The revenue growth will be primarily supported by 8-10% expansion in the domestic formulation market and 6-8% growth in the US, while revenues from Europe and emerging markets are expected to rise by 3-5% and 8-10%.
ICRA expects the overall domestic formulation industry to grow 1-2% less than its sample set of companies.
ICRA expects stabilisation of raw material and freight costs to ensure operating profit margin to be steady at 20.5-21.5% in FY24. The continued focus on complex generics and specialty launches in the US market, is also expected to support industry margins in FY24, it added.
The rating agency expects the overall credit profile of Indian pharmaceutical companies to remain healthy, supported by their stable earnings profile, comfortable leverage and coverage metrics, and strong liquidity position.
“8-10% growth in the domestic market in FY24 will be supported by a WPI (wholesale price index)-linked price hike of 12.1% allowed for
products under the National List of Essential Medicines (NLEM), new product introductions and, annual price hikes for non NLEM products,” said Mythri Macherla, assistant vice president and sector head, ICRA.
“While new product launches and sizeable revenues from generic Lenalidomide (launched during the end of Q4FYFY22) are expected to continue in FY24, growth in the US market is expected to moderate to 6-8% in FY24, given the large base and continued mid-high single digit price erosion for base products.”
Patent expirations in the US are expected to be nearly $115-125 billion between 2023 and 2026. Of this, biosimilars will comprise around $35-40 billion. This is expected to boost the growth for Indian pharma companies over the next few years.
ICRA said the key focus areas for Indian companies in the US include biosimilars, inhalation, ophthalmology, dermatology, CNS, oncology, anti-diabetes, osteoarthritis and pulmonary.
With the pick-up in inspections by the United States Food & Drug Administration (USFDA), Indian pharmaceutical companies have received multiple official action indicated (OAI) observations, warning letters, and import alerts in the recent past.
“While some facilities of key pharmaceutical companies have received warning letters or placed under import alerts, there has been no material impact on their revenues from the US market until now,” Macherla said.
“However, delayed resolution of the same could impact the new launches and revenue growth momentum in the US market over the medium term,” she added.
The revenue growth for the European market is expected to remain subdued in FY24, owing to continued challenging macroeconomic conditions and intense competition in the tender business. While India and the US remain the key focus markets for Indian pharmaceutical companies, given the pricing pressures and regulatory risks in these markets, most Indian companies increased their focus on emerging markets to fuel their growth.
ICRA expects the R&D expenses for its sample set to stabilise at around 6.5-7% of its revenues as companies will optimise their spending, focusing more on complex molecules and specialty products against plain vanilla generics.
