The growth of the entire sample must be supported by a growth of 6-8% in the domestic market
Revenue growth for ICRA’s sample of 16 Indian pharmaceutical companies is expected to moderate to 6-7% in fiscal 2023 after posting 8.5% annual revenue growth in the fourth quarter of the year. fiscal 2022 and by 7.7% in fiscal 2022 to Rs 1.87 lakh crore. Sample set revenue growth will be supported by annual growth of 6-8% in the domestic market, 11-13% in emerging markets and 8-10% in the European market. US business growth, however, is expected to be moderate at 1-3%, due to continued pricing pressures in the generics sector.
CIFAR expects sample operating profit margin (OPM) to moderate to 20.2% in fiscal year 2023 from 21.5% in fiscal year 2022, given continued pricing pressures in the US generics market and high raw material and other input costs. The magnitude of the impact on margins will vary from company to company depending on the product portfolio, geographic distribution of revenues and diversification of the supplier base.
OPM for the sample set contracted to 18.3% in Q4 Fiscal 2022, from 22.3% in Q4 Fiscal 2021 and 21% in Q3 Fiscal 2022. This is primarily due to rising raw material costs, other input costs such as freight, packaging, among others, pricing pressures in the US generics market (which is typically the most profitable) and inventory write-offs for COVID-19 products. for a few companies in the sample.
In the fourth quarter of fiscal 2022, year-over-year revenue growth for the Domestic Defined Sample was healthy at 13.5%, supported by new product launches, market share gains for some companies in the defined sample and a robust performance of both chronic/acute segments.
Emerging markets saw healthy year-over-year revenue growth of 14.3% in the fourth quarter of fiscal 2022, although revenue was slightly lower by 2% on a quarterly basis. Overall growth for FY2022 was healthy at 17% on an annual basis and was broad-based, distributed across all key regions. This development is explained by the launches of new products, a weak base, a strong demand and the depreciation of the INR against certain currencies.
CIFAR expects research and development (R&D) spending to stabilize at current levels of 7-7.5% of revenue for its sample as companies continue to focus on complex generics, opportunities first deposit and specialized products, which involve higher R&D. expenses. Steady investments in R&D to develop such products will support growth and improved margins in the medium term.
The outlook for India’s pharmaceutical industry remains stable, driven by expectations of continued healthy revenue and margin growth.