'US holds the key for better prospects of Indian pharma'

Pharma is one of those sectors that have turned into a nightmare from being a sweet dream. Having been marred by USFDA's scrutiny and bans, many top pharma stocks are still waiting for a turnaround in their fortunes. We speak to Tanmaya Desai, who manages SBI Healthcare Opportunities Fund, about the state of the sector. The pharma sector has suffered in the last couple of years. What were the reasons for this? The US is the largest pharmaceuticals market. For Indian pharma companies too, it comprises 40-50 per cent of revenues. Now that the base of Indian pharma companies in the US is larger than earlier, regulatory woes, a heightened price erosion and channel consolidation have been impacting growth for a number of Indian companies in the US. This has led to lower growth and contributed to the poor performance of the pharma sector in the last couple of years. At the same time, growth in India, which comprises 25-30 per cent of the revenues of Indian pharma companies at an industry level, too has been lower led by lower volume growth, pricing-policy impact and GST-led readjustment of inventory levels. When do you see the pain ending? The US, the largest contributor to revenues and profitability for Indian pharma companies, holds the key for better prospects going ahead. While one will have to brace for a lower growth in the US in general, due to our sheer size in the US generics space, most US companies as well as Indian peers have highlighted the need for stabilisation in the pricing environment in the US. They expect that it will not deteriorate further from here. At the same time, growth in India, too, is expected to pick up on a lower base of the last couple of years. Hence, growth is expected to be better going forward than in the last couple of years. How do you read the USFDA actions against the Indian pharma sector going forward? Indian pharma companies form close to 40 per cent share by vo