Pharma sector growth to be moderate: ICRA

Domestic pharmaceutical industry is likely to register moderate growth largely owing to increased regulatory scrutiny as well as consolidation of supply chain in the US market, says a report.

According to rating agency ICRA, revenue from US during from 2011-15 period, rose at an average 33 per cent. This plunged to 15 per cent in 2015-16 and 12 per cent in the first nine months of the current fiscal despite consolidation and currency benefits.

It noted that the growth trajectory for Indian pharmaceutical industry would moderate on back of slowing growth from US.

Further, the report said that the continued regulatory interventions in domestic market are expected to put some pressure in near term though long term growth prospects for domestic pharmaceutical market remain healthy given increasing penetration, accessibility and continued new launches.
 

"Going forward the growth momentum is likely to face further pressure," ICRA said.

"Increased regulatory scrutiny and consolidation of supply chain in US market resulting in pricing pressures along with increased R&D expenses will have an impact on profitability of Indian pharmaceutical companies," it added.

On the positive side, the report said the domestic pharma industry has gained adequate scale and drug development capabilities over last decade of growth which would "keep them in good stead to capture new opportunities in the US market".

Aggregate revenues of ICRA sample of leading players grew by 9.0 per cent in October-December quarter of the current fiscal compared to the same period year-ago.

In the first nine months of 2016-17, the growth stood at 8.9 per cent as against 10.1 per cent registered in 2015-16.

"The revenue growth for Indian pharma industry remains moderate...With base business in US continuing to face high single digit price erosion, regulatory overhang for select companies and temporary impact of demonetisation on domestic growth to an extent," ICRA senior group vice president Subrata Ray said.

"The domestic formulations business of companies within our sample registered growth of 9.3 per cent in third quarter of 2016-17 as against 14.1 per cent in the preceding quarter with demonetisation resulting in channel de-stocking though the growth should come back in the next few months," Ray added.