Indian pharma continues forward march

Growth in the Indian pharma sector is more than double of that in core sectors like metal, cement and realty and is likely to continue analyses Anil Khanna, an independent strategic consultant and investment banker, gives an outlook about the future growth story of India’s pharma industry

Pharmaceutical market continued its healthy double digit growth momentum. Empirically there has been link between the GDP growth of a country and the pharma market growth – normally they mirror each other. Growth in the pharma sector is more than double of that in core sectors like metal, cement, realty.

Consider the growth in the last month (March) and the previous 12 months. The Indian pharma market registered its highest monthly growth in the last 18 months, when it grew by 21.9 per cent and on MAT basis it grew by 16 per cent.This was infact better than the February growth, when pharma market grew by 18.5 per cent and for the previous 12 months, growth was 15.4 per cent. Thus the market continued its exceptionally good growth trajectory.

If the growth momentum continues like this, then the McKinsey projections for the likely size of the Indian pharma market will most probably come true. According to it, pharma growth CAGR will continue to be 15 per cent+, and due to this, by 2015, Indian pharma market will be around $20 billion in size, vis-à-vis around $12 billion now.

Good growth of the pharma market is on account of the strong growth in chronic segments. Companies which have strong presence in chronic segments, like cardio or diabetes, have shown higher growth than the overall sectoral growth. Some of these companies are Sun Pharma, Micro Labs, Glenmark, USV etc.

But with an extended and erratic winter, even acute segment has also shown a sterling performance. Companies which have done well in this segment are Cipla, GSK, Zydus, Alkem and Mankind.

Again historically, in the Indian pharma market, share of chronic therapies has been consistently increasing and that of acute is coming down. This clearly reflects the changing disease profile of the Indians. Lifestyle ailments like cardiac problems, or diabetes are sharply on the rise. And they entail lifelong treatment.

As seen during the past few months, Macleods has been consistently leading the chart in terms of clocking fastest growth. In March it maintained its scorching growth rate of 38.2 per cent, while in February, it grew by 40 per cent and outshone every other company in terms of growth rate

Dr Reddy’s Laboratories has been one of the laggards in terms of growth during previous 12 months. Reasons for low growth are — key brands like Omez and Nise are mature, and secondly, increased competition from MNCs. In fact Satish Reddy, Managing Director and Chief Operating Officer, Dr Reddy’s Laboratories also alluded to this fact. DRL revenues has also got impacted because the health ministry banned Nimusilide (ingredient for Nise) for children’s usage. This decision was later revoked by Madras High Court, but the negative publicity for the drug led to lower sales (consumption) by adults as well. Even doctors stopped prescribing Nimusilide-based products.

Ranbaxy saw lower growth in February, due to slowdown in anti-infective segment. Since, for Ranbaxy, contribution of acute therapies in its overall revenue is quite significant — around 80 per cent.

In terms of companies ranking, Sun Pharma has gained the third position from the beginning of 2012, replacing GSK, which has held onto this position for long, behind Abbott (consolidated entity) and Cipla. Other two companies which have also moved higher ranking are Mcleods and Glenmark based on the robust performance.

Therapies wise performance

In line with the consistent trend of previous years, growth in chronic therapies is much higher than the acute therapies.

Clearly, chronic therapies (on account of lifestyle related ailments), like cardiac, diabetes, dermatology and VMS are high growth segments and hence driving the overall healthy growth of the Indian pharma market.

Though acute segments like anti-infectives, respiratory, grew at a higher rate in February, due to extended winter, but for the previous 12 months, their growth is subdued.

Future prognosis

Pharma industry in India will continue to maintain its healthy growth momentum, primarily on account of two factors:

i) Consistent growth in incidence of lifestyle chronic ailments
ii) Large amount of drugs going off-patent, which will open up huge generic opportunity, leading to newer brands being launched in domestic market

With close to $160 billion worth drugs going off-patent between 2012 and 2015 worldwide, it’s quite apparent that the generic versions of these drugs will be launched by Indian companies sooner than later, thus enabling the growth momentum to continue.

On the other, people of India (ironically!), will also contribute to the pharma industry growth with their lifestyle and hence becoming ‘willing’ sufferers of chronic ailments. There would be a rapid rise of number of people suffering from various chronic diseases — for e.g., number of people suffering from cardiac problem will increase by 72 per cent, from obesity by 142 per cent, suffering from diabetes by nearly 50 per cent.

Clearly, future of Indian pharma industry is bright and healthy!

The author can be contacted at anil.khanna@taipi.in