Strong revenue growth in the active pharmaceutical ingredients (API) business segment and lower operational expenses that perked up the April-June performance of the Indian pharmaceutical companies are unlikely to be the same for them amid global unlocking, says India Ratings and Research (Ind-Ra).

“With global unlocking, operational expenses and API prices would normalise. Ind-Ra does not expect Indian pharmaceutical companies to sustain the healthy operating performance reported during Q1,” it said on Monday.

In an analysis based on 14 large pharmaceutical companies, Ind-Ra said the API business revenue grew 31% year-on-year and 18% quarter-on-quarter in Q1. This came as demand from global and Indian formulation players remained robust, aided by higher pricing opportunities.

Growth in API business was primarily attributable to the export business. Indian API players benefited due to a thrust on supply chain continuity from customers and better inventory management in view of supply disruptions from China and the run up in the prices of API. Channel stocking also contributed to the growth.

Procurement strategies, however, are now gradually being recalibrated by customers as they look at diversifying sources away from China or seeking alternative sources for the same API.“Price sensitivity among formulation players seems to be lowering, as ensuring availability has taken a precedence over price in view of the threat of supply chain disruptions. While these factors will play out over the medium to long term, Ind-Ra expects the growth in the API business to taper off in the near term, as companies normalise their buying patterns,” a release said.

There may also be price correction, as the sudden demand had led to prices of some APIs’ rising significantly.

On the expenditure front, the release said restricted movement of medical representatives and other cost savings due to the lockdown led to operating expenses declining 8% YoY and 19% QoQ. While companies maintain that a significant proportion of the savings is sustainable, with use of digital tools to reach out to internal and external customers, Ind-Ra said amid competitive pressures companies will eventually revert to in-person engagement with doctors.

The rating agency said the key formulation business that got hit, during the lockdown, is likely to do better with the unlock phase gaining momentum.

You have reached your limit for free articles this month.

To get full access, please subscribe.

Already have an account ? Sign in

Show Less Plan

Subscription Benefits Include

Today’s Paper

Find mobile-friendly version of articles from the day’s newspaper in one easy-to-read list.

Faster pages

Move smoothly between articles as our pages load instantly.

Unlimited Access

Enjoy reading as many articles as you wish without any limitations.

Dashboard

A one-stop-shop for seeing the latest updates, and managing your preferences.

Personalised recommendations

A select list of articles that match your interests and tastes.

Briefing

We brief you on the latest and most important developments, three times a day.

*Our Digital Subscription plans do not currently include the e-paper ,crossword, iPhone, iPad mobile applications and print. Our plans enhance your reading experience.



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here