Pharmaceuticals: 3QFY17E Results Preview

3QFY17E will be a mixed quarter for the Indian pharma sector with some companies expected to deliver good operating performance and a few suffering from regulatory headwinds in the US. As a result, we expect muted top line growth (8 per cent YoY) for our coverage universe in 3QFY17E. EBITDA will decline on a high base of 3QFY16, which includes gAbilify profits during semi exclusivity. Adjusted for gAbilify, the EBITDA growth will also be in a low single digit. We continue to believe that the situation is likely to improve substantially in 4QFY17/1QFY18 as US FDA issues will be resolved.

Within our coverage universe, Lupin and Glenmark will strong numbers in 3QFY17E. Effects of increased generic competition in gGlumetza will not be visible during this quarter due to late launches by competitors. We expect Lupin's top line to grow 2 3 per cent YoY and profits 16 per cent YoY. The launch of gZetia in Dec-16 is likely to drive both top line and bottom line for Glenmark (27 per cent top line and 81 per cent PAT growth).

Aurobindo will report modest growth of 13 per cent on top line and 16 per cent growth in EBITDA in 3QFY17E. Higher sales from injectable products will drive the US business for Aurobindo. Alkem will also report a better quarter led by increased traction in both India and US businesses. However, a sequential decline is expected due to seasonality.

Dr.Reddy's revenues will continue to decline in 3QFY17E on account of the erosion in its US base business. The expected decline in Alembic's and Torrent's revenues will however be due to the high base of 3QFY16 which includes gAbilify sales in the US.

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