The Indian pharma market (IPM) grew 19% from a year earlier in March despite a strong base, and 14% in the March quarter, underscoring the market’s robust health, according to Motilal Oswal Financial Services data. The IPM’s growth continued to pick pace regularly throughout FY23. After growth slipped to negative territory in Q1FY23 on a very high base, it made a smart recovery in Q2FY23 to 8.4% from a year earlier, and 10.2% in Q3FY23.

Analysts at Kotak Institutional equities said, “IPM growth in March 2023 was strong at 19.1% yoy, aided by a favourable base; however, on a four-year basis, IPM reported a healthy 11.4% CAGR in March 2023″. In line with expectations, IPM growth of 7.9% in FY23 was supported by a 12.5% increase in the second half of FY23, the analysts said.

Domestic market growth is being supported by both acute and chronic therapies. Chronic grew at 15% from a year earlier in March, while acute notched a 22% rise. Among therapies, anti-infectives, and respiratory pain relief drugs led the growth. Aristo Pharma, JB Chemicals, FDC Ltd, Alkem Laboratories, Mankind Pharma, Macleods Pharmaceuticals, Alembic and Cipla clocked higher growth rates than the broader market.

Among the top-25 firms–Abbott, Zydus, Torrent and Lupin gained the most share over the past six months, showed Kotak data. Meanwhile, Alkem, Macleods and Cipla lost the maximum share in the same period. The March quarter remains seasonally weak for Cipla, said analysts at JM Financial Institutional Securities.

Meanwhile, the healthy pace of domestic growth is boosting analysts’ confidence on the earnings growth of Indian drug makers even as they remain cautiously optimistic on growth in the US market. In the US, management commentaries post Q3 results had indicated continued pricing pressure though it’s abating slightly. Analysts are pinning hopes on reduced competitive intensity in the US and also new launches to help drive performance for Indian firms. Nevertheless, most analysts remain cautiously optimistic.

For the March quarter, analysts Kunal Randeria and Aashita Jain at Nuvama Institutional equities expect the US market to be a mixed bag. While there are good launches by Zydus Lifesciences and Aurobindo Pharma, sales of flu treatment drugs may remain soft for Lupin and Ajanta Pharma in the quarter.

Also, Halol import alert is likely to take a toll on Sun Pharma added analysts. The Halol plant of Sun Pharma in Gujarat has remained under the USFDA scanner for long.

Many companies, including Cipla and Lupin, are trying to resolve USFDA observations.

JMFL analysts point out that Dr Reddy’s, Natco pharma, Cipla and Zydus Life remain key beneficiaries from the launch of generics of Revlimid (to treat multiple myeloma). However, Cipla has seen sequential decline in respiratory inhaler Albuterol sales, though there is steady rise in Lanreotide (hormone disorder treatment drug) and oncology drug Luprolide. Besides there are some write offs during the quarter.

Hence it is the domestic market growth trend that can keep earnings outlook steady for companies.

Kotak analysts expect their coverage companies to report 10-14% domestic sales CAGR (compound annual growth rate) across FY2023-25, largely driven by pricing and new launches. Though even as increased stability in US generics is a respite, sustained momentum in domestic sales is critical to drive overall growth for the brokerage’s coverage.