Global Pharma Market Update - Emerging markets to drive global growth - Centrum

As per our analysis of the global pharma market, Dr. Reddy's Labs (DRL) and Lupin are poised for good growth due to their strong product pipelines in the US and EU. DRL has a strong presence in Russia & CIS whereas Lupin is well placed in Japan due to its acquisitions. We expect the emerging markets of Asia, Africa and Australia (AAA) to drive future pharma growth rather than US and Europe. The global pharma market slowed down in 2012-13 due to patent expiry of several blockbuster drugs in the US. Indian pharma companies derive their advantage from integration and low cost manufacturing base. But they face risks from regulatory authorities and the high cost of product withdrawals from the US market due to quality issues.

Expected to grow at 5.3%: As per IMS data-June'13, the global pharma market grew at 6.2% CAGR during 2003-2012 with the lowest growth of 2.4% in 2012. This was due to patent expiry of many blockbuster products including Lipitor of Pfizer. The global pharma market is expected to grow by over 5.3% during 2012-2017. Among regions, US and Europe are set to grow at 0.7% and -0.4% respectively whereas AAA and L. America are expected to grow at 11.4% and 10.0% respectively during 2012-2017.

Top 20 companies corner 59% of the market: The top 20 global pharma companies reported revenues of $502bn (~59% of total) of the $856bn global revenues in 2012 but de-grew 2.1%YoY. Novartis emerged as the number one pharma company with revenues of $50.76bn but de-grew by 0.2%YoY. Mylan was adjudged the fastest growing pharma company with revenues of $10.51bn and grew at 17.8%YoY. Bristol Myers Squibb (BMS) reported 21.5%YoY decline in revenues to $13.5bn from $17.2bn due to patent expiry of its major product Plavix in the US market.

Lipitor revenues decline by 61%: The revenue of top 20 pharma products in 2012 fell by 4%YoY to $121.6bn from $126.8bn due to patent expiry of major products, Plavix of BMS, Lipitor of Pfizer and Singulair of Merck. Seretide of Glaxo SK emerged as the largest selling product globally in 2012 with revenues of $8.9bn and grew 1.1%YoY. Revenues of Pfizer's Lipitor dropped by 61%YoY to $5.1bn from $12.9bn due to patent expiry in November'11.

Preferred picks & risks: Dr. Reddy's Labs (DRL) and Lupin are our preferred picks as both have strong presence in the US market. DRL has 64 ANDAs pending with US FDA of which 38 are Para IV and 8FTF. Lupin has branded generic portfolio of Suprax, Allernaze and Alinia and OC products for the US market. Indian pharma companies face risks from regulatory authorities for their manufacturing facilities and high costs of withdrawal over quality issues.

Source : Equity Bulls

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