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The Indian pharma, which has a strong footprint in the generics segment grew by nearly 5 per cent on a y-o-y basis to $49.78 billion in FY23, and is expected to reach $57 billion by FY25, according to the CareEdge report.
During FY18–FY23, the sector, including domestic and exports, registered a compound annual growth rate (CAGR) of 6–8 per cent with 8 per cent growth in exports and 6 per cent growth in the domestic market during the same period.
Compared to FY22, exports grew by just 3 per cent while the domestic market continued to grow at a healthy rate of 7 per cent in FY23.
Key developments
Pharma exports largely include formulation products, and with increasing focus on the synthesis segment, complex and specialty products, apart from the easing of pricing pressure in US generics, are likely to support growth in the medium term.
The US holds a prominent position as one of the largest export destinations for the Indian pharma industry, accounting for approximately 30–35 per cent of total formulation exports. In FY23, formulation exports to the US recorded a growth rate of 5.9 per cent, primarily supported by sales volume growth of around 16 per cent.
Furthermore, the pricing erosion in the US generic market has eased to low single digits, a significant improvement compared to the high double-digit erosion witnessed in the past two years.
Favourable landscape ahead
Looking ahead, approximately $188 billion worth of drugs worldwide are set to go off-patent during the period from CY2023 to CY2026, presenting a favourable landscape for the Indian pharma industry to capitalise on these patent expirations and expand its market share.
CareEdge estimates the industry to grow at 7 to 8 per cent in FY24–FY25, supported by 6 to 7 per cent growth in exports and 8 to 9 per cent growth in the domestic market during the same period.
While the operating margin of industry players are expected to improve by 100–150 bps over FY24–FY25 compared to FY23, factors such as raw material prices, freight rates, and the easing of pricing pressure in the US generics market along with a focus on complex and specialty products.
Furthermore, historically, the credit profile of Indian pharmaceuticals companies in general has remained stable due to their strong profitability and lower reliance on debt which is likely to continue.
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