US margins under stress, Indian drug makers get booster dose in Europe

 The North American market may have dragged margins for Indian pharma in 2017-18, but most of the large caps seem to have done well in terms of growth in the European countries. Aurobindo, for example, led the pack with a 33 per cent year-on-year (YoY) rise in EU sales, followed by Glenmark (27.55 per cent), Lupin (11.2 per cent) among others. 
Europe is the third-largest market for Indian drugmakers after the US and Africa. IQVIA data shows the European generics market at $35 billion is the world’s second-largest by value after the US. 

For some players such as Torrent Pharma, the sales from Europe almost equalled the revenues from the US market. Europe now accounts for 7 per cent of Lupin’s global sales. The company sees EU as an important geography from an R&D perspective with the acquisition of Nanomi, The Netherlands-based injectables company.

“Our sales in Europe, Middle-East & Africa (EMEA) region grew by 11.2 per cent in 2017-18, accounting 7 per cent of our global sales. Within Europe, sales in the German market reported an increase of 18.2 per cent to €31 million,” said Thierry Volle, president, EMEA, Lupin. 

He said that as part of its strategic vision, Lupin has a strong focus on building a specialty products portfolio in neurology. It is all set to add new selected molecules to the already existing portfolio with the filing of its first orphan drug. “Biosimilars will play a pivotal role in driving our growth strategy in Europe. The first step towards that has been filing of our Etanercept biosimilar, which we hope to commercialise in the next 12-18 month,” Volle said. 

Analysts pointed out the robust growth in Europe business of Aurobindo in 2017-18 is partly because of the fact that it benefited from the absence of a major player in the tendering process last year. Aurobindo had made some acquisitions in Europe (Generis Farmaceutica S.A. in Portugal in 2017 and the generic operations of Actavis in 2014) that have helped the company to boost its sales in the continent. “The company has done well in Europe. Even if one takes out the sales from the acquired firms, Aurobindo’s Europe growth would be at around 15-18 per cent,” said Amey Chalke, analyst with HDFC Securities. 

Data from Edelweiss shows that the turnover from Europe ($676 million) was around 58 per cent of its revenues from the US market ($1155 million) for 2017-18. Europe, therefore, is emerging as a significant overseas geography for the Hyderabad-based pharma major. 

For players such as Glenmark, have seen growth through launch of new products in the European countries. During the third quarter of 2017-18, it closed the registration procedure for generic seretide (Accuhaler) in the Nordic region including Sweden, Denmark, Norway, Finland and Iceland. Glenmark has already launched the inhaler in Denmark. 

“We now have a sizeable European business, which is driven by in-licensing of products and launch of a differentiated product portfolio. In the last financial year, we grew the business in excess of 25 per cent driven by new product launches across key markets in Europe,” said Glenn Saldanha, chairman and managing director, Glenmark Pharmaceuticals. 

The respiratory segment, especially the inhaler category, has driven growth for many pharma companies in the last couple of years. For example, Cipla had launched its generic version of GSK’s blockbuster Advair in the UK in 2016. 

Analysts also said many European countries faced shortage of affordable cancer medicines. Firms such as Sun, Dr Reddy’s Laboratories, Aurobindo, Cipla, Lupin, Alembic have all mapped up growth plans in the oncology segment. 

Europe, however, is a low margin market, pointed out Chalke. However, the price erosion is less compared to the US market. Torrent, that focuses primarily on the German market — a cost competitive generic market — has done well to achieve consistent double-digit growth. Torrent’s European revenues stood at $142 million in 2017-18, compared to $171 million from the US. 

Pharma majors have admitted Europe is a long-term play. “Currently, a lot of high complex products are under development and we expect to file those in 2019-20.  Regarding the US, it continues to be our leading market in terms of revenue share but we are focused on building our presence across all global markets for consistent growth,” Volle added.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel