India's pharma firms see strong growth

 As India battles the Covid-19 pandemic, its pharmaceutical industry and health care services have seen a strong growth. Companies such as Ipca showed improved sales and profitability led by its export’s formulations and APIs (active pharmaceutical ingredient) business which jumped by 72 percent year-on-year (y-o-y). The demand for malaria drug Hydroxychloroquine Sulfate (HCQ) to treat Covid-19 had led the momentum in APIs for Ipca.

Dr Reddy’s, another significant player in the API space, which partners with global pharma companies across the United States, Europe, Latin America, Japan and China, saw an 88 percent jump in its pharmaceutical services and API business, totalling ₹855.3 crore, in the three months to June.

In the June-ended quarter, strong growth was also seen through domestic sales of drugs for chronic therapies—particularly cardiac, anti-diabetes and immunity boosters (see table)—in the June-ended quarter. A similar trend continued in July, where cardiac therapy, anti-malaria, analgesics and respiratory-related drugs saw strong sales.

A visible element of the earnings was also a rise in margins, as pharmaceutical companies were able to lower their operational expenses in the past three months. This was across segments where companies managed to cut their travel expenses, marketing and advertising costs and on-the-ground expenditure, says Isha Chaudhary, director at Crisil. All of these boosted margins and profits earnings.

Global innovators are trying to gradually shift their focus from China to markets like India, which has led to an increase in the API business. And analysts are confident that the outlook for pharma companies’ earnings will continue to be bright because of this.

Currently, about 65 percent of the raw material for Indian drug makers is being sourced from China, often used for tuberculosis and vitamin medicines. But there is a conscious move by India to reduce its dependence on imports of APIs from China. This could be done by looking for alternatives to China or increasing the domestic production. The ministry of pharmaceuticals in June released the guidelines for a production-linked incentive (PLI) scheme to kick-start the domestic manufacturing of key APIs and key starting materials (KSM) in India. This gives details of the API or KSM to be manufactured, the minimum production level, investment to be made, applicants to be selected per category and the rate of incentive.

The focus in the near-term will, however, shift towards the research Indian manufacturers have been carrying out for a Covid-19 vaccine. At least five Indian manufacturers are in the race, led by the Serum Institute of India for the Oxford University vaccine, followed by Bharat Biotech, Zydus Cadila, Gennova Biopharmaceuticals and Biological E, which are in various stages of research or boosting manufacturing capacity.