Analysts See Two Key Segments Driving Growth For India-Focused Pharma Companies
Analysts expect drugmakers focusing on Indian markets to outperform in the near to medium term as pricing pressure escalates in the U.S., the biggest contributor to sales for most pharma companies.
Sales in the Indian pharmaceutical market jumped 37.2% over the year earlier in the quarter ended June 2021, according to Prabhudas Lilladher. That compares with a 6% year-on-year decline in the April-June 2020 period on account of logistics and supply chain issues as the country imposed a nationwide lockdown to curb the first wave of the Covid-19 pandemic.
While the growth in the first quarter of the ongoing fiscal came on a low base, analysts said the improvement was aided by key therapies.
Since April-June 2020, sales in the Indian pharma market have been improving sequentially, according to Kinjal Shah, vice president at ICRA Ltd. “This recovery was aided by a strong growth in chronic and sub-chronic segments even as demand for acute segment remained subdued due to lower infections as people stayed home and fewer hospital visits,” Shah told BloombergQuint.
In the three months to June 2021, drugmakers with a focus on acute therapies—for severe but short-duration illness—and Covid-19 drugs outpaced peers, according to Anand Rathi, as their domestic formulations business rebounded. “Ahead, we expect their India business to grow in mid-teens,” the brokerage said in a report.
The therapies for chronic ailments, or long-term illness such as diabetes, high blood pressure; and lipid-lowering drugs, combined with sub-chronic segment, contributes to 55% of the Indian pharma market, according to Shah. Acute treatments form the rest.
The industry-wide volumes, she said, should normalise soon and return to pre-Covid levels in FY22, assuming no or minimal impact of the third wave of the pandemic.
Growth By Therapy
Signs of that were visible in July with key therapies showing growth. The Indian pharma market expanded 13.7% year-on-year in July, according to a report by Prabhudas Lilladher. That compares with an increase of 0.2% a year earlier.
Prabhudas Lilladher said among the top therapies, anti-infective, cardiac, gastro intestinal, anti-diabetic and vitamins-minerals-nutrients led growth. They together accounted for around 58% of the total market share in July.
During the month, among the top five therapies, anti-infective, gastro intestinal and vitamins-minerals-nutrients recorded year-on-year growth of 30.2%, 19.6% and 10.5%, respectively.
Cardiac and anti-diabetic segments grew 4.4% and 3.3%, respectively, over the year earlier.
According to Abdulkader Puranwala, research analyst at Anand Rathi, growth in vitamins-minerals-nutrients may not sustain in the long run. The upheaval in demand may be temporary due to Covid-related immunity improvement sentiment among people, he said.
“Pain management and chronic therapy area could see substantial growth in the future,” Puranwala told BloombergQuint.
Shah agreed. The chronic segment, she said, is expected to continue leading the market. All key drugmakers earn a substantial chunk of business in this category.
Eris Lifesciences Ltd earns the highest 91% revenue from chronic and sub-chronic segments as of July, according to pharma market research organisation AIOCD.
Torrent Pharmaceuticals Ltd. follows with 75% contribution, while that for Lupin Ltd., JB Chemicals Ltd. and Sun Pharmaceutical Industries Ltd. stands at 74%, 71% and 68%, respectively.
Puranwala said competitive pressures are unlikely to severely impact the Indian market’s established players and they would continue to enjoy their market share.
Shah, however, sees regulatory pricing controls in the form of price caps and genericisation of products as potential threats.