The emerging price stability in the US generic market and the robust domestic growth are likely to support cash generation for most large pharma firms, leading to a margin improvement, according to a report.
The US, the world’s largest drug market, is also the largest export market for domestic pharma companies with nearly a half of their forex income coming in from there.
Having made considerable investment into R&D and also capacity, the domestic pharma companies will cut down on capex this fiscal, a report by India Ratings said on Wednesday. The agency has also maintained the stable outlook for the sector in FY21.
Demand-supply situation in the US generic drug market favours complex generics, said the report, which also expects most large domestic pharma firms to aggressively invest in new product platforms to strengthen their market-readiness.
Though this investment will constrain cash flows and hamper the deleveraging progress, new product launches and the overall price increase trend will ensure stable volume growth in the domestic market. With this forecast, we maintain our stable outlook for the sector in FY21, said the note.
In the domestic market, it sees the chronic therapies market maintaining faster-than-market growth than the acute therapies segment.
Another positive for the market is the de-risking product portfolios from potential price controls and enhancing the presence in the chronic segment to drive investments for domestic market-focused drug makers.
The report expects active pharma ingredients supply originating from China to remain stable in FY21 despite the disruptions caused by the coronavirus outbreak. Any threat from China has the potential to impact manufacturing of critical drugs in the country.
Domestic pharma companies have seen a significant spike in the USFDA scrutiny in 2019, which had issued 19 warnings to them in the year as against 11 in 2018.-Business Standard