FY21 Performance of Best Pharma Stocks in India

19 Jul 2021by Pradeep U

FY21 Performance of Best Pharma Stocks in India

The Covid-19 pandemic was major challenge for several industries, but it came as an opportunity for the pharma industry. In this aricle let's take a look at how leading pharma companies performed in year filled with adversity.

Performance of best pharma stocks in India in FY21

Cipla

Cipla primarily develops medicines to treat respiratory, cardiovascular disease, arthritis, diabetes, weight control, depression as well as other medical conditions. Cipla has a geographically diversified presence across 80+ countries with its India branded formulations accounting for more than 40% of business and the company ranks among the top 3 players in the market.

Now let’s look at the journey of Cipla (CIPLA) in the last financial year.

Performance of CIPLA in FY21

In FY21, the Nifty generated a return of 71% whereas CIPLA generated a return of 93%. The Nifty Pharma index too generated return of 71% in FY21. Thus, we can imply that the stock of CIPLA was an outperformer in comparison with the above indices.

How CIPLA Fared in FY21

While Cipla’s revenue increased from Rs 17,132 crore in FY20 to Rs 19,159 crore in FY21, the company’s net profit increased from Rs 1,546 crore in FY20 to Rs 2,404 crore during the last financial year.

Key highlights of Cipla’s performance in FY21

The company’s India business reported a growth of 19% YoY in FY21 while its branded business grew 6% YoY. Trade generics business is now ~20% of the portfolio. Cipla’s Covid portfolio contributes ~5% of total sales, largely India. The company has expanded its COVID portfolio with oral antiviral drug Molnupiravir in partnership with MSD, antibody cocktail (Casirivimab and Imdevimab) in partnership with Roche and Baricitinib in partnership with Eli Lilly.

North American business grew by 17% YoY with ramp up in US Generics business continued market share expansion in overall Albuterol market. European business grew by 7% YoY led by consistent in-market performance. The Emerging markets grew by 4% YoY led by continued demand across all regions.

The company’s SAGA region business, which comprises South Africa, Sub-Saharan Africa, Uganda (Cipla QCIL) and Cipla Global Access grew 10% YoY in local currency terms. For FY21, private business grew 13% and tender business grew by 3%.

Future outlook for Cipla

Cipla is expected to benefit from the promising growth outlook for Indian pharmaceutical markets (IPM) which is estimated to witness double-digit growth for FY2022 backed by sustained price hikes and increase in volumes. Apart from sustained growth in chronics, acute therapies are likely to report healthy growth in FY2022 due to a low base. With a formidable presence in chronics, Cipla looks well poised to capitalize on the strong growth outlook for IPM as it currently derives around 40% of sales from India.

Cipla’s market leadership position in respiratory, inhalation therapies and urology segments are likely to remain unchallenged over the next few years. Ramp-up in Albuterol sales and a strong new product pipeline, which includes high-value respiratory assets and complex generics, are likely to are likely to keep revenues and margins intact.

Divi’s Laboratories

Divi’s Laboratories is a dominant player in India’s Active Pharmaceutical Ingredients (API) space and major Contract Development and Manufacturing Organization (CDMO) player -Divi’s Laboratories.

Established in the year 1990, Divi’s Laboratories is a leading manufacturer of Active Pharmaceutical Ingredients offering high quality products to over 95 countries.

Performance of Divi’s Laboratories in FY21

In FY21, Divi’s Laboratories gained 80%, outperforming even the benchmark index Nifty which generated a return of 71% as well as the Nifty Pharma Index which too gave a return of 71%.

How Divi’s Laboratories Fared in FY21

Factors that worked in favor of Divi’s Laboratories in FY21

  • Increase in demand for APIs due to the Covid-19 pandemic
  • Blended model offering custom manufacturing solutions to several big pharma companies as well as manufacture of API’s
  • Relatively lower competition due to high entry barriers in the segment
  • Higher demand for APIs from domestic pharma companies in a bid to reduce dependence on China

The total consolidated revenue of Divi's Laboratories increased from Rs 5584 crores during FY20 to Rs 6969 crores in FY21 reflecting a growth of 25%. The company's net profits too increased by 44% to Rs 1984 in FY21 as against Rs 1376 crores in FY20. To ensure industry-leading growth trajectory, the company has invested heavily in backward integration of key molecules and is focusing on expanding in profitable ones such as mesalamine and carbidopa/levodopa, as well as increasing its investments in Neutraceuticals.

Future outlook for Divi’s Laboratories

While the Covid-19 pandemic adversely affected many industries, it was a blessing in disguise for the companies involved in the business of manufacturing APIs such as Divi’s Laboratories. This demand is likely to further increase over the next few years.

Post the environmental clampdown in China followed by COVID-19 pandemic which resulted in massive supply chain disruption across the world, the global companies are looking for alternate source of supply chain apart from China. Naturally, Divi’s with such a huge capacity and technical expertise is expected to become preferred choice of supplier for global companies.  Also the Indian government has been keen to reduce the dependence of Indian pharma companies on China for raw materials for drugs.  In a big boost to domestic companies in this sector, the government had extended the performance-linked incentive (PLI) scheme to bulk drug manufacturing.

Strong supply visibility due to supply chain replacement from China by major pharma companies in the post-covid era, capacity addition and long-standing supply track record with innovators will help Divi’s Laboratories to make the most of this opportunity.

Dr Reddy’s Lab (DRL)

DRL is one of the largest Indian generic companies in the world. To complement its generics portfolio, DRL has vertically integrated into API’s. It also has a robust biosimilars pipeline. It has presence in more than 40 countries with US, Russia and India being the key geographies.

Performance of DRL in FY21

In FY21, the Nifty generated a return of 71% whereas DRL generated a return of 46%. The Nifty Pharma index too generated return of 71% in FY21. Thus, we can imply that the stock of DRL was an underperformer in comparison with the above indices.

How DRL Fared in FY21

 

A look at the performance of DRL across different markets from various segments in FY21

Global Generics (GG)

DRL’s revenues from GG segment witnessed an increase of 12% over FY20, on account of growth across all markets with markets in Europe and India displaying double growth during the year. Let us have a look at how some of the key markets have performed for DRL:

  • North America

The company’s revenues from North America Generics business for FY21 displayed a YoY growth of 9% due to new launches, scaling up of existing products and favorable forex rate.  The modest growth in North America Generics business was due to price erosion in the base business.  

  • Europe

DRL’s revenues from Europe witnessed a YoY growth of 32% in FY21, due to volume traction in base business, new product launches across European markets and favorable forex which was partially offset by price erosion.

  • India

Revenues from India witnessed a YoY growth of 15% in FY21 driven by revenues from the acquired business of Wockhardt and contribution from new product launches.

  • Emerging Markets

DRL’s revenues from Emerging Markets for the year witnessed a growth of 7% due to slowdown in many markets.

Pharmaceutical Services and Active Ingredients (PSAI)

Revenues from PSAI segment grew by 24% driven by new products, increase in volumes of key products of API business and favorable forex partially offset by price erosion.

Proprietary Products (PP) & Others

Revenues from PP & Others for the year at Rs. 3.3 billion, YoY decline of 69%. FY20 was higher due to income from sale of the US and select territory rights for two of Neurology franchise products pertaining to PP.

The total consolidated revenue of DRL grew by 9% from Rs 17460 crores in FY20 to Rs 18972 crores in FY21. However, the company's net profits for the year de-grew by 20% to Rs 2591 in FY21 as against Rs 3255 crores in FY20.

Future outlook for DRL

DRL has a strong portfolio of products for Covid including multiple preventive and curative treatment options.

Some of DRL’s major Covid-19 products are:

  • Sputnik V vaccine (under partnership with RDIF)
  • Remdesivir used for treatment of severe conditions.
  • Avigan® (Favipiravir) which is currently in advanced trial phase in North America for  mild and moderate symptoms.
  • 2-deoxy-D-glucose (2-DG) developed in partnership with DRDO lab.
  • Molnupiravir and Baricitinib for treatment of mild to severe conditions.

With a strong portfolio of diverse offerings and global presence, DRL looks poised to take a giant leap over the next few years.

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