API segment supports growth for large generic pharma players in Q1

However, price correction could lead to growth moderation in the near term

Even as top pharma companies were struggling to grow their sales in the US and Indian markets, one segment which stood out in the June quarter was the active pharmaceutical segment (APIs). While most Indian companies reported a drop in year-on-year sales in the two key geographies, API sales growth was in double digits. India and the US account for 70 per cent of revenues for most pharma majors while APIs account for 3-20 per cent. 

Though a substantial part of the APIs are used by the companies inhouse for making formulations they are also supplied to third parties. The strong sales in the June quarter was on account of supply disruption from China, higher prices of APIs and stocking up by companies to keep a buffer and counter any supply shocks. 

In value terms, Aurobindo, Divi’s and Dr Reddy’s are the largest players. While growth is expected to steady over the medium term for the segment, analysts believe the high growth seen in the quarter could moderate in the near term. Analysts at Ind-Ra expect the growth in the API business to taper off as companies normalise their buying patterns. They also expect price correction to happen and reverse the rising price trend due to a sudden spurt in demand.