Weak pharma growth in Q2 sparks concerns

livemint.com:

Nifty Pharma index has risen nearly 30%. Indian pharma market (IPM)’s growth was in mid-single digits in August. It grew 5.8% from a year earlier, as against 6.4% in July, according to analysts’ data.

One contributing factor to this moderation is the high base of August 2022, when IPM growth was at 10.1%. Besides, analysts said this slowdown is also due to sluggish sales in the acute segment. According to Kotak Institutional Equities analysts, owing to a relatively slower acute season, the Indian pharma market growth remained subdued in mid-single digits for the third consecutive month.

However, moderation in growth for the IPM has raised some concerns about pharma companies’ earnings prospects despite expectations of growth picking up in the second half of the financial year, they added. “While we continue to bake in an 8-15% organic domestic sales growth in FY24 for our coverage, largely driven by pricing and new launches, recent weakness can play spoilsport," Kotak added. Improved US generics pricing has provided relief, but maintaining strong momentum in domestic sales is crucial for our overall formulations’ coverage, the Kotak analysts said.

Weakness in domestic growth, driven by the slow growth in the acute segment, is all thanks to the high base of last year. Also, steady rainfall during the 2022 monsoon season supported demand of acute segment drugs, while the rainfall this year has remained scanty and erratic, analysts said. This could be another reason for softer sales growth, said an analyst at a domestic broking firm, seeking anonymity.