Pharma exports growth heading for a sharp decline: CRISIL Research

For growth to sustain beyond 2020, domestic companies will have to step up investments in new molecules and draw up a roadmap to deal with lower generics growth

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CRISIL Research foresees exports growth in formulations (in US dollar terms) decling sharply to 10-125 annually over the next 5 years, compared with a growth of 19% seen in the last decade.

Exports of generics have been the growth engine of the industry for a long hile now, but the script is changing because the value of drugs going off patent is declining even as pricing pressures are increasing. for example, annual sales growth of generic drus in US is seen slowing to 8-9% over the next five years, and decelerate even more after that. Therefore, for growth to sustain beyond 2020, domestic companies will have to step up investments in new molecules and draw up a roadmap to deal with lower generics growth.

In the past decade and more, what came in handy was process chemistry skills--which helped companies clone drugs going off-patent by tweaking their molecules--and low-cost manufacturing. But competition has been intensfying, particularly for the large players, because of the huge number of abbreviated new drug applications (ANDAs) being filed with the USFDA, including by mid-sized domestic ones looking to step up presence in the biggest market.

Furthermore, consolidation of distribution channels in the US could reduce the pricing power of domestic drug makers.

Says Ajay Srinivasan, Director CRISIL Research,"Sharper focus on innovation and R&D has become an imperative. Our analysis of new drug applications approved by USFDA reveals that Indian companies got approvals for just 26 products between Jan 2006 and June 2015- a fraction of the 840 garnered by global pharma companies. Their global generic competitors such as Teva and Mylan has 48 and 33 NDAs to their credit as of Feb 2016."

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