Pharma majors to see muted growth in FY24: ICRA

Credit rating agency ICRA expects the revenues of the sample set of 25 Indian pharmaceutical companies (which account for about 60% of the overall Indian pharmaceutical industry) to grow by 7-9% in FY2024, post a YoY growth of 10% in FY2023.

The growth will be supported by 8-10% expansion in the domestic market and 6-8% growth in the US market, while revenues from the European market and Emerging Markets are expected to rise by 3-5% and 8-10%, respectively, the agency says.

“An 8-10% growth in the domestic market in FY2024 will be supported by a WPI-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. The growth in the US market is expected to moderate to 6-8% in FY2024, given the large base and continued mid-high single-digit price erosion for base products”, Mythri Macherla, Assistant Vice President & Sector Head, ICRA, says.

According to ICRA, the operating profit margin (OPM) for the sample set is expected to be steady at 20.5-21.5% in FY2024. While high raw material and freight prices were a drag on margins in H1 FY2023, these input costs have stabilised now. Coupled with a continued focus on complex generics/specialty launches in the US market, this is expected to support industry margins in FY2024.

The overall credit profile of Indian pharmaceutical companies is expected to remain healthy, supported by their stable earnings profile, comfortable leverage and coverage metrics, and strong liquidity position, ICRA states.

On the US market, ICRA says that the growth for Indian pharma companies over the next few years in the US will be driven by patent expirations in the US (that are expected to be nearly $ 115-125 billion between CY2023 and CY2026, which includes biosimilars around $ 35-40 billion).

Indian pharma companies have also made some acquisitions in recent times to strengthen their specialty molecule portfolio in this market. The key focus areas include biosimilars, inhalation, ophthalmology, dermatology, CNS, oncology, anti-diabetes, osteoarthritis, and pulmonary, the rating agency said.

The revenues in emerging markets are expected to be supported by new product launches, strong demand, and depreciation of the INR against certain currencies.