Taro Pharmaceutical Industries Ltd., the U.S. subsidiary of Sun Pharmaceutical Industries Ltd., reported its quarterly earnings on Monday, missing street estimates.
The stock lost two percent on the U.S. exchanges. The company's net sales were down 26 percent, while profit saw a decline of 27 percent. Sun Pharma stock, fell about 7 percent in morning trade, adding pressure to the Nifty Pharma index which has lost six percent in the last couple of days. It fell as much as 4 percent in early trade on Tuesday.
Pricing pressure from the U.S. is expected to continue for another couple of quarters, Ranjit Kapadia, senior vice-president, Centrum Broking, told BloombergQuint.
Here are the edited excerpts of the conversation:
Is the market spooked by Taro results?
Yes, Taro results were very disappointing, which has triggered a 7 percent fall in Sun Pharma. The street is also expecting weak results from Aurobindo Pharma Ltd. due to pricing pressure and hence the five percent decline in the stock.
Companieslike Glenmark Pharmaceuticals Ltd. have guided for up to 15 percent erosion in price, do you see anyrespite coming in on pricing pressure?
The pricingpressure will continue for another couple of quarters, and will be dependent onthe new approvals. We have seen a slowdown in the U.S. FDA (Food and Drug Administration) approvals coming inand there is a scarcity now. There is no new launch in the U.S. markets, whichhas resulted in a stagnation of existing products and are seeing a decline inrevenue. Revenue will go up as and when the U.S. FDA gives more approvals.
Your growth expectation for domestic market?
The domestic market is well placed and growingat about 12 percent. Our top picks in the domestic pharmaceutical space are Sanofi andAbbot India.
Pharma valuationsare near multiyear lows, what are your thoughts going ahead?
Valuationscan improve by 15-20 percent in the coming quarters. Someone with a long-termview should look to buy at current levels. The U.S. FDA concerns are onlyprocedural issues and not quality issues. Once the U.S. FDA issues are resolvedwe will see pick up in exports.
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