Pharma firms to boost export to come out unscathed from Covid-19: Rating agency CRISIL
Mumbai: Higher exports will help the Indian pharmaceutical sector come out "unscathed" from the coronavirus pandemic and deliver a marginally lower 9 percent revenue growth, ratings agency CRISIL said on Thursday. Exports and domestic formulations account for an almost equal share in the Rs 2.8-lakh crore domestic pharma sector, CRISIL said.
It added, "In 2020-21, growth in exports at 11-12 percent, as against 10 percent last fiscal, will outpace growth in domestic formulations expected at 5-6 percent from 10 percent in 2019-20."
This will lead to a 8-9 percent overall growth, which is down just 1.50 percentage points from the year-ago period, it added.
Operating profitability for the 350 pharmaceutical companies it rates, which represent 70 percent of the sector's revenue, would soften by 1.50 percentage points but remain healthy at 19 percent despite the higher input prices, it said.
Currently, the export pie is divided into regulated markets such as the US and Europe (45 percent), rest of world (ROW) markets (35 percent), and bulk drugs (20 percent).
CRISIL said exports growth is expected to remain strong at 10 percent in each of the segments. The growth in the regulated markets will be supported by a steady increase in new product launches from compliant plants, lower pricing pressure on existing generics, and a visible easing in scrutiny by the United States Food and Drug Administration in recent months, it said.
"India accounted for almost half the abbreviated new drug application, or ANDA, approvals provided by the USFDA since fiscal 2019," CRISIL Research Director Isha Chaudhary said.
It added that this strong pipeline, coupled with lower import alerts and warning letters in recent months, should ensure a steady pace of new launches, which will help sustain export momentum to regulated markets.
Exports to ROW markets are also expected to rebound to 10 percent in 2020-21 compared with 7 percent in 2019-20, driven by opportunities in under-penetrated generic markets such as Africa and Latin America, it said. Bulk drug exports will benefit from moves worldwide to reduce dependence on China, CRISIL added.
Higher exports should offset some of the reduction in domestic formulation sales because of the pandemic-led disruptions, especially in the acute therapies segment, which accounts for 60 percent of domestic formulation sales, its Associate Director Tanvi Shah said.
"Lower footfalls in hospitals and fewer field visits by medical representatives have affected prescription-based sales in acute therapies, as evident from the steep moderation in the first-quarter sales of anti-infectives and gastro-intestinals," she said.
However, steady demand for chronic therapies pertaining to lifestyle diseases should help keep domestic formulation sales growth at 5-6 percent, she added.
Despite the slight moderation in business performance, credit profiles of domestic companies would remain largely steady, benefiting from healthy balance sheets and liquidity, the note said adding that equity infusions from private equity funds have helped.
The pharma companies will be prudent in capital and research and development spending, as well as efficient working capital management while transitioning through the current times, it said.
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