With Covid behind us, what are pharma companies doing now for business growth?

The thinning tally of coronavirus cases in India is diminishing the influence of Covid-19 on the domestic pharmaceutical industry’s sales and future plans. After having shown resilience in the toughest of times and after harnessing the immense opportunities that came with the pandemic, Indian pharma is now returning to business as usual, moving away from Covid-19-related products. Anand Rathi Equity Research’s research analyst Aarti Rao and research associate Maulik Varia say footfalls in dermatology (skin), stomatology (mouth), ophthalmology (eyes), neurology (nerve disorders) and gynaecology (pregnancy-related) have started to pick up. “We maintain our positive view on chronic focussed companies...,” the firm said in a recent report.

According to the analysis by Rao and Varia, in August 2022 the Indian pharmaceutical market (IPM) grew 12.1 per cent year-on-year (YoY), largely led by price hikes (6.6 per cent), volumes (4 per cent), and with some growth coming from product launches (1.5 per cent). “The base month of July 2021 had no major impact from Covid-19, with a majority of all therapies returning to normal,” says the report, further adding that in the past 12 months, the moving annual total (MAT) of the IPM has grown at 6.3 per cent YoY. Barring anti-malarial and anti-infective therapies, most other major non-Covid-19 categories grew in double digits, including respiratory, central nervous system and cardiac, which together form around 26 per cent of the IPM. Some other categories also saw double-digit growth (see Booster Dose for details) including chronic (pre-existing or long-term illnesses) and acute therapies (for short-term illnesses such as respiratory ailments, cold and cough or flu).

That is not to say that Covid-19, and its impact on the pharma industry, is totally gone. While there has been a slide in demand for Covid-19 vaccines produced by companies like Serum Institute of India (SII) and Bharat Biotech, other drugs used in the management of mild, moderate and severe Covid-19 such as antipyretics, antibiotics and multivitamins still have a healthy market. There is also muted demand for the much-hyped anti-viral drug Molnupiravir, which at least 13 firms—including Sun Pharma, Cipla and Dr. Reddy’s—are manufacturing. Meanwhile, the growth in non-Covid-19 categories is being driven by an underlying rise in the instances of other illnesses, which is what the companies are now focussing on.

Public health experts indicate that the after-effects of Covid-19 infections have resulted in a sharp increase in cases of neurological, endocrine, diabetes-related, respiratory and dermatological complications, a trend that is set to heighten the consumption of drugs for the treatment of these diseases. A report by American global data science firm IQVIA shows that India has over 15.5 million Covid-cured patients who will have long-term health consequences—technically called long-Covid—the second highest after the US’s 19.1 million (in all, the global total is 104.6 million).

“We are witnessing new cases of onset of diabetes after the pandemic. This trend is likely to go on for about three months more and may level off to pre-Covid-19 status. About 90 per cent of patients with diabetes are on medication, and those with long duration of diabetes [are] on multiple medications and insulin,” says Dr Anoop Misra, Chairman of the National Diabetes, Obesity and Cholesterol Foundation, and President of Diabetes Foundation (India). Misra, also the Chairman of Fortis C-DOC hospital in Delhi, says there were many more patients with uncontrolled diabetes during the second wave of the pandemic, since these patients were severely affected with Covid-19 and most were on steroids. “There was an increase in medicine consumption during the Covid waves—demand for anti-Covid-19 drugs, antibiotics, vitamins, paracetamol and steroids was high. Subsequently, medication for non-communicable diseases (NCDs), I expect, would be higher than the pre-Covid era,” says Misra.

In addition, according to the IQVIA report, indiscriminate use of treatments such as steroids had led to an increase in black fungus cases in India and perhaps an increase in the incidence of acute vascular necrosis of bones (death of bone tissue due to a lack of blood supply) in the post-Covid-19 period, leading to patients needing intensive care, including intubation.

With the demand scenario changing, Indian pharma majors are now scrambling to return to their areas of expertise. For instance, Dr. Reddy’s Laboratories, the main distributor of Russian Covid-19 vaccine Sputnik, is now focussing on its core businesses of APIs or active pharmaceutical ingredients (a biologically active constituent of a drug), generics, branded generics, biosimilars (these are identical copies of original drugs manufactured by different companies), and over-the-counter (OTC) drugs. These constitute the company’s near-term growth drivers or what it calls its “Horizon 1” of growth. It has a plan for long-term growth (Horizon 2) as well. “As the pharmaceutical landscape evolves, we see intense competition in traditional generics, disruption brought on by new players and new business models, and demand for holistic healthcare solutions,” says a company spokesperson, adding that Dr. Reddy’s plans to deepen its presence in nutraceuticals, discovery and development of immuno-oncology NCEs (new chemical entities or new molecules) at subsidiary Aurigene Discovery Technologies, and strengthen its contract development and manufacturing company (CDMO) services. Dr. Reddy’s is also exploring new spaces such as digital healthcare services, clinically differentiated assets, biologics and cell and gene therapy, and disease management.

Pharma major Cipla indicates a focus towards wellness and lung specialty businesses. “Today, we are witnessing a massive transition towards wellness and we aim to build a wellness-oriented business. We are also continuing our quest of attaining global lung leadership,” says Umang Vohra, MD and Global CEO of Cipla. “On innovation, we are actively working on newer constructs like mRNA, stem cells and biosimilars.”

Sun Pharmaceuticals, India’s largest pharma company, has also defined some growth drivers for itself. According to its FY22 annual report, changing lifestyles and food habits will continue to result in higher incidence of chronic diseases globally, driving growth for cardiovascular, anti-diabetic and other such segments. The company further affirms that oncology and immunology will continue to witness higher volume growth and will, therefore, require significant investments in developing new products. The medicine requirement is higher for an ageing population and this is expected to be another growth driver for the industry, the report mentions.

Meanwhile, covid-19 isn’t history yet. Booster doses against Covid-19 are gaining prominence as new strains of the virus continue to emerge, but the offtake has not been encouraging for pharma companies. In particular, companies that appeared late on the Covid-19 vaccine map are struggling to generate revenue from their vaccines. The newest entrants in the government’s national immunisation programme are Biological E. Limited’s Corbevax, Zydus Cadila’s ZyCoV-D and Gennova Biopharmaceuticals Limited’s GEMCOVAC-19.

However, while the current consumer response to booster shots has been cold, there is sense in betting on long-term goals in the government programme. With booster shots turning out to be a yearly affair, Covid-19 vaccines may yet prove to be a growth driver in the coming years. “In terms of sales, Covid-19 vaccines have already outperformed their forerunners. Booster shots are anticipated to be more profitable than the initial doses since they will not be accompanied by the R&D expenses the companies spent to get the vaccines in the market in the first place,” says Arvind Sharma, Partner at Shardul Amarchand Mangaldas & Co, who tracks the space. “Additionally, the Covid-19 shots are now being developed to combat certain [other] viral strains, and patients may require it annually like the flu shot.” Sharma adds that pharma companies have been developing repurposed inhalation products for Covid-19 after injectables and oral medicines.

Apart from Covid-19 boosters driving a certain level of annual income and profit, some other areas are also expected to gain traction. “Chronic illnesses that force patients to spend a consistent portion of their earnings on medication are likely to continue to rise. Companies are aiming to target their R&D efforts on distinct sectors such as injectables, biosimilars, specialty drugs as well as transdermals (drugs delivered through the skin),” says Sharma. According to CRISIL, acute and chronic therapies contribute almost equal share in terms of revenues for the domestic pharma industry. With OPDs (outpatient departments) and clinic patient footfalls recovering and inpatient departments (IPDs) operating at occupancy levels observed before the pandemic, volume growth this fiscal is expected to remain stable despite the high base of last year.

As per CRISIL, in FY22, there was significant increase in demand for acute therapy drugs due to increased Covid-19 cases in India. “Within acute, growth momentum in anti-viral, anti-infective and vitamin therapies will continue. Within chronic, large volumes will continue to be driven by cardiac, anti-diabetic and respiratory segments,” says Aniket Dani, Director at CRISIL Research. “From a strategic viewpoint, Indian pharma players are exploring opportunistic investments to drive medium- and long-term growth by focussing on specialty drugs, diversifying export portfolio through geographical mix, and inorganic deals or alliances to bridge the gaps in their capabilities like R&D and product diversification.”

The fundamental truth is highlighted by Vinay Bafna, analyst-Pharma & Healthcare at ICICI Securities: “Opportunities from Covid-19 were always deemed to be short-lived. So, it doesn’t change the structural need for medicines which is arising from increasing chronic ailments due to lifestyle changes as well as early detection of diseases with increasing awareness of diagnostic testing.”

It appears that we are almost back to normal in terms of medical and healthcare needs and priorities, with Covid-19 cures having been added to the mix over a tumultuous couple of years.

@neetu_csharma