India's drug export industry players such as Sun Pharmaceutical Industries, Dr. Reddy's Laboratories ($DRREDDY) and Glenmark Pharmaceuticals among others took an estimated combined hit of as much as INR5 billion ($75 million) from the sharp fall in the British pound after a U.K. referendum told the country to leave the European Union--in what has become known as "Brexit."
That initial estimate comes from a back-of-the-envelope tally the Times of India received from industry sources since the pound plunged against the dollar after the June 23 vote, to a 31-year low of $1.3151 from levels a tad above 1.500 to the dollar. It had risen hugely in the hours leading up to the referendum vote on the back of polls suggesting the "remain" camp had won, but quickly dropped after it became apparent that the "leave" campaign had triumphed.
''We have seen an instant weakening of pound, which will have its impact on various businesses, and for the pharma industry in Europe, we have to wait and watch how the guidelines and regulatory frameworks emerge due to Brexit," Glenn Saldanha, chairman and managing director at Glenmark told the newspaper.
Domestic ratings agency ICRA suggested that while the weaker currency was the initial hit, other factors will move to the fore as policy impacts are felt.
"The European markets account for 10-13% of total (Indian drug industry export) revenues," Subrata Ray, senior vice president and co-head of corporate sector ratings at ICRA told the Times of India.
"Accordingly, the impact of GBP and Euro depreciation is likely to be limited. However, given the fact the profitability in the European business has been low vis-a-vis other markets on account of price cuts and shift towards tender market, currency depreciation and any possibility of further austerity measures may impact the attractiveness of the market."
Biocon managing director and chairwoman Kiran Mazumdar-Shaw suggested that another way to look at the weaker pound and possible downturn is as an opportunity to buy U.K. firms.
"Of course, it also means that Indian companies can actually look at M&A activity in UK," Mazumdar-Shaw told the Hindu BusinessLine. "What the UK economy would look like in the future? It might be a very attractive and fast developing emerging economy."
Domestic drug lobby group the Indian Pharmaceutical Alliance said that Indian firms such as Dr. Reddy's Laboratories and Wockhardt that have manufacturing operations in the U.K. may see an initial gain, while on the regulatory front the status of the European Medicines Agency and the U.K. Medicines and Healthcare Regulatory Agency will likely continue with current operations for some time. There are however concerns that the EMA, which is based in London, will need to leave the country's capital--with the U.K.'s future drug regulatory system under a shadow.
Indian drug firms took a hit last year on shipments to the European Union after a series of drug test data fraud charges hit testing laboratories and firms that ship to the market.
- here's a story from the Times of India
- and one from the Hindu BusinessLine
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