Fw: Investor's Eye: Pulse - RBI's mid quarter policy review; Update - Pharmaceuticals

 

 

Investor's Eye [June 18, 2012]  Sharekhan www.sharekhan.com

Summary of Contents PULSE TRACK RBI's mid quarter policy review  Amid the expectation of a 25-basis-point reduction in the repo/cash reserve ratio (CRR) rates the Reserve Bank of India (RBI) surprised the market by keeping the key rates unchanged in its mid quarter policy review. According to the central bank, it has already frontloaded the rates cuts (a 50-basis-point rate cut in April this year) while the inflation scenario continues to be challenging. With regard to growth the RBI asserts that several other factors are responsible for the slowdown in the investment cycle as banks' effective lending rates remain lower than the levels seen during the 2003-08 period. Going ahead, the government's fiscal action especially with regard to the fuel price hike and macro data will decide the course of the monetary action. SECTOR UPDATE Pharmaceuticals      Mid-sized players prepare to take center-stage in the USA We have studied and analysed the pattern of the latest abbreviated new drug applications (ANDAs) approved by the US Food and Drug Administration (USFDA). On the basis of the number of ANDAs approved for the key Indian players, we feel that the mid-sized players have outpaced the major players in the past few months. Though the number of approvals does not exactly represent the revenue potential of the individual players, but the pace of the approvals surely shows relative activity and preparation of the players for the US market.    Key trends    Major global players outpace Indians during first half of June 2012  The starting weeks of June 2012 witnessed a dry period for the Indian players, as most of them could not open an account in terms of obtaining ANDA approvals. Except for Dr. Reddy's Laboratories Ltd (DRL), which received an ANDA approval for the generic Requip (ropinirole hydrochloride), none of the Indian players received any ANDA approval during this period. In contrast, major global players like Teva Pharmaceutical Industries, Watson Pharmaceuticals, Sandoz and Mylan Inc together received six ANDA approvals out of the 11 approvals sanctioned by the USFDA up to June 14, 2012.    Mid-sized players perform better  In the past few months a sizeable number of ANDA approvals were received by the mid-sized players like Aurobindo Pharmaceuticals, Strides Arcolab, Glenmark Pharma and Torrent Pharmaceuticals. Companies like Ranbaxy Laboratories, whose approvals were stalled due to the ban on two of its manufacturing facilities in India, also received approvals (from the newly approved Mohali plants) in April and June this year. However, the pace of approvals fell for Lupin and Sun Pharmaceuticals during April-June 2012 (up to June 14th), though on a cumulative basis these players hold a strong pipeline of ANDA approvals.   A few blockbuster products go off patent during April-June 2012; but stiff competition limits the scope The first two and a half months of Q1FY2013 have seen a few blockbusters getting off patent. However, most of them are witnessing intense generic competition leading to severe erosion in product prices. We do not expect much upside from these products for the Indian pharmaceutical players.    Outlook  The trend of approving ANDAs in the USA during the past few months was mixed. The big players like DRL and Lupin showed a fewer number of approvals relative to their historical trends whereas players like Strides Arcolab, Glenmark Pharma and Ranbaxy Labs seemed prepared to grab the center-stage in the US generic markets. Nonetheless, we believe players like Sun Pharma and Lupin would continue to be strong players in the USA owing to its large product basket and ability to play in niche segments.   Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.