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MOSL: HEALTHCARE | In-licensing-Green-shoot in domestic formulations-Potential to aid better growth and profitability

HEALTHCARE | In-licensing: Green-shoot in domestic formulations; Potential to aid better growth and profitability, going forward

 

• Over the past five years, a few companies in the domestic formulation (DF) space have witnessed a meaningful increase in revenues from in-licensed products.
• Also, an increased number of fixed dose combinations (FDCs) coming under ban and heightened scrutiny by the Indian drug regulator are restricting growth of newly launched products in the DF market.
• Based on inherent potential of the product and supporting external regulatory factors, 'in-licensing' as a strategy is emerging as one of the key growth drivers in the DF segment.
• We remain positive on the DF business due to medical representative (MR) led brand creation/enhancement, which aids sustained growth and provides better profitability. Key beneficiaries of in-licensing are Lupin, Sun Pharma, Cipla, Cadila Healthcare and Dr. Reddy's Lab.

Multifold increase in in-licensed products’ sales

According to AIOCD data, on an aggregate basis, sales from in-licensed products have increased almost 4x from ~INR5b during 12M Jun’14 to ~INR21.2b during 12M Jun’18. Currently, share of in-licensed products range between 1.5-30% of total sales, for a few companies.

Regulatory hurdles boosting impetus for in-licensing

With the Indian DF market largely dominated by generic branded drugs, launching off-patent molecules and line extensions using combinations has been one of the strategies to aid growth. However, the ban on various combinations and increased inquiries prior to approvals of new combinations has taken a toll on growth of new launches. Growth of new launches decreased to 2.5% during 12M Oct’18 v/s 3.2-3.5% for 12M Oct’15. Introducing a new molecule (patented/off-patented) using the in-licensing strategy would mean less approval hassles and a reduced timeline for commencement of product marketing.