Pharma sector to post moderate 7-9% CAGR due to healthy demand

The domestic pharmaceutical industry is likely to register a moderate growth at 7-9 per cent in the period between FY18 and FY21, a report said.

The concerns in the domestic market pertain to price control and mandatory genericisation, rating agency ICRA said in its report, which sampled 21 firms in the industry.

It further said that concerns in the US market pertain to relatively moderate proportion of large size drugs going off patent, increased competition leading to price erosion albeit at moderate pace, generic adoption reaching saturation levels and regulatory overhang with base effect catching up.

"The pharma industry growth will remain moderate at 7-9 per cent CAGR over FY18 to FY21 on the back of healthy demand from the domestic market given increasing spend on healthcare along with improving access, though constrained by regulatory interventions and slowing growth from the US given the relatively moderate growth prospects," the report said.

ICRA said the revenue growth from US remained sluggish during June quarter at 1.5 per cent, compared with 4 per cent in FY17 and minus 13.1 per cent in FY18 despite consolidation benefits.

"The growth momentum for US business is likely to remain in low single digit for FY19, led by limited near term first to file (FTF) generic opportunities, pricing pressures and product rationalisation for US base business," ICRA vice-president Gaurav Jain said.

The aggregate domestic growth was 27.2 per cent in June quarter, compared with 4.6 per cent in FY18 and minus 8.8 per cent in June quarter last year, the report said.

The aggregate research and development (R&D) spends of top few domestic companies, which had increased from 5.9 per cent of sales in FY11 to close to 9 per cent in FY17, moderated to 8.8 per cent during FY18 and further to 8.6 per cent in June quarter, according to the report.

ICRA expects R&D budgets to remain at 8.6-8.8 per cent given the growing focus both on regulated markets and complex molecules/therapy segments such as injectables, inhalers, dermatology, controlled-release substances and bio-similars.

Indian companies have gained adequate scale and drug development capabilities over last decade of growth which will keep them in good stead to capture new opportunities in the developed market, it said.