Pharma: Is the 'Dragon' far behind? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Pharma: Is the 'Dragon' far behind?

Oct 10, 2006

In the global economy, both India and China have staked claims as nations to watch out for in the future. Both these countries along with their counterparts Russia and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest growing economies by 2050. While much has been said about the impact of India and China on the dynamics of the global economy, here, we shall attempt to find out as to which country has the edge in the global pharmaceutical space. The Chinese edge...
As mentioned earlier, China has proven its capabilities in the manufacturing space and the same advantage extends to the pharmaceutical segment as well. Being a cost-efficient country, it has emerged as the preferred destination for outsourcing intermediates (used in the manufacture of APIs) and APIs. Chinese companies have forged growing relationships with top global pharma companies (referred to as Big Pharma) in custom manufacturing and also for outsourcing older APIs. Besides this, China also has the edge over India in the biotech field due to the presence of high quality research institutions and the Chinese government's commitment.

The number of DMF (Drug Master File) filings made by Chinese companies have also been witnessing a rise in recent times, highlighting the growing interest of multinationals in the country. In fact, India too, has been sourcing intermediated from China for the purpose of manufacturing low cost APIs.

Where India scores...
That said, while China is set to provide stiff competition to India in the API space, it still lags behind in the formulations segment. This can be gauged by the fact that in the global generics market, while India accounts for 25% of the ANDAs filed in the US market, China has yet to file a single ANDA. India's advantage vis--vis China lies in R&D, availability of scientific manpower, laws that have begun to recognise intellectual property and Indian companies having alliances with global pharma companies in research, generics and manufacturing. Even in the API space, while China has been growing at a fast pace, it still falls behind India in terms of overall filings made until now.

India is making increasing strides in the global generics space, as can be evinced by the progress made by Tier-I companies such as Ranbaxy and Dr.Reddy's. Ranbaxy is already ranked amongst the top ten generic companies in the world. Both of them have emerged as major contenders in the consolidation activity gaining momentum in the generics market and have also been aggressive in challenging innovator patents (Para IV). In contrast, the Chinese Tier -I company, Zhejiang Hisun, has yet to make a significant mark in the global generics market.

India VS China: Top company comparison
  Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
Source: Newport Strategies

The equation: Present and future
Given the fact that the 'low cost distinction' is no longer a trait unique to the Indian pharmaceutical sector with the resurgence of Chinese companies in this area, Indian companies will have to focus more than ever on moving up the value chain. This has to be by capitalising on the generics opportunity (in both plain vanilla and value added products), strengthening efforts on the NDDS and NCE research front and continuing relationships with global pharma in research and manufacturing. At present, on an overall basis, India does have the edge over China in terms of relevance to the global pharmaceutical industry. That said, Indian companies need to capitalise on the window of opportunity currently available before the competition from China begins to pose a significant threat.


Equitymaster requests your view! Post a comment on "Pharma: Is the 'Dragon' far behind?". Click here!

  

More Views on News

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

How to Save Money by Exiting Stocks Before They Fall podcast (Views On News)

Sep 24, 2020

A penny saved is a penny earned. It doesn't matter where you enter. All that matter is where you exit. Watch this video to identify an opportune time to exit your investments and book profits.

ICICI Prudential ESG Fund: Aims for Sustainability (Outside View)

Sep 24, 2020

PersonalFN briefly explains the newly launched fund : ICICI Prudential ESG Fund.

What to Do if there is a Second Wave of the Stock Market Crash (Profit Hunter)

Sep 24, 2020

Here's what I think investors should do in this selloff.

IDFC Mutual Fund Starts Campaign 'SIFI'. Should Buy Into the Idea? (Outside View)

Sep 23, 2020

IDFC Mutual Fund is taking the road less travelled and hence started a campaign SIFI (SIP in Fixed Income) to promote the concept of SIP for its debt funds investors.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Sep 24, 2020 (Close)

MARKET STATS