• In-licensing Route to Offer Modest Benefits to Domestic Prescription Businesses

    • November 15, 2018
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    India Ratings and Research (Ind-Ra) believes in-licensing pursuits by Indian pharmaceutical formulators for the domestic markets are likely to offer modest benefits to overall revenue and profitability of domestic prescription businesses over the medium term. Furthermore, measurable impact of these differentiated strategic initiatives on the overall domestic business risk profile of Indian formulators are likely to be established over the long-term, largely determined by their ability to scale up the in-licensed portfolio.

    Indian pharmaceutical formulators have explored opportunistic launches of speciality patented products in partnership with global innovators and multinational companies (MNCs) as potential growth levers to domestic prescription businesses. As per the agency’s analysis, about 59 deals were signed among 20 global innovators with 10 Indian pharmaceutical formulators over FY15-FY18, indicating strong interest. While the established formulators have increased their share of in-licensed products, the market has also attracted new entrants to explore the potential of this growth avenue.

    As per the agency’s analysis, few of the large Indian pharmaceutical formulators have been able to build a successful franchise over the last decade with meaningful contribution to chronic prescription businesses. In-licensed products offer an increase in chronic portfolio breadth and enhance brand equity amongst prescribers. The agency believes that large Indian formulators with an established market position in chronic therapies and robust physician coverage are likely to be preferred partners for future in-licensing opportunities.

    However, the agency believes that more tangible benefits of scale, therapy diversification and contribution to operating profitability for new entrants may be limited in the near-to-medium term. Product and market dynamics are likely to determine the extent of potential scalability, market share gains and contribution to the overall revenue. Operating profitability of the in-licensed products depends on the therapeutic segment and nature of commercial agreements with the MNC partner. The operating profitability of most in-licensed products has been relatively lower than established chronic therapies, leading to limited diversification benefits to overall profitability. Furthermore, the stability and certainty of cash flow from in-licensed products may involve initial market development challenges as well as competitive elements on product maturity, which are similar to the acquired products.


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