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15
November 2016
Indian pharmaceutical industry will face
pricing pressure in the US and domestic markets for some more time to come and
the players have to focus their research and development (R&D) on
speciality/complex drugs, said global credit rating agency Fitch Ratings. The Total Investment & Insurance
Solutions
Giving a stable outlook for the Indian
pharmaceutical industry, Fitch said: "We feel that speciality/complex
drugs represent a key growth area, given the increasing shift towards
speciality and more targeted therapies in the US."
"We acknowledge the above-average
level of associated risks, but feel that this shift in focus will be important
for the Indian companies to move to the next level and sustain growth
momentum," Fitch added. The Total
Investment & Insurance Solutions
According to Fitch, rising competition
in the pure generics segment has led many of the top Indian pharma companies to
focus increasingly on speciality and complex generics through higher R&D
spending. The Total Investment &
Insurance Solutions
Expecting the domestic market to grow in
the low teens over the medium term, Fitch said the government's focus on
regulating prices over the past few years has led to moderate growth.
"The pricing environment is likely
to remain tough, though we expect government to take a more collaborative
policy approach - to encourage investment," Fitch added.
As regards the price erosion in the US
generics market, Fitch said the profitability would be affected due to
intensity of the competition. The Total
Investment & Insurance Solutions
"The US generics market, a key
growth driver for Indian pharma exports, has seen high competition with the
entry of new players and significant channel consolidation over the past few
years," Fitch added.
The rating agency said there will be
moderate price erosion in the existing generic portfolios of Indian drug
companies. The Total Investment &
Insurance Solutions
Fitch expects the pricing pressure to
continue with the ongoing policy focus to limit healthcare costs through faster
approval of generic alternatives under Generic Drug User Fee Amendments (GDUFA
I & II). The Total Investment &
Insurance Solutions
On the acquisitions of Indian pharma
companies, Fitch said many companies have actively pursued acquisitions in line
with the trend in the global pharma sector, in order to augment their existing
drug portfolios and solidify their presence in both existing and new
geographies.
The acquisitions will help to
consolidate their positioning, with deleveraging likely only over the medium
term as the acquired businesses contribute incremental earnings, Fitch said.
According to Fitch, failure on the part
of Indian companies to resolve the USFDA issues in time at key manufacturing
facilities could hamper growth and hurt profitability.
Increased appetite for debt funded
acquisitions could affect credit metrics.
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