Mar 14, 2012 05:34 PM IST | Source: Moneycontrol.com

Earnings growth may continue in pharma stocks: ICRA

ICRA has come out with its report on Indian pharmaceutical sector. According to the research firm, earnings growth will continue, benefitting from healthy growth in the domestic formulations business and steady growth expected in the U.S/Europe generics space on back of patent expiries.

Earnings growth may continue in pharma stocks: ICRA

ICRA has come out with its report on Indian pharmaceutical sector. According to the research firm, earnings growth will continue, benefitting from healthy growth in the domestic formulations business and steady growth expected in the U.S/Europe generics space on back of patent expiries.

After a period of sustained growth, the domestic formulations market began to decelerate since the beginning of Q3 FY11 largely prompted by intense competition, especially in the acute segments. The growth rates slipped quite sharply in H1FY12 on back of high base effect of the previous year and spill over of pricing pressure even to the chronic segments to some extent. The competitive pressure in the domestic formulations market has been rising steadily for some time now. While on one hand, this has been prompted by significant increase in investments by domestic players in marketing efforts through expansion in field force, on the other, MNC have also renewed their focus on India. Some of the smaller players have also contributed to the competitive intensity by offering huge discounts/incentives to the distribution network and doctors. However, while competitive pressures are unlikely to abate, the growth momentum appears to be back on track with last few months reporting a fairly strong growth across therapy segments. We believe, that the structural demand drivers would continue to support growth in the long-run despite short-term headwinds.

The Domestic formulations market, valued at ~Rs. 48,200 crore has grown steadily at CAGR of 14-15% over the past five years. The strong growth has been driven by a confluence of factors including

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