Domestic drug firms to witness 8-10 pc revenue growth in FY25: Report

Commenting on key risks being faced by the industry, Icra Assistant Vice President and Sector Head Mythri Macherla said the number of warning letters and import alerts issued by the USFDA to Indian drug firms have increased in the past year.This has led to delays in product launches, translating into failure to supply penalties and entailing significant cost burden towards remedial measures like hiring consultants and consuming additional management bandwidth, thus impacting the profit margins, she added.

Revenue growth of leading 25 domestic drug firms is expected to moderate to 8-10 per cent in the next fiscal year, rating agency Icra said on Thursday.

The revenue of the companies, which account for 60 per cent of the overall Indian pharmaceutical industry, witnessed an increase of 13-14 per cent in the current fiscal year.

Following the high base of 2023-24, the revenue growth momentum from the US and Europe markets is expected to moderate to 8-10 per cent and 7-9 per cent, respectively, Icra said. The markets are expected to witness a year-on-year expansion of 18-20 per cent and 16-18 per cent, respectively, in the current fiscal year, it added.

The domestic market, on the other hand, is expected to see a stable growth of 6-8 per cent, while the emerging markets may log an 8-10 per cent rise in FY25, against 16-18 per cent in FY24, the rating agency said.

The revenue growth of the sample set companies in the US market in FY24 has been supported by increased new product launches, product shortages in select therapeutic segments, and healthy performance of complex generics (first to file), it stated.

''However, as the base effect plays out, growth is expected to taper in FY25. While low-single digit pricing pressure in the US market is likely to sustain, Indian pharmaceutical companies remain focused on enhancing their revenue contribution from the complex generics in the US market,'' it stated. Commenting on key risks being faced by the industry, Icra Assistant Vice President and Sector Head Mythri Macherla said the number of warning letters and import alerts issued by the USFDA to Indian drug firms have increased in the past year.

This has led to delays in product launches, translating into failure to supply penalties and entailing significant cost burden towards remedial measures like hiring consultants and consuming additional management bandwidth, thus impacting the profit margins, she added. ''Further, while the ongoing Red Sea crisis has not had an impact on the Indian pharmaceutical companies as of now, any adverse impact in the form of supply chain disruptions or increase in logistics costs will be a key monitorable,'' Macherla stated. Besides, since price growth has been a key revenue driver, any developments favouring genericisation and inclusion of more products under the NLEM remain key risks for the industry players, she added.

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