Failure to comply with the stringent quality requirements in developed markets is a key risk
Growth for Indian pharma companies is likely to get a boost as countries are increasingly focusing on affordable healthcare. However, failure to comply with the stringent quality requirements in developed markets is a key risk, reveals a report by Standard & Poor’s, ‘Indian Pharmaceutical Companies Have a Global Opportunity, If They Conquer Compliance Issues.’
“Expansion into developed markets, especially the US, is positive for the credit profiles of Indian pharma companies. The market’s size and the absence of price controls are likely to support the revenue growth and profitability,” said Vishal Kulkarni, Credit Analyst, Standard & Poor’s.
The growth prospects are particularly high for Indian companies in the speciality and complex generic drugs segment in the US. Most of these companies have a limited presence in this segment, but we expect them to gradually move up the value chain. Compliance with regulations is a key requirement for Indian pharma companies to realise their growth potential, the report notes. Failure on this front would seriously hurt creditworthiness. It could lead to disruptions in production, import bans, remediation costs and above all reputational and litigation risks. The largest 10 Indian pharma companies are much smaller in terms of revenue than their global generics peers.
Indian companies’ R&D focus will continue to help them build a sustainable product pipeline. Standard & Poor’s expects the role of Indian companies in M&As in the global pharma market to be moderate to marginal. Their acquisitions are likely to be measured against the backdrop of elevated valuations, longer integration periods, problems with operational synergies, and the managerial bandwidth required to reap benefits from such acquisitions.
EP News Bureau – Mumbai