Covid-19 lockdown: Domestic pharma growth takes hit as stock piles up

In what may be considered as early signs of slowing down, the domestic pharmaceutical industry’s inventory lying with trade has gone up since the nationwide lockdown was announced on March 24. Industry insiders say the pharma industry is expected to clock 1-3 per cent overall growth this year.
 

At an overall level, the inventory days have gone up from 31 days as on March 22 to 41 days as on April 22, showed the data from market research firm AIOCD AWACS. The first month of the nationwide lockdown has seen lower offtake of medicines across the country. Barring chronic therapy, areas such as cardio-diabetic and other therapy segments have seen steep rise.
 

Anti-infectives, for example, have seen a spike from 35 days on March 22 to 62 days on April 22. Dermatology has seen a rise from 43 days to 61 days, whereas vaccines have seen a sharp rise in inventory from 27 days to 69 days as India’s immunisation drive was paralysed.

Even ophthalmology saw a significant rise from 33 days to 50 days as eye clinics remained closed. What is surprising is that vitamins, minerals, supplements, and respiratory illness drugs have seen a slowdown in sales, leading to inventory days rising.
 

Anti-diabetes is the only therapy that has seen steady inventory level at 23 days, while cardiac medicines, too, have remained more or less stable at 29 days in April, up from 26 days in March. Oncology medicines, however, saw a rise in inventory days, with cancer patients being advised to stay indoors to avoid infection. Fresh prescription generation has reduced in the segment.
 

The industry admits these may be the first stirrings of slowdown.  Ameesh Masurekar, director of AIOCD AWACS, said if inventory days are at around 60 (for some therapy areas), they basically mean sales have petered out. He added that the overall domestic industry growth this year could be in the range of 1 per cent and 3 per cent.

“Considering there will be a 4-5 per cent price hike (which is based on the wholesale price index, or WPI), the volume and new introduction growth would be in negative terrain,” said Masurekar.

On a moving annual turnover (turnover for last 12 months) basis, the Indian pharma market clocked 9.8 per cent growth in December 2019. In 2019, the price growth was 5.3 per cent, average volume growth 1.9 per cent, and new product growth 2.6 per cent. Some analysts, however, feel the price growth, too, may be negative.

“Last year, most pharma companies took a price hike in between low- and mid-single digits. This is despite the fact that for non-national list of essential medicines (NLEM), they can take a hike up to 10 per cent. For NLEM drugs, the price hike is based on the WPI. In a dull year such as this, taking price hikes will be tougher. At least, they will be pushed back by a quarter or so,” said Ankit Hatalkar, analyst, Edelweiss Securities.
 

Meanwhile, the data also shows that smaller companies have fared worse, compared to the larger ones. For example, Zuventus Healthcare has inventory days of 86, Troikaa Pharmaceuticals has inventory of 65 days lying with trade. Gujarat-based small companies, such as Lincoln Pharmaceuticals, have inventory of 98 days. In comparison, larger firms, especially those that are chronic-focused, have fared better.

Torrent Pharmaceuticals has an inventory of 34 days, Novo Nordisk around 18 days (it makes insulin), Mankind Pharma 36 days, Intas Biopharmaceuticals 42 days.
 

This is solely because large brands have done well during the lockdown. The data shows that for brands that are over Rs 100 crore in size, sales in the first 21 days of April, compared to the first 21 days of March, have been 78 per cent in acute therapy and 101 per cent in chronic therapy. This basically means that in April they have sold 78 per cent of what they sold in March.

Compare this with a brand with less than Rs 10 crore value — it has managed to touch 58 per cent of its March sales in April in the acute segment, and around 83 per cent in chronic.
 

Come May, sales of chronic medicines will fall, as patients have stocked up on their prescription drugs for two-three months, said Hatalkar.
 

Companies admit these are trying times. “With lockdown and social distancing, many gastrointestinal ailments, or even flu and other viral infections have slowed down. These would hit drug sales,” said Pranabh Mody, president of JB Chemicals & Pharmaceuticals.