Stability Of Input Cost To Support Performance Of Pharmaceutical Firms In FY24: Icra
Stability of input costs and specialty product launches to support the performance of Indian pharmaceutical companies in FY2024, said rating agency Icra in a report.
The rating agency expects the revenues of its sample set of 16 Indian pharmaceutical companies to grow by 6-8 per cent in FY2024, primarily driven by steady performance across key markets (the US and India) and some recovery in growth in the European market.
The operating profit margin (OPM) is expected to be steady at 21-22 per cent in FY2024, supported by the stabilisation of raw material prices and increased focus on complex generics/specialty molecule launches in the US market.
Deepak Jotwani, Assistant Vice President and Sector Head, Icra said, “New specialty/complex generic molecule launches in the US market by ICRA’s sample set of the leading pharmaceutical companies will help them offset continued pricing pressure and also support revenue growth of 6-7 per cent in FY2024."
As for the domestic market, it expects the revenue growth for its sample set to increase to 6-8 per cent in FY2024, post an estimated growth of 3-4 per cent in FY2023, given the large base of FY2022.
"Structural factors such as an ageing population and continued rise in lifestyle/chronic diseases, in addition to the WPI-linked price hike for products under the NLEM, new product introductions, and annual price hikes for non-NLEM products are expected to support revenue growth for the industry,” added Jotwani.
While India and the US remain the key focus markets for Indian pharmaceutical companies, most companies have also enhanced their presence in emerging markets to fuel their growth, Icra stated.
It added that growth in the emerging markets has been driven by new product launches, strong demand, and the depreciation of the Indian rupee against certain currencies.
Mergers and acquisitions (M&A) in the pharmaceutical industry have picked up considerably over the past year.
Commenting on the same, Jotwani, said, “Leading Indian pharmaceutical companies have made sizeable acquisitions in the recent past to enhance market share in select geographies/therapeutic areas, primarily in the US and the Indian markets, which are expected to provide diversification benefits and support revenue growth for these players going forward."
However, the sizable value of most of these M&A deals also indicates the elevated risk appetite of these pharmaceutical companies, he explained.
As for FY2023, Icra now expects the revenues for its sample set to grow by 6-8 per cent (against the earlier expectation of 4-6 per cent), closer to 7.7 per cent growth in FY2022.
The same will be supported by 10-12 per cent growth in the US market (drivenb y robust performance of new product launches including first-to-file molecule, Lenalidomide) in addition to the depreciation of the Indian rupee by 8 per cent against the USD during fiscal, while the revenues from the European market are expected to contract marginally, given the ongoing macroeconomic challenges and the large base of the previous fiscal, which was supported by Covid-19 vaccine sales.
The OPM is projected to contract by 50-100 bps to 21-22 per cent in FY2023 due to relatively high input costs in H1 FY2023, it mentioned.
