The Indian pharmaceutical market (IPM) is expected to report 11-12 per cent year on year growth in the FY 2023 mainly pushed by price rise and further recovery in non-Covid drugs volumes. Building on to the recovery seen in June, the IPM reported 8.1 per cent YoY growth in July. Except Pfizer and Sanofi, all major companies reported growth in July 2022.
As per a recent report by Kotak Institutional Equities though there could be regulatory headwinds due to challenges in the US and also there may be margin pressures sustained recovery in the domestic market in India will push the growth of the IPM.
As per the Kotak report in July, pharma players such as Ipca, Torrent, Alkem and Sun Pharma, which posted 13-18 per cent YoY growth in July did well. The report points out that drug formulations in the acute and chronic segments grew at 7 per cent YoY and 9 per cent YoY, respectively in July 2022. The report highlighted that after a challenging CY2021, growth in chronic therapies continues to recover. Interestingly the Kotak report also points out that domestic pharma companies grew 9 per cent YoY compared to 4 per cent YoY growth for MNC companies in July. IPM growth was bolstered by impressive yoy performance across most therapies, led by pain, respiratory and gastro-intestinal drugs in July.
The report further highlights that pharma companies such as Alkem, Mankind were top gainers while Zydus, Cipla top losers. The IPM growth of 7.7 per cent YoY in MAT (Moving Annual Total) July2022 was led by 480 bps YoY contribution from higher pricing, 260 bps YoY from new launches and 30 bps YoY from increased volumes. On a three year basis, IPM reported a decent 9.7 per cent CAGR in July .
In the backdrop of minimal contribution from Covid therapeutic drugs in July, the MAT growth trends for IPM remain encouraging. The Kotak report said that among the top 25 companies, Alkem, Mankind, Aristo and Ipca have gained maximum share over the past six months. On the other hand, Zydus, Cipla, Pfizer and Lupin have lost maximum share.
Going ahead, it is expected that amid anticipated regulatory actions, the IPM growth will revert to normalcy in 2H FY23. Over the past three years, pricing has contributed 400-500 bps to overall IPM growth and it is expected that it will contribute much more higher in the FY2023 amid prevailing input cost pressures. Experts at Kotak also expect that there would be an increase in the volumes in the non- Covid drugs and contribution from volume growth and new launches will be 300 bps yoy each in FY 2023. There could also be any anticipated regulatory action via trade margin caps (negative for Cipla and Alkem) and or price caps on certain high-value drugs. The report also points out that it remains to be seen if companies derive any tangible long-term benefits from the digital initiatives over the past two years. The report points out that going ahead amid the challenges in the US and supply chain disruptions, a sustained domestic recovery will become an ever important aspect for the IPM.