Business news, strategy, finance and company insights


Revenue growth for major Indian pharmaceutical companies such as Sun Pharma, Lupin, Aurobindo and Dr Reddy’s Lab in the US – the most lucrative market for Indian companies – will see moderate growth of 1-3% over the next fiscal year 2023, according to an analysis.

Revenue growth for about 16 major Indian pharma companies is expected to moderate to 6-7% in fiscal 2023, according to industry analysis from ICRA. The growth of these companies will be supported by growth of 6-8% in the domestic market, 11-13% in emerging markets and 8-10% in European markets. US business growth, however, is expected to be moderate at 1-3%, due to continued pricing pressures in the generics sector. Headwinds from pricing pressures in the U.S. generics market and rising raw material costs will also cause profit margins to contract in fiscal 2023. This is after posting revenue growth of 8.5% year-over-year in the fourth quarter of fiscal 2022 and 7.7% in fiscal 2022, the rating agency notes.

Year-over-year U.S. market growth was only marginal 1.2% of revenue in the fourth quarter of fiscal 2022, while revenue contracted 1.1% on a quarterly. This is primarily due to continued price erosion between high and low teenage numbers in the US generics market. Citing continued pricing pressures and intense competitive intensity in the U.S. generics industry, some big pharma companies reported significant impairments in the fourth quarter of fiscal 2022 and also announced the discontinuation of some products and segments due to reduced earnings potential, notes CIFAR.

CIFAR expects sample set operating margins (OPM) to moderate to 20.2% in fiscal year 2023 from 21.5% in fiscal year 2022 , given continued pricing pressures in the US generics market and high raw material and other input costs. The magnitude of the impact on margins will vary from company to company depending on the product portfolio, geographic distribution of revenues and diversification of the supplier base. Operating profit margin (OPM) for the sample set contracted to 18.3% in Q4 2022, compared to 22.3% in Q4 2021 and 21% in Q3 2022. This was mainly explained by rising raw material costs, other input costs such as freight, packaging, among others, pricing pressures in the U.S. generics market (which is typically the most profitable market) and inventory write-offs for Covid-19 products. for some companies.

Any further impact of ongoing geopolitical issues on input prices and the supply chain remains to be monitored. Since companies export their products and also import raw materials, currency fluctuations and their impact on margins will also affect performance, says ICRA.

“Going forward, the WPI-related price increase of 10.8% for National Essential Medicines List (NLEM) products effective April 1, 2022 is expected to support domestic market growth in the fiscal year. 2023, although a high base effect is likely to impact volumes in the first half of fiscal 2023,” said Mythri Macherla, Assistant Vice President and Business Leader, ICRA.

As Indian pharma continues to focus on new product launches, complex generics, including first-to-file opportunities to improve margins in the US business, mid- to high-single digit price erosion will exert short-term pressure.

Emerging markets saw healthy year-over-year revenue growth of 14.3% in the fourth quarter of fiscal 2022, although revenue was slightly lower by 2% on a quarterly basis. Overall growth for FY2022 was healthy at 17% on an annual basis and was broad-based, distributed across all key regions. This is due to new product launches, low base, high demand and the depreciation of INR against some currencies.

CIFAR expects research and development (R&D) spending to stabilize at current levels of 7-7.5% of revenue for these companies, which continue to focus on complex generics, first-in-class opportunities depositor and specialty products, which lead to higher R&D expenditure. Steady investments in R&D to develop such products will support growth and improved margins in the medium term, according to ICRA.


Comments are closed.