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Pharma euphoria may reverse soon, and how!

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Mumbai: Ipca Laboratories, Glenmark and Zydus Cadila, companies making drugs that are being used in the treatment of the pandemic, have seen sales increase in lockstep with the rising number of confirmed Covid cases in the country, although analysts expect a profitability squeeze when more drugmakers begin to produce the prescribed antivirals and prophylactics.

Drugs such as hydroxychloroquine (HCQ) and favipiravir have added to the revenues at these companies. Mumbai-based Ipca, one of the world’s biggest makers of active pharmaceutical ingredient HCQ, reported a record growth in revenues for its quarter ending June, primarily driven by Covid-19 demand for these drugs.

Ipca’s export formulations business grew by 89 per cent to 1,500 crore. Sales of HCQ for the quarter totalled Rs 200 crore. The share price of Ipca in the past six months has risen by 27 per cent to Rs 2,034 from Rs 1,599. Shares of the other two companies have also risen by about a fifth since the pandemic struck.

Glenmark Pharma was the first Indian company to have launched the flu drug favipiravir locally. From Rs 7.7 crore in June, the total revenue from favipiravir has gone up to Rs 51.5 crore, as per data collated by Prabhudas Lilladher. Cadila Healthcare, which had received export orders for HCQ, registered 89 per cent growth in its API.

Favipiravir and HCQ are recommended as a first line of treatment option for Covid-19 in several parts of the world despite inconclusive data about their effectiveness. Six months ago, there was hoarding and stock-piling of HCQ in countries such as the US because Donald Trump endorsed it to be effective against the disease. The medical fraternity is divided on its utility.

Similarly, favipiravir remains one of those drugs yet to conclusively prove its effectiveness in the treatment of Covid-19.

Analysts believe, however, that companies may not be able to sustain the momentum of sales of such drugs because of the price war in this segment. There are over a dozen companies that have launched their version of favipiravir at a price as low as 30 per tablet.

“We expect revenues and margin will significantly be reduced for Glenmark on favipiravir (Fabiflu) from Aug CY20 onwards while revenues and profit of the competitors are unlikely to be significant (in comparison to its India revenues) in FY21E,” said Surjit Pal, a pharma analyst at Prabhudas Lilladher.

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