Pharma industry outlook revised to negative

New Delhi: Rating agency Icra on Thursday said it has revised its outlook on Indian pharmaceutical industry to negative from stable due to ongoing lockouts in parts of China following the outbreak of coronavirus.

The domestic drug industry is highly dependent on imports, with more than 60 per cent of its active pharmaceutical ingredients (API) requirement being shipped from overseas locations, especially China.

In some specific active pharmaceutical ingredients (APIs), like cephalosporins, azithromycin and penicillin, the dependence is as high as 80 to 90 per cent, Icra said in a statement.

Of the total imports of APIs and intermediates into India, China accounts for 65-70 per cent, it added.

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 drugs, wherein, in some cases, China is the exclusive supplier, the rating agency said.

For instance, PenG and 7ACA, the key raw materials required for manufacturing cephalosporins are manufactured exclusively in China, it added. Additionally, for some input materials, even if alternate sources are available, China remains the preferred source given the economical rates, Icra said.

"The outbreak of the coronavirus in China and the consequent lockout in parts of China have resulted in a shutdown of production units in China. Though majority of the pharmaceutical manufacturing facilities in China are located far away from the coronavirus affected sites, there has been a disruption in the supply chain due to the lockouts," Icra noted.

According to Icra research, 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, Icra said.