Global Pharma Industry trends

Industry Experts have forecasted a 19 % growth for the Indian Pharmaceutical Industry for the year 2013. Morgan Stanley has said that Investments in research and trade mark expenditure will start bearing fruits in European Union and United States. Several new drugs are expected to be launched as a result of clinical trials and obtaining intellectual property rights. Apart from these, new emerging markets in Japan and other countries will have cascading positive effect in the pharmaceutical industries. Moody's have also forecast return of growth in 2013. They have also said that this status of the market will be stable for another one and half year paving the way for growth and earnings [Outlook report]. This is also based on the expected loss of patent protection of some of the high selling drugs since a long time. The average pre-tax earnings have been expected to be about 1 %. They also expect this to accelerate further into 2014 due to decrease in adverse effects of patient cliff. The generics-focused companies are expected to continue to be benefited from patent expirations in 2013, but these will lesser as compared to 2011-12. The current price erosion and high costs involved in production of complex drugs may result in reduced profits. They have also said that the quality of late-stage drug pipelines is rapidly improving. Many new and innovative drugs are showing a lot of promise in driving higher sales growth in 2013-14, including drugs that are more efficacious in the treatment of certain forms of cancer, oral treatments for hepatitis C, easier-to-administer drugs for multiple sclerosis etc. One negative factor countering the smooth flow of growth is the US deficit reduction efforts apart from the continuous stress due to pricing pressures on account of governmental health care reforms, especially in Europe. This will have an adverse effect on revenues of pharmaceutical companies. Moody's is forecasting decline in sales due to ongoing health care reforms in Europe this year, but in southern European markets it effect is unlikely as the drug manufacturer account for much lower contribution to their total sales and receivables. The report expects easing out of regulations allowing copying of biotechnology drugs in the US, paving the way for regulatory filings during the year. Within Europe also similar opening up with regard to more complex biotech drugs could lead to at least one bio-similar launch as patent on Remicade (infliximab) expires. Moody's is also project positive climate for merger and acquisition (M&A) activity which is likely this year. Giant companies like Roche, Pfizer and Novartis, have resorted to deleverage that could create grounds for acquisitions. Such acquisitions are expected generally of small to mid-sized. Moody's could shift its outlook depending on legislative changes in the US if they are significant or if emerging-market growth falters. Simultaneously sales in emerging markets are important to offset decline in sales. This situation is faced by pharmaceutical companies in developed markets on account of pricing pressure and expiry of patents. Such developments may force rating agency to revise lower its expectation for EBITDA growth to below 1%, yet it may never happen as such a scenario as most unlikely in the next few years