"After underperforming for several years, pharma MNCs have outperformed the industry growth in CY 2011," rating agency ICRA said in its report titled `Indian Pharmaceutical Industry: Trends & Outlook' here.
MNCs have started witnessing growth at a faster pace as revenues grew by 15 per cent in calendar year 2011 from 12 per cent in 2009 and 9.8 per cent in 2008.
MNCs are now pursuing a comprehensive strategy for growth, with focus on chronics, branded generics and launch of patented products.
The drug patent expiries and weak pipeline quality are forcing innovator companies to explore growth opportunities in the emerging markets.
Indian pharma companies are also preferring tie-ups with MNCs to leverage their development & manufacturing skills. The industry has witnessed an increasing trend where marketing & distribution footprint of Indian companies and product portfolios of MNCs are being leveraged.
"After giving preference to acquisitions in the initial phase, pharma MNCs have entered into tie-ups with domestic players, like Lupin with Eli Lilly, Cadila with Bayer and Sun with Merck," ICRA report said.
Commenting on the domestic formulation market, ICRA said the size of the industry is Rs 58,300 crore and it ranks third in volume and 10th in value globally.
The growth in the country is driven by expansion in volumes and new drug introductions. The lifestyle-related disorders are driving the growth at faster pace in chronic segments, the report said.
Indian generic players are likely to be benefit from patent expiries in 2012; branded drugs worth $ 70 billion are likely to lose patent protections between 2013-17.
Domestic formulation business is likely to maintain healthy volume growth as emerging markets are expected to offer strong growth opportunity.
However, ICRA warned that the delays in regulatory approvals could impede growth. The adverse FDA actions are emerging as a key challenge. Many generic players, including several Indian companies, have been issued warning letters, so regulatory costs are on the rise.
The aggressive healthcare budget cuts could hurt pricing for generic players. It is feared that transformation of German market from being a branded generics to a "tender-driven" market could spread to other countries. Given the current macro-environment, Europe also appears to be most vulnerable, the report said.