Indian Pharma Market Faces Q3FY25 Volume Decline Amid Pricing Gains

The Indian pharmaceutical market sees negative volume growth in Q3FY25 but benefits from strong pricing and new product launches. Management suggests stabilization, while the US generics market faces temporary moderated price erosion. Companies focus on capital allocation and exploring new avenues amidst valuation challenges.

The Indian pharmaceutical market (IPM) has experienced negative volume growth in the third quarter of fiscal year 2025 after two successive quarters of modest gains, according to a report by Goldman Sachs. Despite this downturn, the market's performance has been buoyed by a robust 5.3% year-on-year rise in pricing and a 2.6% growth stemming from new product launches following recent patent expirations.

Leading company executives indicate that volume growth is somewhat better than secondary market data suggests, although still below historical norms. Goldman Sachs predicts that IPM's volume growth will stabilize at low single digits in the foreseeable future. The firm also forecasts a moderation in pricing benefits starting next year, with the Wholesale Price Index for 2024 expected to fall below 2%.

In the US generics sector, the report highlights that price erosion has slowed since March 2023 but warns that this trend is temporary rather than permanent. "We expect price erosion to normalize and stabilize at mid-to-high single digits over the medium term," the report states. Indian pharmaceutical companies are anticipated to maintain strong gross margins, aided by favorable US pricing, reduced input costs, and the depreciation of currency.

The report further mentions that the ongoing advantageous pricing environment in the US, coupled with softened input costs and currency devaluation, is expected to sustain strong gross margins for Indian pharma. However, there are warnings of potential input cost increases, particularly due to logistical challenges in the Middle East. Rising research and development expenses and higher Active Pharmaceutical Ingredient (API) prices may offset some gains, yet margins for FY25 are projected to remain robust.

Capital allocation has become a key area of focus for pharmaceutical companies with substantial cash reserves. High valuations in the domestic market are prompting a strategic shift towards share buybacks and international acquisitions. Investments in expanding capacity within the Contract Research, Development, and Manufacturing Organization (CRDMO) sector persist, despite delays in the implementation of the BioSecure Act. (ANI)

(With inputs from agencies.)