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Pharma companies' revenues seen growing at 9% over next 3 years: Crisil

Exports, which account for nearly 45 per cent of industry revenue, will see another year of a tepid one per cent growth in fiscal 2018

Press Trust of India  |  Mumbai 

Pharmaceuticals, drugs, pharma industry, medical, health, lab

Robust domestic demand and rising need for complex products in the West will help players log in a 9 per cent with healthy cash flows over the next three years, offsetting headwinds in exports and rising competition, says a report.

Revenue of is seen growing at 9 per cent per annum over the next three fiscal years ending Exports, which account for nearly 45 per cent of revenue, will see another year of a tepid one per cent growth in fiscal 2018, but recovering thereafter, said in a note on Thursday.

Over half of the exports are to the regulated markets in the West but those are set to de-grow by 5 per cent this fiscal, after growing 3 per cent last fiscal.

It attributes this to greater price erosion in existing products following competition, and delays in new product launches or import bans on existing products following scrutiny from the food and drug administration.

But the report sees this trend reversing with from regulated markets gradually increasing to 7 per cent annually over the medium-term, augmenting overall exports growth to 6 per cent annually.

This is contingent on faster product approvals by the regulator, especially for complex products.

"We are seeing successful resolution of regulatory actions from remediation efforts made over the past three years, even as regulatory scrutiny remains intense," the report noted. "For instance, warning letters on nine domestic plants were resolved in the past 15 months, which is considerably higher than the four seen between fiscals 2013 and 2016, it added.

Besides remediation efforts, are also increasing their research and development (R&D) spends to capitalise on the $20 billion-a-year complex products opportunity in the regulated markets.

expects spend to increase 700 basis points over fiscal 2017 to reach 30 per cent of annual revenue from the regulated markets over the medium-term.

Another factor offsetting the export slowdown is the steady from the domestic market, which accounts for 55 per cent of the revenue.

"Strong demand will help firms maintain 10-11 per cent growth and healthy profitability, despite intense competition and frequent regulatory actions," says the report.

Domestic demand growth will be backed by better access to healthcare, higher penetration of health insurance and increasing lifestyle diseases.

rates over 300 domestic pharmaceutical firms, over 55 per cent of which have an international presence. Besides business strength and diversity, the credit profiles for most firms are backed by low reliance on debt.

This is reflected in the credit ratio (upgrades to downgrades) exceeding 1.5 times for its pharma portfolio since fiscal 2015.

Crisil believes these strong credit profiles will sustain and will be backed by healthy cash flows despite near-term challenges in the regulated markets.

First Published: Thu, December 28 2017. 17:06 IST