How Sun Pharma To Lupin Fared In U.S. In January-March, And What Analysts Expect

Indian pharma companies saw mixed results in the U.S. market in January-March as prescription drug sales business ranged between a contraction of 3.8% to a growth of 5%.

Sales rose sequentially for Sun Pharmaceutical Industries Ltd. (excluding Taro), Cipla Ltd. and Glenmark Parmaceuticals Ltd., according to data by IQVIA. Lupin Ltd., Torrent Pharma Lt., Taro Pharmaceutical Industries, Cadila Healthcare Ltd., Alkem Laboratories Ltd., Dr Reddy's Laboratories Ltd. and Aurobindo Pharma Ltd. reported a decline.

Product recalls also increased in the January-March period, IQVIA said calling them a "leading indicator of facility compliance risk, especially in the absence of regular U.S. FDA inspections".

Here's what analysts say about key drugmakers:

Sun Pharma

The company's trailing three-month sales (ex-Taro) were up 14 million on a sequential basis, driven by generic Lialda, gProtonix (for gut-related issues) and specialty products like Ilumya (for psoriasis), Absorica (for treating severe acne) and Cequa (to ease dry eye), according to Nomura.

The firm expects generic competition in Absorica from December last year as per the settlement agreement with Teva Pharmaceuticals Industries Ltd. "However, Teva has not yet received approval, which may provide Sun Pharma with a limited time opportunity to shift prescription to the new formulation," the note said.

Nomura expects Absorica to contribute $70-80 million to the company's annual earnings.

The company also recalled three of its drugs in January-March, Jefferies said in a note.

Dr. Reddy's

Trailing three-month sales fell $7 million sequentially, according to IQVIA data. While sales for gSuboxone (opioid addiction drug) and gCiprodex (for treating ear infections) were stable. The market share for gCiprodex rose to 28% in March 2021 from 19% as of September.

The company's injectable portfolio recorded a declining trend, driven by additional competition in key products including gDoxil (chemotherapy), gArixtra (leg vein clots) and gHemabate (postpartum haemorrhage), according to Nomura.

Upgrading the stock on March 19, Nomura wrote that the recent correction in the stock price has turned risk-reward favourable. The stock declined 13% in January-March, making it the worst performer on the Nifty 50.

The company also recalled of products, with two at the end of their shelf life, according to Jefferies.

Glenmark

Trailing three-month sales rose $7 million over the previous quarter. The decline in derma segment reversed with an increase of $2 million.

Growth was mainly driven by an increase in sales of pimecrolimus cream (eczema) by $5 million, Nomura's said.

Macquarie expects Glenmark to cut debt by a higher level in FY22 compared with previous years. It also expects value-unlocking for shareholders through an initial public offering of its active pharma ingredient division.

The research firm maintained its 'outperform' rating on the stock with a 12-month price target of Rs 595, implying an upside of 29% from Tuesday’s closing levels.

Lupin

The drugmaker's trailing three-month sales fell $18 million sequentially, mainly due to gApriso (for gut issues) and a weak flu season. Sales for gApriso, according to IQVIA data, fell by $13 million.

"We think the decline is possibly not reflective of primary sales," Nomura's note said. The sale of flu-related products fell $93 million or 79% year-on-year, it said.

However, the company's market share in Albuterol (for respiratory issues) recovered to about 5.5-6% in the past four weeks but still remains below the peak of around 7.5% during December 2020.

"The company has faced supply disruptions of key components in the recent past, but these issues have been resolved," Nomura said.

Highest Product Recalls Since 2020

Alkem Laboratories, Alembic Pharma, Dr Reddy's, Lupin, Sun Pharma and Zydus Cadilla recalled products in January-March.

Reasons vary from mislabeling, a mix-up in packaging to presence of impurities and failure of dissolution specifications, according to a note from Jefferies. However, none of the recalls related to N-nitrosodimethylamine, a known carcinogen.

The firm said that specific data around problematic batches can throw light on site-wide and even firm-wide manufacturing practices.

"Based on recall data, Daman (Alkem), Pithampur Unit I, II, III (Lupin) are the sites that are likely to be inspected on priority once the U.S. FDA resumes inspections," Jefferies note said. Since June 2019, Alkem's Daman facility has seen six product recalls, while Lupin's three units at Pithampur have seen 15 recalls.

Jefferies expects U.S. FDA inspections to resume fully over the next one to two quarters as travel restrictions ease due to increasing vaccinations in the U.S. "Priority areas for the FDA will include facilities presently under warning letter/OAI which have completed remediation and a closer examination of facilities with product recalls," Jefferies said.