Continued demand for generics from the US market will ensure stable outlook for Indian Generics Pharmaceuticals in 2011, global rating agency Fitch Ratings said on Monday.
However, liquidity will remain a concern for the sector, mainly due to working capital requirements, it added.
"The outlook for Indian generic pharmaceuticals for 2011 is stable. Earnings and profitability of Indian generic-based pharmaceutical companies will benefit from continued demand for generics," the ratings agency said.
"Fitch expects the US market to be the main growth driver for the demand of generics," it added. It said that Indian pharmaceutical companies expect about $ 96 billion worth drugs to go off patent in the US in 2011-2013.
The agency, however, said despite demand coming from European markets, "stiff pricing environment will limit exposure".
It said that Indian pharmaceutical companies expect about $ 96 billion worth of drugs to go off patent in the US in 2011-2013.
On the mergers and acquisitions front, Fitch said it expects the trend to continue into 2011.
It said that attractiveness of Indian domestic market has been highlighted by acquisition of formulations business of Primal Healthcare by Abbott.
"Increasing interest towards generics among global innovator companies to either set shop in India or forge alliances and partnerships with Indian pharmaceutical companies will be additional revenue triggers for the sector," it said.
Growth in domestic sales will continue to be aided by rising expenditure on healthcare, changing disease profiles on account of lifestyle-related diseases, and growing penetration in rural markets.
The domestic generics business has traditionally been the mainstay for Indian pharmaceutical companies. This will continue to be the profitable based on the growing domestic sector and increasing penetration on the rural market, it said.
Fitch expects working capital levels for the sector to remain high, which could have a negative impact on the liquidity profiles of smaller pharmaceutical companies.
It further cautioned that regulatory risks emanating from quality issues, litigation risks relating to alleged patent infringements and disputed 'first-to-file' can change the outlook to negative.
The strength of Indian companies remain the robust product outline and infrastructure and their focus on niche product segments and choosing high-value and low competition products to break through the US markets, it said.
