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Indian CRAMS sector to fuel export growth, CARE says

By Nick Taylor , 12-Jan-2012
Last updated the 12-Jan-2012 at 12:11 GMT

Outsourcing to Indian CRAMS and bulk drug businesses will drive the country’s export growth, a credit rating agency said.

Last year India returned to double-digit pharmaceutical export growth, after a slump in 2010, and the upwards trend is continuing. Credit Analysis and Research (CARE) found the Indian pharmaceutical sector grew 17 per cent in the first half of fiscal 2012 and outsourcing will drive further gains.

CARE said: “The growing trend in outsourcing by global pharmaceutical companies will further fuel exports, especially for companies focusing on bulk drug and contract research and manufacturing services (CRAMS) segments.”

Demand for outsourcing will continue to increase, CARE said, and help export growth outstrip the domestic market. Indian companies have increased their attractiveness to global pharmaceutical firms through “improved compliance with global regulatory norms and recognition”, CARE said.

Enhanced capabilities will help India towards its export goals. The Indian government aims to break the $25bn (€20bn) pharmaceutical export barrier by 2014 but is aware it faces “intense competition” from China.

Patent expirations in regulated markets over the next three to five years could help India ramp up export growth. Indian companies have invested in new manufacturing facilities or bought companies, CARE said, to be in a position to profit from patent losses overseas.

As per CARE’s estimates, drugs worth $235bn of innovator sales will go off-patent by 2015 representing sizeable growth opportunity even after considering the severe price erosion that would happen upon entry of many generic companies”, the credit rating agency said.

Credit analysis

CARE conducted the analysis to assess the credit outlook for Indian pharmaceutical companies. Over the mid-term the credit profiles of large Indian pharmaceutical companies look strong, CARE said, but smaller businesses may face problems.

Many small to mid-sized Indian pharmaceutical manufacturers and service providers expanded to take advantage of the aforementioned opportunities but this has put them at risk. The investments “are largely debt-funded”, CARE said, so it is important envisaged benefits are realised quickly.

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