Nursing Back to Health

A strong product pipeline and receding US FDA threat could well turn the tide in favour of the beleaguered pharma players

Soumik Kar

The past two years haven’t exactly been a walk in the park for the pharma sector. Steep price erosion of generic drugs in the US and higher regulatory scrutiny by the US Food and Drug Administration (US FDA) kept revenue from the industry’s largest market under significant pressure. A stronger rupee and disruptions in the domestic market in the form of demonetisation and destocking owing to the GST further compounded the problem for Indian pharma.

It’s no surprise that the Nifty Pharma index came off 30% over the past two years (up until October 9, 2017). During this period, the sector’s one-year forward multiple contracted from 34x to 22x as companies found it difficult to sustain its growth rates on a larger base. Over the past five years, the aggregate earnings and revenue of companies that feature in the index have gone up by an average of 18% and 19%, respectively, every year.

Some analysts and fund managers feel that the earnings forecasts factor in most of the risks and challenges that lie ahead for the sector. According to estimates, earnings of pharma companies are likely to grow at an average of 10% over FY17-FY20

While numbers put the earnings picture in perspective, it may be difficult to gauge the full impact from regulatory scrutiny of the US FDA or from the price erosion of generic drugs. Giv


You don’t want to be left behind. Do you?

Our work is exclusively for discerning readers. To read our edgy stories and access our archives, you’ve to subscribe