Pharma sector to see healthy growth, not all

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The pharma sector is likely to maintain a healthy revenue growth rate of 20-25% for the quarter ended December 2011. The 8.5% fall in the rupee during the December quarter will help the sector log better export realisations. Most companies in the sector are also likely to report margin expansion during the quarter.

However, the quarter will be mixed for different companies. Companies such as Ranbaxy and DRL are likely to be positively impacted on account of exclusivity sales.

Cipla is also likely to post strong performance on account of increased production from its Indore SEZ. Sun Pharma's performance may be disappointing as its subsidiary Taro is not likely to repeat its extraordinary September quarter performance.

For Ranbaxy, the December quarter performance will reflect a small part of the exclusivity period sales of generic Lipitor. The company will be adversely hit on account of its foreign currency loans and currency derivative contracts.

Investors can also look forward to more clarity from the company with regard to the terms of its settlement with the US FDA over regulatory compliance at the two manufacturing units in India. Dr Reddy's Labs (DRL) is likely to have a mixed quarter since its US business is likely to be benefited from the exclusivity period sales of the generic Zyprexa (20 mg).

However, the company is not likely to perform well in India and Russia as expected. This will impact its revenues from these emerging markets. Cipla will benefit from improved realisations due to commercialisation of its Indore SEZ.

Even on the domestic front, the company is expected to log an improved performance in the quarter. With growth in the acute therapeutic segment picking up during the December quarter, larger companies such as Cipla, Ranbaxy, GSK Pharma and Pfizer, with a presence in the segment, are likely to log a healthy growth in their domestic business.

Lupin and Cadila Healthcare are likely to post a modest performance aided by growth in their domestic and exports businesses. Among smaller companies, Ipca, Orchid Chemicals and Divi's Labs are expected to report a strong performance during the December quarter.

The stock market also appears to have factored in the December quarter performance of pharma companies. During the past three months, both Ipca and Cipla have gained more than 20%. DRL and Sun Pharma have gained 7-8%, while Lupin has lost 6%, Cadila Healthcare 11% and Ranbaxy 15%.