Cipla, Sun Pharma among top pharma picks for Motilal Oswal as US sales to help boost growth
Motilal Oswal Financial Services questions whether US generics will reverse the tide for the pharmaceutical companies given that the market's prospects have recently improved. According to the brokerage in the report, from the perspective of incremental business, the US generics market continues to be a product-specific play. This would effectively deliver growth while also offsetting the deterioration in the base portfolio.
However, a look at of industry-level approvals reveals a cautious stance towards this optimism. In contrast to the pre-Covid yearly run-rate of 670 products each year (CY17-CY19), the USFDA has approved roughly 420 products in 7MCY23 (about 725 annualised). Although it hasn't yet reached pre-Covid levels, the speed of inspection is picking up, suggesting rising regulatory risk.
The brokerage in its report noted that filings of coverage companies has reduced but approvals have recovered smartly. The number of filings by pharma companies covered by its coverage has fallen over the past seven years from 295 in FY17 to 183 in FY23 as companies reexamined the economic viability of particular products in light of increased competition and the high cost of filings. "Sun Pharmaceutical Industries Ltd, Dr Reddy's Laboratories Ltd, Alkem Laboratories Ltd, and Ajanta Pharma Ltd have reduced filings in the US generics space over the past two years.
However, Aurobindo Pharma Ltd, Zydus Lifesciences Ltd, Lupin Ltd and Cipla Ltd have witnessed a stable-to-increasing filing pace during the same period. Aurobindo Pharma has the highest filings in the US among pharma companies under our coverage with ~50 filings per year. Interestingly, the approval rates have improved to 191 in FY23 from 115 in FY22, partly due to
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