Muted fourth quarter expected for pharma sector: Jefferies

Chennai, April 7: The Indian pharmaceutical sector is expected to have a muted fourth quarter of last fiscal due to weak growth in US business, pricing while FY18 is likely to dominate the results, said investment banking firm Jefferies.

In a statement issued on Friday, Jefferies said: "We expect another muted quarter for the Indian Healthcare sector led by weak US business."

According to Jefferies latest industry report, the overall revenue growth for the sector is expected to be around eight per cent year-on-year (YoY).

The US business growth will likely remain muted despite new launches due to price erosion in the base business and increased competition in key products, Jefferies said.

"We expect Natco, Narayana and Cipla to report strong results while most large caps should see YoY decline in earnings," Jefferies said.

Jefferies said the approvals by the US Food and Drug Administration (USFDA) were at one of their best levels in fourth quarter of last fiscal at 173 abbreviated new drug applications (ANDA) approved.

The share of Indian companies increased in FY17 to 36.8 per cent vs 34.6 per cent in FY16.

Jefferies said the recent round of inspections by USFDA across the sector has again raised concerns for the sector.

"It also indicates that FDA is looking more deeply at various practices and past is no guidance for future. We believe that most of the issues are cultural and will require significant work to change. We believe the sector will need another 12-18 months to upgrade processes and practices across facilities," Jefferies said.

According to Jefferies, the key focus in the results will be commentary on pricing scenario in US and also guidance for growth/margins/launches in FY18.