Pharma companies will have to live with pricing pressure for now: Praful Bohra, Equirus Capital

Praful Bohra, Research Analyst, Equirus Capital, points out to ET Now, that a low double-digit price erosion is being factored in by most companies.

Edited excerpts:

What is happening in the business cycle of pharma majors back home because the trouble does not seem to end?

The downward trend that started in the US pricing a couple of years back is still going on. This quarter, there is pricing pressure which is likely to continue because company commentaries show they are still talking of a low double digit price erosion. That is significantly higher than the 5% we were all baking in earlier. Overall, the dynamics have changed considerably and pricing pressure is something that the companies will have to live with now.

What could change for the Indian pharma sector? Will USFDA problems get reduced, will pricing improve, will new approvals come in? We can talk about what has gone wrong but a year from now things would change. A year, a-year-and-a-half from now, will the cycle reverse again on the upside this time?


If you look at the whole dynamics, there has been some green shoots in the US market for now. Large companies like Teva and Mylan are rationalising the portfolios. Probably that is going to help the players. To that extent, there have been some green shoots. Somewhere, this has to end. Maybe at some point of time, companies will say we cannot really go below this point because that is going to hurt the ROCs and it is going to hurt the margins.

Beyond a point, it will be unviable for a lot of companies to manufacture and a lot of companies will go through portfolio rationalisation. That is happening to even smaller players like Cipla and Lupin. Even the larger players like Teva, Mylan are rationalising their portfolios.

How much this is going to benefit the industry would really depend on how much the overlap is. Say for example, an x company has 35-40% overlap with Teva. Then they are probably going to benefit a little more than someone else who has got a relatively lesser overlap.

It would still vary from company to company but on a broader level, there has been some green shoots. Companies are probably at the bottom of the pricing pressure. Some companies have witnessed pricing erosion in the range of 15-20% in the past. That is probably something that we are not hearing anymore. Most companies are talking of a low double digit kind of a price erosion. I think incrementally we would not see the pricing pressure that we have seen in the last two years but it would still be more than 5% that we saw in the past from FY14-15 levels.