Indian Pharma firms likely to see muted revenue growth from US Generics Market in FY23: Ratings agency Icra

The US has always been a key market for Indian pharmaceutical companies but over the past few years, the revenues from there have grown at a relatively modest pace due to consistent pricing pressure, lack of major generic product launches and increased regulatory scrutiny, Icra said in a statement.

In FY22, the ratings agency said, the revenues from the US pharmaceutical market for its sample of eight leading Indian pharmaceutical companies declined marginally by 0.2 per cent owing to high single-digit to low-teens price erosion.

On the outlook, Icra vice president and co-group head Kinjal Shah said, "Icra expects mid to high single-digit price erosion to continue to exert pressure over the near term, resulting in muted revenue growth for the Indian pharmaceutical companies from the US generics market in FY23."

Further, she said the impact of elevated raw material prices and packaging costs in addition to relatively higher freight rates and impact of supply chain disruptions on their margins will remain key monitorables.

Icra said the COVID-19 pandemic had impacted the pace of approvals of Abbreviated New Drug Applications (ANDA) and revenue growth for companies in FY21, while pricing pressures impacted growth in FY22.

With the USFDA unable to conduct physical inspections due to the pandemic-induced restrictions, both the pace of ANDA approvals and issuance of warning letters to Indian pharmaceutical companies were lower over the past two years.

"However, the same is likely to pick up over the medium term as inspections gain traction," it added.

Shah said off late, Indian pharmaceutical firms have reported sizeable provisioning and settlement pay-outs against some of the ongoing litigations, which have impacted their earnings and balance sheets to an extent.

"Indian pharmaceutical companies remain exposed to regulatory risks arising out of regular scrutiny by regulatory agencies including the US Food and Drug Administration (USFDA), the US Department of Justice and the Securities and Exchange Commission (SEC)," she added.

Most major companies have various ongoing litigations related to patent claims, antitrust litigations and remain vulnerable to any further adverse developments on the same, Shah said.