Domestic credit rating agency, ICRA in its latest report has said that the growth momentum of the Indian pharmaceutical industry is likely to witness moderate in the next three years, largely owing to slowdown in revenues from the United Sates, increasing competition and adoption of generics reaching a saturation level. Apart from this, it also noted that increased regulatory scrutiny and consolidation of supply chain in the US market along with increased R&D expenses will also have an impact on profitability of Indian drug companies.
The rating agency has pointed out that the overall aggregate revenues of 21 leading players increased only by 7.4% in FY17 as compared to 10.1% posted in the previous fiscal year. For the period between FY18 to FY20, it noted that the Indian pharma sector is expected to surge at 7-10% after mid to high double digit growth over the last five years. It also said that revenue growth from US during FY 2012-17 period for its sample set experienced a compounded annual growth rate (CAGR) of 19.3%. However, ICRA has stated that growth from the US has come down to 4% in FY17 from 14.4% in FY16, with the fourth quarter of FY17 registering negative growth despite consolidation and currency benefits.
The report further said that the continued regulatory interventions in domestic market are expected to put some pressure in near term though long-term growth prospects for domestic pharmaceutical market remain healthy given increasing penetration, accessibility and continued new launches. The report also noted that the domestic pharma industry has gained adequate scale and drug development capabilities over the last decade of growth which would keep them in good stead to capture new opportunities in the US market.