You are here: Home » Companies » Industry
Business Standard

Indian drug firms' R&D spending rises as growth slows in US, domestic mkts

Firms have spent around 9% of their operating income on research and development activities

Sohini Das  |  Ahmedabad 

drug, drugs, medicine, pills,
Photo: Shutterstock

Indian pharmaceutical are increasing expenditure on (R&D) at a time when revenue growth from the domestic and businesses has slowed down. 

An analysis of the top seven pharmaceutical in the country — Cipla, Dr Reddy's Laboratories, Lupin, Aurobindo, (Zydus), and — shows that their expenditure on R&D as a percentage of their operating income has increased from 5.8 per cent in 2011-12 to 9 per cent in 2016-17. 

Rating agency ICRA states that over the same period the growth rate of their revenue fell from 56.2 per cent to just about 4 per cent. The previous financial year saw a steady decline in the revenue growth for these seven firms, from 15.1 per cent in the first quarter to a negative 16 per cent in the fourth quarter. 

The domestic market has fared better. From 15 per cent revenue growth in 2011-12 it has slowed to nine per cent in 2016-17. This, however, is on a higher base; from Rs 70,500 crore in March 2013, the Indian pharmaceuticals market has swelled to Rs 1.14 lakh crore in March 2017. 

Gaurav Jain, vice-president and co-head, corporate sector ratings, ICRA, said, "Given the commitment that big pharma has to complex and niche product filings, its R&D investments will continue to rise. This will also ensure growth in revenue and profitability in the medium term." 

The base basket of products for pharmaceutical is facing pricing pressure. Jain said in the past year pricing pressure on the base basket had increased from five-eight per cent to the low double-digits. 

Indian pharmaceutical produce roughly 40 per cent of the generic drugs sold in the The generic drug market is expected to reach $71.9 billion by 2018. 

The number of abbreviated new drug applications (ANDAs) has increased significantly with the growth in R&D expenditure. ICRA data showed that from 1,961 cumulative ANDAs in 2014-15, the number of cumulative filings has increased to 2,446 in 2016-17. 

Approvals, too, have been growing. The Food and Drug Administration website states Indian companies, including their US-based subsidiaries, received 141 drug approvals between January and June. This is higher than the 94 approvals received during the same period last year. In comparison, the growth rate in drug approvals for non-Indian is 15.27 per cent.

RECOMMENDED FOR YOU