From the stock markets perspective, experts signaled “some positivity” emerging towards the US generics business.

“To some extent the stock prices of Glenmark, Lupin and Aurobindo Pharma Limited over the last three months seem to demonstrate that. These stocks have given 25-30% returns over the last 60-90 days,” Navroz Mahudawala, managing director of Candle Partners, told Scrip.

The seasoned investment banker said that to some extent the positivity was being driven by the “consistent performance” of Sun Pharma in the US and the positive outlook. Sun’s formulation sales in the US (including Taro) for fiscal year 2023 (i.e. the 12-months ended 31 March 2023) stood at $1.68bn (+10.3%).

“We do not expect any exits by mid and larger Indian companies. However we do expect recalibration of future investments. This is definitely being driven by review of return on capital employed (ROCE) across geographies and the fact that Indian markets have potentially given the best ROCEs,” Mahudawala added.

He does not expect some of the diversifications into areas like diagnostics or nutraceuticals to create “any material topline impact in the near term”, though.

A study by Candle had previously indicated that the Indian pharma sector had reported revenue growth of 7% over the last five years and attributed the flat/negative growth for the US businesses of several companies in the study universe as the single biggest contributor of the low growth rates.(Also see "Why India Pharma Failed To Impress In 2020-22 Bull Run" - Scrip, 5 September, 2022.)

Eye On ROI: Will More Indian Firms Re-Calibrate US Market Presence?

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