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Pharma's tough year concludes; hopes up for a better 2019

Leading Indian pharma company Dr Reddy's has still not been able to overcome the regulatory challenges. Its important Duvvada facility in Andhra has been under warning letter from the US drug regulator since 2015.

twitter-logo E Kumar Sharma   New Delhi     Last Updated: February 22, 2019  | 18:50 IST
Pharma's tough year concludes; hopes up for a better 2019

The calendar year, just concluding, has arguably been a tough year for most of the Indian pharmaceutical companies. Most of them, especially the leading players, saw a decline in the US business--be it on account of regulatory challenges, part of it linked to plant-specific issues or due to price erosion in the base portfolio.

Leading Indian pharma company Dr Reddy's has still not been able to overcome the regulatory challenges. Its important Duvvada facility in Andhra has been under warning letter from the US drug regulator since 2015.

The biggest Indian pharma company, Sun Pharma, while could get its important Halol plant cleared by the USFDA (US Food and Drug Administration), they were recently hit by allegations of slippages in corporate governance. On December 3rd, Sun Pharma founder Dilip Shanghvi tried his best on a conference call to pacify the investors that some of the issues were old, some actual but from a different regulatory era, when the company was itself very small. Nonetheless, its stock took a hit on the bourses.

Overall, the exact quantum of the hit that Indian players had to deal with in the US market, varies from company to company but analysts point to many companies reporting 20 to 30 per cent decline in their US business and a price erosion to the tune of 15 to 20 per cent.

In this trend and in the overall scene there are perhaps hopes for a better 2019. Those within the industry apart from some of the leading analysts, feel that things will start improving in 2019. This is linked to an expectation that many of the issues faced by Indian companies in their major export market US, will stabilise.

Also read: Indian pharma's window of opportunity

The same also holds true for the Indian market, since in year 2018 many companies were finally able to put behind the setbacks they had encountered on account of the Goods and Services Tax (GST) and demonetisation.

Hurt by de-growth at one point post-GST and later a single digit growth, the domestic market growth is expected to stabilise at between 10 to 12 per cent. However, Indian pharma is also coping with cost increases in active pharmaceutical ingredients (APIs) from China, which is tightening its regulatory norms.

The year also saw some significant acquisitions. For instance, IHH won the bidding war for Fortis Healthcare and Hyderabad-based Aurobindo Pharma acquired the dermatology and oral solids businesses from Sandoz Inc., USA.

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