ICRA has revised its outlook, due to the outbreak of Coronavirus in China.

▴ ICRA has revised its outlook due to the outbreak of Coronavirus in China
ICRA has revised its outlook on the Indian pharmaceutical industry from stable to negative in view of the ongoing lockouts in parts of China following the outbreak of the coronavirus.

The domestic pharmaceutical industry is highly dependent on imports, with more than 60% of its active pharmaceutical ingredients (API) requirement being imported, and in some specific APIs, like cephalosporins, azithromycin and penicillin, the dependence is as high as 80 to 90%. Of the total imports of APIs and intermediates into India, China accounts for ~65-70%. The situation is more alarming in case of intermediates of stages prior to APIs and key starting materials (KSMs) which are the building blocks for the drugs, wherein, in some cases, China is the exclusive supplier. For instance, PenG and 7ACA, the key raw materials required for manufacturing cephalosporins are manufactured exclusively in China.Additionally, for some input materials, even if alternate sources are available, China remains the preferred source given the economical rates.

According to ICRA research, the domestic API manufacturers have an inventory of one-two months, which should adequately support their production till mid-March 2020. Continuation of the virus outbreak, however, beyond mid-March 2020 may adversely impact production of these API manufacturers, possibly leading to a complete halt of production for some smaller players.

While the domestic pharmaceutical manufacturers have not seen any significant increase in raw material prices as of now, expectations of disruption in supply beyond mid-March 2020 would result in an increase in the prices, thereby impacting their profitability.In view, of the above, ICRA has revised its outlook on the Indian pharmaceutical industry to negative.
The extent of impact of production shutdowns and increase in prices of raw materials on the profitability of the domestic pharmaceutical manufacturers would, however, vary depending on each company’s product and raw material sourcing mix and the quantum of inventory held.
Tags : #Icra #Coronavirus #Indianpharmaceuticalindustry

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