Pharma Firms Thriving in US Market Driven by New Products and Drug Demand

Pharma companies are poised to sustain their growth and profitability, with the United States playing a central role in their expansion, reports India Ratings and Research (Ind-Ra). The industry's upward trajectory will be fueled by product launches, persistent drug shortages, and promising opportunities in domestic formulations. The normalization of drug prices in the US, coupled with reduced raw material costs, is expected to drive revenue growth of around 10% and an EBITDA margin of approximately 21% for the fiscal year 2023-24, as evidenced by Q1 results.

Pharmaceutical firms rated by Ind-Ra have already reported strong Q1 revenue growth, attributed to product launches and robust demand from the US and European markets, resulting in an overall top-line expansion of 16.5% YoY. Notably, the US business of these firms demonstrated remarkable growth, surging by 26.6% YoY. Ind-Ra observed a significant improvement in EBITDA margins, soaring by 518 basis points YoY to reach 23.4% in Q1. This was driven by lower raw material and freight costs, contributions from high-margin niche product launches (e.g., generic Revlimid), reduced pricing pressure in the US market, and more favorable raw material prices. In the Indian formulations business, Ind-Ra projects a 10–11% YoY growth for FY24, fueled by price increases and new product launches. Despite challenges in the acute therapy segment and price impacts, these companies reported a 6.2% YoY revenue growth in Q1, primarily driven by the chronic segment.

The US generic business continued its robust growth, expanding by 26.6% YoY in Q1, thanks to niche product launches like generic Revlimid, drug shortages, and moderated pricing pressure. Ind-Ra anticipates price erosion stabilization in the US business for the remainder of the fiscal year. While revenue growth for API manufacturing companies moderated to 8.7% YoY in Q1, EBITDA margins remained healthy due to lower API prices.

Performance among Ind-Ra rated API companies varied during the quarter. Ind-Ra rated pharmaceutical companies also recorded an 8.5% YoY revenue growth in their Rest of the World (RoW) business in Q1, with mixed performance. The European business segment demonstrated strong growth momentum during the same period, highlighting the overall resilience and promise of the pharmaceutical industry. In summary, the pharmaceutical sector is expected to thrive, driven by innovative products and sustained demand, particularly in the US market, reinforcing its growth and profitability.