Stock Market

Doubling of R&D spends a negative for Torrent Pharma: CLSA

Chillicious Team

Torrent Pharma ’s fourth quarter results were largely in line with street expectations. A key metric in the company’s fourth quarter results was its India growth, which was back on track after two subdued quarters, says a CLSA report. India sales grew 13 percent year-on-year to Rs 450 crore.

Another positive piece of news for Torrent was the commissioning of the Dahej plant in April. This plant should support growth in the US and EU markets where the pharma company’s running capacity is constrained, adds the report.

Torrent Pharma reported consolidated net profit of Rs 357 crore for the quarter ended March 31, 2016. It had posted net profit of Rs 130 crore for the January- March period of the previous fiscal.

However, a couple of negative surprises revealed the pharma company has more work to do. Torrent has guided for R&D spends to rise to 8 percent of sales in FY17 as against 4 percent in last fiscal year gone by.

 “In absolute terms, the brokerage expects an increase of 54 percent in R&D spends in FY17 (40 percent YoY increase in FY16),” says the report.

In May, the US FDA visited its Indrad facility (the largest facility for Torrent) and handed out Form 483 with 2-3 observations (minor and product related). It was the
second inspection in the span of a year on the facility.

CLSA has a buy call on the pharma as it has a positive outlook on its overseas business.

“The R&D spend will accelerate 15-20 filings in the US and improve capabilities in India and Brazil. For FY17, Torrent expects to launch 10 new products in the US and supply greater quantities of existing products in the US and EU as new capacities have been commissioned recently,” the report said.