Pharma sector seen posting moderate growth in FY19 on slow US market

The domestic pharmaceutical sector is likely to register a moderate, single-digit revenue growth in the current fiscal year, on slowing US market growth, increased competition and regulatory overhang, a report said.

Consolidation of supply chain in the US market resulting in pricing pressures along with sustained investments in research and development (R&D) will also have an impact on profitability of Indian pharmaceutical companies, Icra said in its report.

"The growth trajectory for Indian pharmaceutical industry is likely to be moderate, in single digit, on slowing growth from the US given the relatively moderate proportion of large size drugs going off patent, increased competition leading to price erosion in low double digit, generic adoption reaching saturation levels and regulatory overhang along with base effect catching up," the report said.

The rating agency said the revenue growth from the US has come down from 14.4 per cent in FY16 to 4 per cent in FY17 and -13.1 per cent in FY18, despite consolidation benefits.

Gaurav Jain, vice-president, Icra, expects the growth momentum to face further pressures going forward, led by limited near term first to file generic opportunities, pricing pressures and product rationalisation for US base business.

Aggregate revenues of Icra's sample comprising 21 companies grew at 6.7 per cent in the March quarter vis--vis the prior year as against FY18 growth of 0.1 per cent.

The rating agency expects demand prospects from the domestic market to remain healthy given increasing spend on healthcare along with improving access though regulatory interventions, especially relating to price control and mandatory genericisation.