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Sluggish US market to pull down domestic Pharma growth to 7-10%: Icra

Key market is slowing down with fewer large sized drugs going off patent, and increased competition

Sohini Das  |  Ahmedabad 

pharma, pharma industry

Rating agency feels that pharmaceutical is likely to grow at a moderate rate of 7 to 10 per cent between FY18 and FY20. This is on the back of slowing from the The saw a mid to high double-digit over last five years. 

says the in the is slowing 'given the relatively moderate proportion of large size going off patent, increased competition leading to price erosion in high single digits to low teens, adoption reaching saturation levels and, regulatory overhang along with base effect catching up.'

According to Gaurav Jain, vice president and co-head, corporate sector ratings, , "The momentum is likely to face further pressure going forward, led by limited near term first-to-file (FTF) opportunities and pricing pressure on base business. Besides increased regulatory scrutiny and consolidation of the supply chain in market resulting in pricing pressures along with increased R&D expenses will also have an impact on the profitability of pharmaceutical Revenue from the during FY2012-17 period for ICRA's sample set experienced a CAGR of 19.3 per cent, though from the has come down from 14.4 per cent in FY2016 to 4.0 per cent in FY2017 with Q4FY2017 registering negative despite consolidation and currency benefits."

Overall the aggregate revenues of 21 leading players grew by 0.2 per cent during the Q4FY17 with FY17 at 7.4 per cent as against 10.1 per cent in FY16. "The revenue has been subdued for the as well as domestic market in Q4 FY17 with base business in the continuing to face high single digit to low teens price erosion, regulatory overhang for select and impact of impending implementation/demonetization on domestic to an extent," the report said.

As for the domestic formulations business, registered of 4.5 per cent in Q4 FY17 as against 9.3 per cent in Q3 FY17 led by destocking initiative following impending implementations and lag effect of

In ICRA's view, there are limited major first-to-file launches in market in near term and base business is expected to continue to face competitive pressures affecting from market. Aggregate revenue for ICRA's sample is projected at 7-10 per cent over FY18 to FY20 after mid to high double digit over last five years.

Despite these ongoing challenges, several pharma have ramped up their R&D expenditure, targeting pipeline of speciality drugs, niche molecules and complex therapies.

Industry's profitability has remained relatively stable with aggregate margins for ICRA's sample at 18.3 per cent for Q4FY17 vis-a-vis 21.7 per cent in Q4 FY16 and 24.6 per cent in Q3 FY17, regardless of the pressures along with increased R&D and compliance related investments.

"expects the increase in R&D budgets witnessed over the past few years to continue. The aggregate R&D spends of top few domestic have increased from 5.9 per cent of sales in FY11 to close to 9.1 per cent in FY17. This is also due to the fact that top are expanding their presence in complex therapy segments such as injectables, inhalers, dermatology, controlled-release substances and bio-similars," said Jain.

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