According to a special report, published by Fitch Ratings, the Indian Pharmaceutical Sector will remain stable in 2010, with demand benefiting from rising global acceptance of generic pharmaceuticals. The agency also expects the credit profiles of some of its rated entities to remain stable - a result of limited capex spends and subsequent improvement in cash flows.
The global pharmaceutical industry is facing a period of significant drug patent expiries, which expands the addressable market for generics companies. Regulatory steps taken by developed countries towards curtailing growing health care budgets can also boost the demand for generics. The agency expects the global acceptance of generics along with outsourcing of manufacturing by global pharmaceutical companies to low cost locations will benefit the export oriented Indian pharmaceutical companies. Steady demand growth will continue to give advantage to the domestic pharmaceutical companies of India. However, Fitch Ratings stated that pricing pressures because of greater-than-expected increase in competition could moderate the anticipated profitability improvements. This would remain a key risk factor for future margins. Regulatory issues can also have an impact, mainly regarding approvals for new products and any rigidity in quality controls.
The report further states that a majority of the entities within its rated national pharmaceutical portfolio are not likely to see any large future capacity expansions. They will focus on consolidating their recently expanded capex in the next couple of years. Nonetheless Fitch views any large debt-led capex programme with concern.
With the global liquidity scenario improving in 2010, Indian pharmaceutical exporters should see shorter cash cycles for their working capital, versus the increase in working capital cycles during the tight liquidity situation in 2008-H109. Liquidity is thus expected to generally remain comfortable. The improved liquidity scenario coupled with improved cash flows in the near term should partly offset the refinancing risks faced from foreign currency convertible bonds outstanding on the books of many Indian pharmaceutical companies.
News Source- Press release from Fitch Ratings based on their special report, 'Indian Pharma Outlook 2010'
The global pharmaceutical industry is facing a period of significant drug patent expiries, which expands the addressable market for generics companies. Regulatory steps taken by developed countries towards curtailing growing health care budgets can also boost the demand for generics. The agency expects the global acceptance of generics along with outsourcing of manufacturing by global pharmaceutical companies to low cost locations will benefit the export oriented Indian pharmaceutical companies. Steady demand growth will continue to give advantage to the domestic pharmaceutical companies of India. However, Fitch Ratings stated that pricing pressures because of greater-than-expected increase in competition could moderate the anticipated profitability improvements. This would remain a key risk factor for future margins. Regulatory issues can also have an impact, mainly regarding approvals for new products and any rigidity in quality controls.
The report further states that a majority of the entities within its rated national pharmaceutical portfolio are not likely to see any large future capacity expansions. They will focus on consolidating their recently expanded capex in the next couple of years. Nonetheless Fitch views any large debt-led capex programme with concern.
With the global liquidity scenario improving in 2010, Indian pharmaceutical exporters should see shorter cash cycles for their working capital, versus the increase in working capital cycles during the tight liquidity situation in 2008-H109. Liquidity is thus expected to generally remain comfortable. The improved liquidity scenario coupled with improved cash flows in the near term should partly offset the refinancing risks faced from foreign currency convertible bonds outstanding on the books of many Indian pharmaceutical companies.
News Source- Press release from Fitch Ratings based on their special report, 'Indian Pharma Outlook 2010'
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