Top 5 Indian Pharma Stocks Set to Shine in the Post-Biosecure Act Era

Long hailed as the "Pharmacy of the World," India's pharmaceutical industry has undergone a remarkable transformation.

From humble beginnings, it has ascended to become a global powerhouse, contributing significantly to global healthcare.

This meteoric rise is a testament to the country's robust manufacturing capabilities, skilled workforce, and cost-effective operations.

Now, a confluence of factors is propelling the industry to even greater heights.

The US Biosecure Act, aimed at reducing reliance on Chinese pharmaceutical supply chains, has created a golden opportunity for Indian manufacturers.

This geopolitical shift, coupled with India's strong foundation in pharmaceuticals, is set to supercharge the domestic industry.

India's pharmaceutical exports have been on a steady rise, reaching approximately US$ 25 billion in FY23.

The industry is a significant contributor to the country's GDP and employment. With the growing global emphasis on healthcare and the increasing prevalence of chronic diseases, demand for pharmaceuticals is expected to surge.

The Biosecure Act presents a huge opportunity for Indian pharmaceutical companies. If passed, it is estimated that around 120 drug projects in the US could be impacted by the restrictions on Chinese sourcing.

India, with its robust manufacturing capabilities and cost-effective solutions, is well-positioned to capitalise on this shift.

Moreover, the Indian government's initiatives such as the Production Linked Incentive (PLI) scheme have provided a significant boost to the sector by attracting investments and promoting domestic manufacturing.

These factors combined are expected to propel the Indian pharmaceutical industry to new heights, making it a global leader in drug production and supply.

Five companies are well-poised to benefit from this ne development.

Let's look at what they do and what the future holds for them.

#1 Divis Laboratories

First on our list is Divis Laboratories.

Divis Laboratories is a leading global player in the Contract Research and Manufacturing Services (CRAMS) sector.

The company, renowned for its expertise in complex APIs (Active Pharmaceutical Ingredients) and intermediates, has built a strong global presence.

Its focus on niche products and robust R&D capabilities have been instrumental in its growth journey.

Divi's Laboratories Financial Snapshot (2020-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	9.45%	25.93%	29.06%	-10.62%	0.89%
Operating Profit Margin (%)	36.89%	41.82%	44.47%	34.71%	32.25%
Net Profit Margin (%)	25.23%	28.38%	32.94%	23.33%	20.28%
Return on Capital Employed(%)	25.36%	32.07%	35.06%	19.36%	16.46%
Return on Equity (%)	19.30%	23.90%	28.16%	14.89%	12.15%

Data Source: Equitymaster

The business has done well over the last few years. Between 2020-2024, the revenue has grown at a CAGR (compounded annual growth rate) of 9.9% and the net profit has delivered a 3.4% growth. This has also helped propel returns over the years.

The 5-year average return on capital employed (RoCE) and return on equity (RoE) stand at 25.6% and 19.7%, respectively.

Divis Laboratories continues to navigate a challenging generic pharmaceuticals landscape marked by price pressures.

However, the company's established products maintain steady demand. Over the past two years, strategic investments and expansion initiatives have yielded positive results, with emerging generic products gaining market share.

The company's pipeline of future generics is robust, with regulatory approvals pending in multiple global markets.

Divis' custom synthesis business remains strong, with a steady inflow of new projects across various clinical stages. The company is capitalising on the success of existing commercial projects and exploring opportunities in the peptide space.

To further solidify its position, Divis is entering into a long-term supply agreement with a multinational corporation and investing Rs 7 billion (bn) in capacity expansion. This new facility is expected to be operational by January 2027.

The company plans to allocate Rs 15 bn in FY25.

To know more about the company, check out its financial factsheet and latest financial results.

#2 Laurus Labs

Next on this list is Laurus Labs.

Laurus Labs is a leading multinational pharma and biotechnology company headquartered in Hyderabad, India. the company focuses on active pharmaceutical ingredients (APIs), lower-cost versions of brand-name drugs, and custom synthesis.

Laurus Labs is at the forefront of healthcare innovation. The company's ImmunoACT cancer therapy offers a groundbreaking and affordable treatment option compared to global counterparts.

Laurus is also investing heavily in gene therapy, with a focus on in-licensing and developing innovative solutions.

The company's R&D efforts have yielded significant progress, resulting in new product launches and expanded partnerships.

Strategic collaborations, such as the joint venture with KRKA and the CDMO contract, are driving growth.

To address the growing demand for cell and gene therapies, Laurus is expanding its manufacturing capabilities. The commercial launch of NexCAR19 and the construction of a new CAR-T facility demonstrate the company's dedication to improving patient access to life-saving treatments.

Laurus Labs Financial Snapshot (2020-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	22.94%	70.46%	2.35%	22.13%	-16.20%
Operating Profit Margin (%)	20.15%	32.71%	29.13%	26.46%	15.95%
Net Profit Margin (%)	9.01%	20.44%	16.87%	13.19%	3.34%
Return on Capital Employed(%)	14.14%	39.82%	25.97%	22.97%	6.64%
Return on Equity (%)	15.39%	45.15%	28.05%	21.63%	4.15%

Data Source: Equitymaster

Between 2020-2024, Laurus Labs' revenue has grown at a CAGR of 17.2%, while net profit has increased at 12.4%.

This has expanded the RoCE and RoE which have averaged 21.9% and 22.9% over the last 5 years.

Capital expenditure reached approximately Rs 7 bn last financial year, with continued investment in CDMO and bio divisions planned at a similar level in FY25.

To know more about the company, check out its financial factsheet and latest financial results.

#3 Syngene International

Syngene is Biocon's global innovation-focussed subsidiary. It is an integrated service provider that offers end-to-end drug discovery, development and manufacturing services on a single platform.

The company does both CRO and CDMO.

Syngene International derives almost 95% of its revenues from exports. A third of the company's revenues come from long-term dedicated contracts with a contractual commitment of five years or more.

It has long-term research contracts with reputed clients like BMS, Baxter, Amgen, and Herbalife. And about 25% of its customers have engaged with the company for over five years.

In the past 5 years, the revenues and net profit have grown at a CAGR of 13.5% and 8.9%, respectively. This has resulted in a respectable 5-year average RoCE and RoE of 15.8% and 15.4%, respectively.

Syngene International Financial Snapshot (2020-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	10.84%	7.57%	19.62%	20.38%	9.61%
Operating Profit Margin (%)	34.77%	33.71%	32.60%	31.45%	31.64%
Net Profit Margin (%)	20.48%	18.54%	15.20%	14.53%	14.60%
Return on Capital Employed(%)	19.60%	15.40%	13.24%	15.43%	15.55%
Return on Equity (%)	20.21%	16.59%	13.29%	13.73%	13.18%

Data Source: Equitymaster

Syngene's first-quarter performance largely met expectations. Dedicated centers and biologics manufacturing services showed steady growth, while discovery services were impacted by reduced US biotech funding.

To address this, the company launched a new protein production platform, accelerating drug development timelines.

Capital expenditure of approximately US$ 40 million was allocated to expand research capabilities, including a new automated compound management facility and a DMPK biology lab in Hyderabad. Additional investments enhanced manufacturing and quality control for small molecules and biologics.

Despite industry challenges, Syngene remains committed to long-term growth, carefully managing investments based on demand and funding expansion internally.

To know more about the company, check out its financial factsheet and latest financial results.

#4 Suven Pharma

Fourth on our list is Suven Pharma.

Suven Pharma is a research-driven company with a core focus on drug discovery and development. While its primary strength lies in early-stage research, the company is increasingly leveraging its expertise to offer contract development and manufacturing services (CDMO).

The company has undergone significant strategic restructuring in the past year, focusing on strengthening its commercial, R&D and M&A capabilities. This strategic overhaul aims to position Suven as a preferred partner for pharmaceutical companies.

A successful FDA audit and other regulatory approvals underscore the company's commitment to quality and compliance.

Despite recent industry challenges, Suven Pharma remains optimistic about the future, given the favourable industry environment lifted by the increase in the clinical pipeline and China Plus One dynamics.

The company has witnessed a surge in RFQs and inquiries (more than doubled in comparison to the previous year), indicating a growing demand for its services.

A strategic shift towards lateral wins and commercial molecules is expected to drive future growth. The expansion of the specialty chemicals business unit, coupled with investments in technology and infrastructure, positions Suven for long-term success.

Recently, the company has significantly expanded its CDMO capabilities with the acquisition of a controlling stake in Sapala Organics. Sapala, a Hyderabad-based company, specialises in oligonucleotide drugs and nucleic acid building blocks, a rapidly growing and high-potential market segment.

This strategic acquisition aligns with Suven's goal of building a comprehensive CDMO platform. By combining Sapala's expertise with Suven's existing capabilities, the company aims to offer a broader range of services to its clients.

The deal is expected to be EPS accretive from the first year and will be funded through internal accruals.

Sapala's strong financial performance, with a CAGR of 18% over the past three years, and its unique capabilities in oligonucleotide synthesis make it a valuable addition to the Suven portfolio.

Suven Pharma Financial Snapshot (2020-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	125.11%	20.20%	37.96%	-1.83%	-19.72%
Operating Profit Margin (%)	48.32%	45.28%	51.03%	46.26%	44.49%
Net Profit Margin (%)	38.02%	35.89%	34.35%	30.66%	28.56%
Return on Capital Employed(%)	50.21%	40.76%	45.92%	33.41%	21.22%
Return on Equity (%)	44.58%	35.78%	33.52%	25.21%	15.87%

Data Source: Equitymaster

The business has enjoyed a great run over the past five years. The revenue has more than doubled in the last 5 years, while the profitability has also doubled over the same time.

This has expanded the RoCE and RoE which have averaged 38.3% and 30.9% over the last 5 years.

To know more about the company, check out its financial factsheet and latest financial results.

#5 Piramal Pharma

Last on the list is Piramal Pharma.

Piramal Pharma is a global pharmaceutical company with a strong presence across the value chain. The company, operates across 17 facilities in India, Europe, and North America, serving customers in over 100 countries.

Piramal Pharma has established a robust global footprint, with a significant portion of its revenue (41%) derived from North America and CDMO services accounting for 58% of total sales.

Piramal Pharma Financial Snapshot (2020-2024)

	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	5.49%	6.90%	14.58%	14.58%
Operating Profit Margin (%)	22.73%	16.77%	10.53%	14.56%
Net Profit Margin (%)	11.92%	5.15%	-2.30%	0.19%
Return on Capital Employed(%)	13.06%	7.10%	1.95%	5.07%
Return on Equity (%)	14.90%	6.11%	-2.77%	0.24%

Data Source: Equitymaster

Between 2021-2024, the sales have reported a CAGR of 5.3%.

The returns have been muted, with the RoCE and RoE averaging at 6.8% and 4.6% over a 5-year period.

The CDMO business has been a key growth driver, contributing significantly to the company's overall performance.

This segment has witnessed sustained growth, driven by a consistent inflow of new orders, particularly in the commercial manufacturing of on-patent molecules.

While early-stage development faced challenges due to reduced biotech funding, the company remains optimistic about future growth in this area.

Piramal Pharma's complex hospital generics business has also demonstrated growth, particularly in products like sevoflurane and isoflurane.

However, overall profitability was impacted by price pressures in the US market. The company is strategically expanding production capacity to address growing demand and is focused on building a differentiated product pipeline within the intrathecal and injectable pain management segments.

Additionally, Piramal Pharma's strategic investment in Yapan Bio, a CDMO specialising in vaccines and biologics, emphasises its commitment to expanding its offerings in this high-growth segment.

To know more about the company, check out its financial factsheet and latest financial results.

In conclusion

The Indian pharmaceutical industry is on the brink of a golden age. The synergy of the US Biosecure Act, India's robust manufacturing capabilities, and rising global demand creates a lucrative opportunity for domestic firms.

With government support through initiatives like the PLI scheme, the future for Top Indian pharma companies looks bright.

Increased government investments and more business inquiries from US companies position Indian CDMOs to capture a larger share of the global market.

While competition from countries like Ireland and Singapore is evident, India's strong pharmaceutical foundation and strategic focus on the CDMO sector provide a competitive edge.

However, the path to success isn't without challenges. Intense competition within the Indian market and persistent regulatory hurdles are significant factors to consider.

Additionally, geopolitical tensions and potential shifts in government policies could influence the industry's direction.

For investors, meticulous research and due diligence are important. By analysing individual company strategies, risk profiles, and financial health, investors can make informed decisions and position themselves to benefit from the resurgence of the Indian pharmaceutical industry.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...