both companies managed operational efficiency through improved ebitda margins. Incidentally, their stocks are trading 5-6% below their record highs. Despite subdued Q4 performance, these companies are likely to enjoy investors’ interest owing to sales of their Covid-related drugs such as remdesivir, favipiravir and baricitinib as well as Sputnik vaccine & 2-DG (in the case of DRL). The digitalisation of the drug supply chain through the industry collaboration acquiring Pharmarack and AWACS will be another key area over the medium term that will unlock value for these companies.

from Economic Times https://ift.tt/3tSQ8ds