Indian pharmaceutical industry is likely to witness moderation in growth in the next three years mainly due to decline in revenues from the US, its largest overseas market, and increased competition, according to ICRA. Already, 21 leading players’ overall aggregate revenues grew only by 7.4 per cent in FY 2017 as against 10.1 per cent posted in FY 2016, the rating agency said. The growth trajectory for Indian pharma industry is likely to be moderate on the back of slowing growth from the US, increased competition leading to price erosion, generic adoption reaching saturation levels and regulatory overhang along with base effect catching up, ICRA said. For the period between FY 2018 to FY 2020, ICRA said the industry is projected to grow at 7-10 per cent after mid to high double digit growth over the last five years. Commenting on the situation, ICRA Corporate sector ratings Vice President & Co-Head Gaurav Jain said: “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 generic base business”.
Revenue growth from US during FY 2012-17 period for ICRA’s sample set experienced a CAGR of 19.3 per cent, he said. However, growth from the US has come down from 14.4 per cent in FY 2016 to 4 per cent in FY 2017, with the fourth quarter of FY 2017 registering negative growth despite consolidation and currency benefits, Jain added. “Besides, increased regulatory scrutiny and consolidation of supply chain in the US market resulting in pricing pressures along with increased R&D expenses will also have an impact on profitability of Indian pharmaceutical companies,” he added. On the domestic front, ICRA said continued regulatory interventions will put some pressure in near term, though long term growth prospects remain healthy, given increasing penetration, accessibility and continued new launches by players.
In spite of these ongoing challenges, several Indian pharma companies have ramped up their R&D spend, targetting pipeline of speciality drugs, niche molecules and complex therapies, ICRA said. The credit metrics of leading pharmaceutical companies are expected to remain stable in view of steady growth prospects in regulated markets and relatively strong balance sheets, it added.