Most pharma companies reported resilient operating performance in FY21, benefitting from gradual stabilisation after 1Q FY21, geographical diversification and sales of pandemic-related drugs.
Fitch expects sales of drugs used to treat acute medical conditions and elective procedures to continue to recover in FY22. Sales in these categories fell in FY21 as travel restrictions reduced doctor visits and hospitals prioritised Covid-19 treatment over elective procedures.
Sales of some of these products are still 10 per cent below pre-pandemic levels although they started to recover with the easing of curbs.
The risk of further waves of infection remains significant in markets with slow roll-outs of vaccination, including India, but healthcare systems are better prepared after the second wave which should limit the impact.
Fitch said revenue in key markets including the United States and Europe will also benefit from a healthy pipeline of generic drugs and further progress in launches of specialty drugs by larger companies.
This should help to offset the effects of continued price erosion, particularly in the United States. Several companies have taken steps to remediate shortcomings pointed out by the US Food and Drug Administration (USFDA) previously in their plants but travel restrictions delayed re-inspections last year.
Progress in resolving the USFDA issues after resumption of inspections can accelerate new launches.
Fitch expects sales in the near term to be boosted by demand for Covid-19 related drugs, particularly in India. Some companies say they will expand production capacities in active pharma ingredients (API) and injectable products to take advantage of government incentives and increased demand.