Indian drugmakers, which have the U.S. market as a key segment, will sustain their revenue improvement in fiscal 2025 due to drug shortages in the United States, Mumbai-based India Ratings and Research said on Monday.

India is a hub of bulk generic drug manufacturing and drugmakers including Dr Reddy's, Cipla, Sun Pharma derive a significant share of revenue from both the U.S. and Europe.

The world's largest drug market is facing decade-high drug shortages, the research firm said in a note citing data from with Utah Drug Information Service.

There is an active shortage of 233 drugs across 22 therapeutic categories as of April, led mainly by discontinuing production of some drugs, rising demand and delays in shipments, it said, also citing data from the U.S. Food and Drug Administration.

"US-catering Indian generic players have seen a strong financial performance during FY24, due to lower raw material cost and stability in pricing," said Vivek Jain, Director of Corporate Ratings at India Ratings and Research.

Reddy's reported a 29% jump in North America sales for the most recent quarter ended March 31, while Cipla saw an 11% jump in revenue from the region.

Smaller rival Lupin's North America sales grew 22.6% during the fourth quarter.

IMPROVED RESULTS

India Ratings and Research said increasing regulatory costs led to many US-based generic pharma manufacturers halting the production of certain drugs.

The increasing complexity of filing applications for new drugs is adding to the shortages and reducing competition, the research firm added.

Indian companies could likely fill the gap by expanding supply chains and increasing participation across therapeutic categories, it said.

Earlier this month, both Reddy's and Cipla said they are preparing for new launches in the U.S.

Additionally, price erosion in the U.S. market - where lower prices amid stiff competition affect drugmakers' margins - is expected to fall to the single digits over the next 12 to 18 months from double digits in 2022, the research firm said, likely improving returns.

(Reporting by Rishika Sadam)