The Indian pharma industry's growth in 2021-22 (FY22) is estimated at 9-11 per cent, driven by a push from domestic and emerging markets in the next few quarters, according to credit rating agency ICRA.
The revenue growth for ICRA’s sample of 21 Indian pharmaceutical companies was moderate at 6.4% in Q2FY2022, down from 16% in Q1 FY2022.
Normalisation of the base and pricing pressures in the US market were themajor reasons for slowing growth momentum in Q2 FY2022, even as growth under domestic and emerging markets remained healthy. The sample set reported a 15.3% Y-o-Y growth in domestic revenues, against a~14.6% Y-o-Y growth for the IPM.
A combination of steady normalization in hospital footfalls and field force operations (given the relatively lower restrictions on account of Covid-19), continued traction in acute therapies and better pricing supported healthy revenue growth across companies.
Going forward, sustenance of trend in doctor visits and elective surgeries given the news around the Omicron variant, and performance of new launches in addition to revenue growth momentum in the acute segment will remain key monitorables.
As for the US market, the revenue growth for the sample set remained muted at 1.9% during the second quarterowing to high single digit to low teens price erosion and past inventory liquidation given the Covid-relateduncertainties. Companies are focusing on specialty products, injectables, complex generics including first-to-file opportunities to improve margins for the US business, which has been impacted by the pricing pressure.
Going forward, improved product mix is expected to contribute to price stabilisation. Overall, ICRA expects mid to highsingle digit price erosion in FY2022.
“Going forward, ICRA expects the Covid-19 related improvement in margins to taper down. This combined withheadwinds such as pricing pressures and rising raw material costs are expected to result in margins of the sample set contracting to 22.5% in FY2022 and further to pre-Covid levels of 21-22% in FY2023, though the same willcontinue to remain healthy,” adds Mr. Deepak Jotwani, Assistant Vice President & Sector Head, ICRA.
The outlook for the pharma sector remains Stable led by healthy revenue growth and margins. ICRA expects thesample set’s capital structure and coverage indicators to remain comfortable despite higher capex and R&D expenses given the robust cash levels.
Mythri Macherla, Assistant Vice President & Sector Head, ICRA, said: “Revenue growth for ICRA sample set is estimated at 9-11% in FY2022 and in FY2023, supported by gradual recovery post the impact of Covid-19. In FY2022, the sample set is estimated to have witnessed growth of 13-15% in the domesticmarket, 14-16% in the emerging markets and 9-11% in the European business even as growth under the US business is expected to remain muted given the pricing pressure."
