'Pharma companies to see muted exports, stable revenues in FY17'

India Ratings has revised the pharmaceutical sector outlook for 2016-17 to 'Stable' from 'Positive',

The pharmaceutical industry is expected to register muted export revenue growth and stable domestic revenue increase in 2016-17, a report said.

The overall pharmaceutical exports are expected to grow at about 5 per cent, while domestic pharma market is likely to grow at 8-10 per cent in the next fiscal.

"The recent increase in US regulatory actions against domestic pharmaceutical companies is likely to restrict growth of exports to the US.

"Higher depreciation of emerging market currencies is also likely to impact export growth to semi-regulated markets.

"We expect the overall Indian (pharma) exports to grow at about 5 per cent in FY17," India Ratings said in its report here.

The ratings agency has revised the pharmaceutical sector outlook for 2016-17 to 'Stable' from 'Positive', expecting moderation in the sector's growth momentum next fiscal.

The industry's muted export growth seen over FY14 and FY15 continued in the first half of 2015-16. The agency has revised down its growth estimate for this fiscal to 5 per cent from 10-12 per cent due to increased regulatory actions.

USFDA issued several warning letters and import alerts against Indian facilities on quality related issues.

As of 2015-end, as many as 42 Indian facilities of 28 companies were under import alerts, it said.

Pharmaceutical growth continued to decline in FY15 due to the slowdown in export growth, and revenue growth in 12 months ended September 2015 was a little over 7 per cent, lowest over the last five years.

However, the domestic pharmaceutical market is likely to sustain the recently gained momentum on the back of stable underlying growth drivers and grow at 13-15 per cent in 2016-17, it said.

However, the market will remain exposed to any expansion of the price control regime.

Overall, the sector growth is likely to be about 8-10 per cent in FY17, the report said.

The domestic pharmaceutical market grew 12.1 per cent in FY15 to Rs 90,000 crore.

Pharmaceutical exports reported modest y-o-y growth of 5 per cent in FY15 to Rs 94,200 crore.

The stable underlying drivers such as increasing healthcare spending by the government, demographic trends, increasing disposable income and higher incidence of lifestyle

Diseases augur well for the growth in the domestic market, it said.

Though expansion of the drug price control regime may impact the topline growth of companies temporarily, a likely improvement in volume sales over the medium term may offset the impact, the Ind-Ra report said.

It added that growth expectations also continue to rest on the USD 19 billion worth of drugs which are likely to go off patent in 2016.