Pharma in need of growth pill

The domestic pharmaceutical industry, which has often been in the spotlight for actions taken by the US drug regulator, could be staring at more disappointing news.

The growth trajectory for the industry is expected to moderate following slowing growth from the US - its key market, increased competition, and a regulatory overhang, apart from the base effect.

According to credit rating agency ICRA, revenue growth from the US between 2011 and 2015, which saw a compounded annual growth rate (CAGR) of 33 per cent, has come down to 15 per cent in 2015-16 and further down to 12 per cent in the nine-month period of this fiscal despite currency benefits.

Further, there are limited major FTF (first to file) launches in the US market in the near term. As a result of all these factors, the base business is expected to continue to face competitive pressures, affecting growth from the US market.

An FTF status for a generic drug gives the applicant a 180-day marketing exclusivity, thereby pushing up the firm's revenues.

"Aggregate revenue growth for ICRA's sample is projected at 9-11 per cent in the period between 2016-17 and 2018-19 after mid-to-high double-digit growth over the last five years,'' it disclosed.

The rating agency added that going forward the growth momentum is likely to face further pressure.

Moreover, increased regulatory scrutiny and consolidation of the supply chain in the US market, which result in pricing pressures and increased R&D expenses, is also expected to have an impact on the profitability of domestic pharmaceutical companies.

Drug firms have over the past few years increased their R&D budgets because of the focus both on regulated markets and complex molecule segments.

The aggregate R&D spends of the top few companies in domestic pharmaceutical markets have gone up from 6 per cent of sales in 2010-11 to around 9 per cent at present.

Subrata Ray, senior group vice-president, ICRA, pointed out that the revenue growth for the domestic pharmaceutical industry remains moderate for the US, with the base business in that geography continuing to face high single-digit price erosion and regulatory overhang for select companies.

The rating agency felt that in the domestic market, continued regulatory interventions are also expected to put some pressure in the near term.

Long-term growth prospects for the domestic pharmaceutical market remain healthy because of increasing penetration, accessibility and continued launches.

Source: https://www.telegraphindia.com/1170313/jsp/business/story_140347.jsp#.WMaYw9KGNdg