Rising prices, growth in sales of non-Covid drugs to boost the Indian pharmaceutical market

The Indian Pharmaceutical Market (IPM) is expected to register 11-12% year-on-year growth in fiscal 2023, driven mainly by higher prices and a further recovery in unrelated drug volumes at Covid. Building on the recovery seen in June, the IPI recorded an 8.1% year-on-year growth in July. With the exception of Pfizer and Sanofi, all major companies recorded growth in July 2022.

According to a recent report from Kotak Institutional Equities, there could be regulatory headwinds due to challenges in the United States and there could also be pressure on margins. A sustained recovery in the domestic market in India will drive MPI growth.

According to the July Kotak report, pharma players such as Ipca, Torrent, Alkem and Sun Pharma, which posted 13-18% year-on-year growth in July, performed well. The report highlights that drug formulations in the acute and chronic segments grew by 7% and 9% YoY, respectively, in July 2022. The report highlighted that after a difficult CY2021, the growth of chronic therapies continues to straighten up. Interestingly, the Kotak report also highlights that domestic pharmaceutical companies grew 9% yoy, compared to 4% yoy for multinational companies in July. IPM growth was supported by impressive year-over-year performance across most therapies, led by painkillers, respiratory and gastrointestinal drugs in July.

The report further highlights that pharmaceutical companies such as Alkem and Mankind were the main winners while Zydus and Cipla were the main losers. IPM growth of 7.7% YoY in July 2022 MAT (Total Rolling Year) was driven by a contribution of 480 bps YoY from higher prices, 260 bps YoY thanks to new launches and 30 bps year-over-year thanks to increased volumes. On a three-year basis, IPM reported a decent CAGR of 9.7% in July.

Against the backdrop of a minimal contribution from Covid therapeutic drugs in July, MAT growth trends for IPM remain encouraging. The Kotak report indicates that among the top 25 companies, Alkem, Mankind, Aristo and Ipca gained maximum share over the past six months. On the other hand, Zydus, Cipla, Pfizer and Lupin lost a maximum share.

Going forward, it is expected that amid planned regulatory measures, IPM growth will return to normal in 2H FY23. Over the past three years, pricing has contributed 400 to 500 basis points to overall MPI growth and is expected to contribute significantly more in fiscal 2023 against the backdrop of current pressures on input costs. Kotak experts also expect there to be an increase in non-Covid drug volumes and the contribution from volume growth and new launches to be 300 basis points year-on-year each over the course of the year. fiscal year 2023. There could also be any anticipated regulatory action via trading margin caps. (negative for Cipla and Alkem) and/or price caps for certain high value-added drugs. The report also highlights that it remains to be seen whether companies are seeing tangible long-term benefits from digital initiatives over the past two years. The report highlights that amid challenges in the United States and supply chain disruptions, a sustained domestic recovery will become an ever more important aspect for IPM.

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