Hyderabad firms dominate bulk drugs sector

Demand for Covid pandemic-related drugs will continue to drive the growth momentum this fiscal

Hyderabad: Hyderabad, India’s largest life sciences hub, continues to lead the country in the bulk drugs sector. Statistics show that five of the top 10 pharma companies in India that achieved highest bulk drugs sales in FY21 are from the city.

Divi’s Labs with Rs 6,817 crore, Dr Reddy’s with Rs 3,198 crore, Aurobindo with Rs 3,086 crore and Laurus Labs with Rs 2,621 crore sales led the country’s charts while Granules at ninth position had sales of Rs 1,699 crore.

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Ever since Covid-19 pandemic struck, Hyderabad-based bulk drugs manufacturers have seen gains in both volumes and demand and witnessed higher bulk drugs prices and new enquiries from customers. Paracetamol for instance has seen a 72 per cent surge since January 2020, while azithromycin and ciprofloxacin saw 44 per cent and 40 per cent jump, respectively, according to strategic business advisory firm B&K Securities.

A bulk drug, also called an active pharmaceutical ingredient, is the key ingredient of a medicine, which lends it the desired therapeutic effect or produces the intended pharmacological activity.

Experts believe, given the macro tailwinds in favour of Indian bulk drug companies, traditional players such as Divi’s Labs, who are entirely focused on bulk drugs, will gain significantly, who have been growing steadily despite Chinese competition. Divi’s has also taken up backward integration to reduce dependence on Chinese raw material imports from about 70 per cent to about 30 per cent.

Other companies from India which recorded higher sales include Biocon with Rs 2,487 crore, Sun Pharma with Rs 1,950 crore, Dishman with Rs 1,908 crore, Aarti Drugs with Rs 1,702 crore and Ipca with Rs 1,506 crore sales.

Sector outlook

B&K Securities projects that the Indian bulk drugs industry will more than double to $24 billion by 2026 from $11 billion in 2020, growing at a CAGR of 14 per cent. The recent anti-China sentiment may be beneficial for Indian bulk drugs industry in the long run to expand market share to 10 per cent by 2025 from the current levels of six per cent.

Dr PV Appaji, former NPPA director and former director general, Pharmexcil, told Telangana Today, “Through production-linked incentive scheme for bulk drugs, the government is giving top priority for creating self-dependent India for raw materials, bulk drug and key intermediates for critical life saving medicines. Hyderabad companies are continuing to expand their facilities to meet the growing demand. They will remain top players and contribute towards Covid-19 treatment.”

Fitch observes that the majority of Indian pharma firms reported resilient operating performance in FY21, benefiting from stabilisation after the first quarter of FY21, geographical diversification and sales of Covid pandemic-related drugs. Sales of drugs used to treat acute medical conditions and elective procedures are expected to continue to recover in the current fiscal.

Some manufacturers are expanding production capacities in bulk drugs to take advantage of the government incentives and increased demand. Also, growth in the US and other global markets helped companies such as Aurobindo and Dr Reddy’s Laboratories report improved revenues in the last fiscal.

Fitch expects costs to rise to normal levels in FY22 as companies step up marketing and R&D activities. Higher sales will however cushion the impact on margins. Most companies were prudent about growth investments in FY21.

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