Pharma to Grow Better in FY25

Pharmaceutical sector companies will continue to benefit from growth in the domestic as well as export markets. India Ratings expects the Indian pharmaceuticals market to grow 8-9 per cent in FY25 against 6 -7 per cent in FY24. Of the 8 -9 per cent growth, 4 -5 per cent will be on account of increase in drug prices, incremental sales from added field force last year, higher growth in chronic therapies and anticipation of favourable seasonality.

The agency expects the active pharmaceuticals ingredients (API) business of Ind-Ra selected companies to report high single-digit growth in FY25 due to a demand uptick. The agency expects a significant increase in USFDA inspections in FY25. The agency expects sales to the US to be stable or there will be mid-single-digit revenue growth in FY25 on account of lack of revenue from one-off products. Hence, the overall proportion of sales from the US is likely to remain stable.

Large players are adequately capitalised to make big investments in FY25 to adjust for the ongoing fundamental shift in market opportunities. Large pharma companies generally have large cash balances, which typically account for 14-15 per cent of their revenues. Furthermore, most companies have sufficient headroom under debt covenants and diversified funding sources.
The agency expects the cash flow-sticky chronic segment to continue to grow at a higher rate than the acute segment.

Ind Ra maintains healthy EBITDA margins led by a moderation in the price erosion in the US generics business, softening of input costs, and high-value product launches in the US generic market. There has recently been a wave of M&A activity in the domestic formulations space, which is likely to continue. end