Indian pharma will continue to stare at single digit growth ICRA


MUMBAI: The growth trajectory for Indian pharmaceutical industry is likely to be moderate on back of slowing growth from US given the relatively moderate proportion of large size drugs going off patent, increased competition leading to price erosion in low-to--mid-teens, generic adoption reaching saturation levels and, regulatory overhang along with base effect catching up, rating agency ICRA wrote in its research report. 

The growth momentum is likely to face further pressure going forward, led by limited near term first to file (FTF) generic opportunities and pricing pressure on base business. Besides increased regulatory scrutiny and consolidation of supply chain in US market resulting in pricing pressures along with increased R&D expenses will also have an impact on profitability of Indian pharmaceutical companies," said Gaurav Jain, Vice President & Co-Head, Corporate Ratings, ICRA. 

Jain said that revenue growth from US during FY2012-17 period for ICRA's sample set experienced a CAGR of 19.3% though growth from US has come down from 14.4% in FY2016 to 4.0% in FY2017 with Q4FY2017 and H1FY2018 registering negative growth despite consolidation benefits. The aggregate revenues of ICRA's sample comprising 21 companies grew marginally at 0.8% in Q2FY2018 Vs the prior year as against Q1 FY2018 growth at -8.8%.  

The saving grace for pharma companies has been domestic market where growth has rebound to 10.3% in Q2FY2018 compared to -8.8% in Q1FY2018 

"There are limited major first-to-file generic launches in US market in near term and base business is expected to continue to face competitive pressures affecting growth from US market," ICRA noted. The rating agency said aggregate revenue growth for the sample is projected at 7-10% over FY2018 to FY2020 after mid-to-high double digit growth over last five years.  

However despite challenges ICRA found that several Indian pharma companies have ramped up their R&D spend, targeting pipeline of specialty drugs, niche molecules and complex therapies.