ICRA predicts 9-11% growth in FY24 fuelled by new launches, US rebound

In a recent report, credit rating agency ICRA has forecast that revenues for Indian pharmaceutical companies are expected to expand by 9-11 per cent in FY2024, compared to 10 per cent in FY2023. This growth is predicted to be driven by a rebound in the US market, new product launches, and strategic acquisitions.

The US, traditionally a critical market for Indian pharma, is projected to contribute 11-13 per cent to this growth in FY2024. Whereas the domestic market is projected to grow by 7-9 per cent in FY2024, supported by price increases and new launches, despite temporary setbacks due to price controls and weather uncertainties.

ICRA anticipates expansion in revenues for its sample set of 25 companies, which represent approximately 60 per cent of the overall revenues of the Indian pharmaceutical industry.

The growth in emerging markets is estimated to rise by 13-15 per cent, and the European market is also expected to rise by 11-13 per cent and contribute to the overall outlook.

Commenting on the report, Deepak Jotwani, Assistant Vice President & Sector Head, ICRA, stated: 'Apart from some key drugs going off-patent, product shortages in select therapeutic segments (oncology, pain/anesthesia, cardiovascular among others) in the recent quarters have also been a growth driver for generic companies in the US market to some extent.'

'These shortages in the US market have been partly caused by lower production/discontinuation of operations by some pharmaceutical companies (including local ones) owing to persistent pricing pressure, supply chain challenges, and increased regulatory scrutiny by the United States Food and Drug Administration (USFDA),' Jotwani further added.

Despite a decline in the share of revenues from the US market in FY2022 due to pricing pressure and regulatory scrutiny, there has been a recovery, with the share increasing to 38 per cent in H1 FY2024. The report highlighted regulatory risks in the US market, citing an increase in warning letters and import alerts issued to Indian pharmaceutical companies. These regulatory challenges have led to delays in product launches, supply chain disruptions, and additional costs for remedial measures, impacting profit margins.

In the domestic market, challenges such as price reductions mandated by the National List of Essential Medicines (NLEM) and uneven monsoons have affected acute therapy sales, resulting in a 7.2 per cent year-on-year growth in H1 FY2024. ICRA foresees R&D expenses stabilising at 6.5-7 per cent of revenues as companies optimise spending, focusing on complex molecules and specialty products.