The domestic pharmaceutical industry is largely of the view that it will not feel the Brexit pinch even while some companies see a short-term limited impact in terms of currency fluctuations.
The domestic pharmaceutical industry is largely of the view that it will not feel the Brexit pinch even while some companies see a short-term limited impact in terms of currency fluctuations. Considering that Europe does not contribute more than 10% to 15% of the overall sales revenues, even big players like Dr Reddy’s, Biocon, Aurobindo Pharma,Wockhardt, feel that the impact is going to be minimal.
“The European Union contributes just over 7% of our overall revenues and UK is just over $10 million. Hence, there is no major impact in terms of business,” a Dr Reddy’s spokesperson said.
“We do no see any immediate impact but we have to wait and see. There could be some rub-off effect and more so with the forex. The consumption pattern of UK and EU will not change,” the spokesperson added.
Dr PV Appaji, director general, Pharmexcil India, said that most of the exports is to the US market, whether valued in Euro or Pound, and hence it is likely to strengthen the Dollar. This could be beneficial to Indian exporters. “In terms of regulations, regulators and product registrations are different for UK and EU and hence there is no likely adverse impact for the Indian pharma exports,” Appaji said.
The total exports to EU was about $2377 million in 2015-16 and to UK, it was about $542 million, constituting about 23% of total exports. “Since it would take about two years for execution and implementation post Brexit, there will be no immediate impact. The pharma industry is not much disturbed with the decision as the currencies are different as well,” he added.
Biocon said that its export business, including sales in emerging markets, is primarily in US dollars and a very small portion in Euro. “We do not have any exposure to GBP. Due to impact of Brexit it is expected that dollar will strengthen, which will benefit us since we are net dollar earners,” a Biocon spokesperson said.
“For Euro exposure, we have hedged our revenues for next 18 months at higher rates. Also, the fallout of Brexit on commodities prices should positively impact us in lowering operating costs for expenses linked to crude oil prices,” Biocon said.
Similar is the case with Aurobindo Pharma which reported 22% of its sales revenues from EU. The company does not see any major impact of Brexit.
Cipla, Sun Pharma, lupin did not comment on the political development. “The Brexit, will have some short-term impact on the currency markets more profoundly and hence will be reflected in the financials of the pharmaceuticals companies,” Sarabjit Kour Nangra, VP Research, Pharma, Angel Broking, said.
Besides currency market, the impact of UK existing from EU, should not have major impact on the financials, as UK stand-alone is not a very big market for the Indian pharma industry. The UK pharma industry is estimated to reach $27-37 billion market by 2018, a 4-7% CAGR growth of 2014-18.
“Pharma companies exposure to the EU is lower except for Aurobindo Pharmaceuticals and IPCA Labs where it is around 25% of sales. Thus, these companies are more exposed to the volatility arising out of the development, both in currency terms and possible some impact on the approvals in the region especially UK, though fundamentally the UK pharmaceutical market should not see major change,” Nangra explained.