Indian pharma sales to see pick up in second half of the year – analysts

The Indian pharmaceutical market is expected to show a recovery in the second half of the financial year, according to analysts tracking this sector.

Pharma sales grew by 10.1% in the 12 months ending August 2023 compared to the same period last year. This growth was driven by a combination of price increases, new product introductions, and volume growth.

Indian pharma sales reached Rs 2.07 trillion in August 2023, up from Rs 1.88 trillion in August 2022. While monthly growth slowed to 5.8% year-on-year in August 2023, this was largely due to declines in two key therapy areas – anti-infectives and respiratory. The volume growth in August was also negative at -4.5% year-on-year, marking the fourth straight month of decline.

However, analysts at JM Financial remain optimistic about prospects for the rest of 2023 and into 2024. They expect early double digit growth for the IPM in FY2024, driven by price growth of 5-7%, new products of 2-3%, and a recovery in volume growth to 2-4%.

The price growth will be boosted by the annual WPI-linked price increases that kicked in April 2023. These are offsetting the impact of National List of Essential Medicines (NLEM) price controls instituted in early 2022, they noted.

Chronic therapies outperform acute therapies:

Chronic therapy sales grew around 9% year-on-year in the 12 months ending August 2023, compared to just 4% growth for acute therapies which suffered from lower seasonal demand. Among the best performing chronic therapies were ophthalmology (+29%), oncology (+23%), urology (+15%) and cardiac (+9%).

The cardiac segment retained its position as the largest therapy area, growing by 11% and accounting for 12% of total IPM sales. Other leading therapies included anti-infectives (11% growth), gastro-intestinal (9%), and anti-diabetics (7%).

MNCs lead among companies:

Among leading companies, Abbott continued to outpace overall IPM growth, increasing sales by nearly 11% on a trailing 12-month basis. Sun Pharma maintained its position as the largest Indian player, with 7.7% market share. But smaller companies like Ajanta Pharma and Natco Pharma put up even stronger growth in the high double digits.

Among the mid-sized players, IPCA Labs, Torrent Pharma, and Sun Pharma were the outperformers, aided by their focus on chronic therapies. Larger companies like Dr Reddy’s, Cipla and Alkem Lab underperformed due to their reliance on acute portfolio sales. Glenmark was an exception, showing above market growth despite its acute focus.

Sales growth muted so far in 2023

While the MAT August 2023 numbers show healthy growth, the monthly sales trend in 2023 has been more muted. After growing by 8-10% for most of 2022, IPM growth slowed to the mid single digits in recent months. January 2023 saw growth slow to just 3.6%, before rebounding to 5-7% in February-April. But it again dipped to less than 6% in the last few months.

In the January-August 2023 period, IPM has grown by just 6.9% versus 11.4% growth in the same period last year. Key reasons have been negative or low volume growth, and the waning impact of price increases taken in early 2022. Volumes declined by -2.7% in the eight months of 2023, compared to 4% growth last year.

Among top companies, Sun Pharma and Abbott have been the most resilient with 8-9% growth. Large players like Cipla, Dr Reddy’s and Lupin have lagged with 3-5% growth. Glenmark and IPCA Labs have been among the better performers in 2023 as well.

Looking ahead, the trends are expected to improve with the benefit of WPI-linked price hikes from April 2023 and an anticipated recovery in volumes. But competitive intensity remains high, and margins will be pressured unless volumes pick up, warned analysts.