Icra sees moderate growth in pharma industry

Research and rating agency Icra said Indian pharmaceutical industry was likely to register a moderate growth on the back of slowing growth from the US, given the relatively moderate proportion of large size drugs going off patent, with increased competition leading to price erosion, generic adoption reaching saturation levels among other things.

However, aggregate revenues of Icra's sample set of 21 leading players declined by 8.8 per cent during the first quarter of the financial year 2017-18 vis-a-vis the prior year as against the December 2016-March 2017 quarter growth at 0.2 per cent.

The revenue growth has been subdued for the US as well as the domestic market in the first quarter. IT is because the base business in US continues to face low-to-mid teens price erosion with regulatory overhang for select companies and impact of GST implementation on domestic growth.

Icra stated that the negative growth in the first quarter of the current fiscal was led by trade channel destocking initiative following GST implementation versus growth of 4.5 per cent in the fourth quarter and 9.3 per cent growth in third quarter of the year 2016-17.

"The growth momentum is likely to face further pressures going forward, led by limited near-term first to file (FTF) generic opportunities and pricing pressures on base business. Besides increased regulatory scrutiny and consolidation of the supply chain in US market resulting in pricing pressures along with increased R&D expenses will also impact the profitability of domestic pharma players..," Gaurav Jain, vice president and co-head of Icra said.

However, the credit metrics of leading pharma companies are expected to remain stable in view of steady growth prospects in regulated and relatively strong balance sheets. The capital structure and coverage indicators are expected to remain strong despite some pressure on profitability and a marginal rise in debt levels given inorganic investments, it said.