3 Indian Pharma Companies that are Investing Big Time for the Future

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  • Nov 9, 2021 - 3 Indian Pharma Companies that are Investing Big Time for the Future

3 Indian Pharma Companies that are Investing Big Time for the Future

Nov 9, 2021

3 Indian Pharma Companies that are Investing Big Time for the Future

According to the Indian Economic Survey 2021, the Indian pharma market is estimated at US$42 bn in 2021 and is likely to reach US$65 bn by 2024.

Further, it's projected to expand to reach around US$120-130 bn by 2030. To reach this milestone, companies are upping their R&D expenses.

For fiscal 2021, the average R&D expenses constituted around 7.2% of the total revenues of the pharma companies. The cumulative R&D expenditure eventually reached an approximate US$ 3.03 bn.

Of late, vaccine research has advanced as scientists and governments are working faster than ever before.

While 2020 was a year to forget, R&D of pharma companies roared to life in a never-before-seen way by creating new drugs, vaccines and tests for the pandemic that ravaged the world.

The Covid-19 pandemic saw technology such as messenger RNA, never before used in a marketed product, demonstrate success and potential to tackle other diseases such as cancer.

Let's take a look at top pharma companies which are investing heavily for the future. These companies have spent the most on research and development (R&D) in terms of spends relative to revenue.

#1 Suven Life Sciences

Suven Life Sciences has been working towards developing new molecules and compounds in the complex CNS (central nervous system) space.

It's present in niche areas of cognitive impairments such as amnesia, dementia, narcolepsy, Alzheimer, delirium, etc. CNS is the second largest therapeutic category in the pharma industry.

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Presently, Suven Life has a total of 15 molecules in development out of which 11 are in development phases and 4 have reached clinical phases. The company operates two R&D centers in the state of Telangana.

During fiscal 2021, the company spent 311.2% of its revenues or Rs 419.4 m on R&D.

And that's not all. In the previous year, it had spent Rs 437.7, or 303.6% of its revenues on R&D.

This just shows how heavily Suven Life Sciences is investing in the future.

Suven Life Sciences' R&D Spend Over the Years

(Rs m) Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21
R&D Expenditure 589.4 709.6 697.3 639.0 647.9 437.7 419.4
% of Revenues 11.0 15.8 13.0 10.0 10.0 303.6 311.2
Data Source: Ace Equity

The amount spent on R&D was higher in the previous years if compared with 2020 and 2021.

But at that time, the company was a merged entity. In fiscal 2019, the company demerged its CDMO business to Suven Pharmaceuticals to continue to focus on discovery & development.

Till date, the company has invested close to Rs 3 bn towards clinical trials and Rs 6 bn towards development efforts of molecules.

Over the past one year, shares of the stock has delivered returns of 127%.

#2 Wockhardt

Wockhardt is a global pharma and biotech company and is one of India's leading research-based global healthcare firms with relevance in the fields of pharma, biotechnology, and a chain of advanced super specialty hospitals.

For financial year ending March 2021, the company has spent a total of Rs 6,217.8 m on R&D. That accounts for 66.9% of its turnover.

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This is the highest it has spent on R&D. In the previous years, R&D expenses have accounted for a max 15% of its revenues. Its R&D expenditure includes capital as well as recurring expenditure.

Wockhardt's R&D Spend

(Rs m) Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21
R&D Expenditure 2,628.4 3,011.7 2,585.5 1,900.1 1,723.3 1,376.7 6,217.8
% of Revenues 13.9 15.3 12.1 9.3 8.4 11.6 66.9
Data Source: Ace Equity

This year, the Mumbai based company considerably reduced its term debt.

It also tied up with global players for manufacturing and supply of vaccines and respiratory drugs.

Wockhardt's has three R&D centres in India, UK, and USA.

In fiscal 2021, Wockhardt became the only company in the world to hold QIDP status for six antibiotics.

Wockhardt's R&D efforts primarily focus on new chemical entities (NCEs), abbreviated new drug application (ANDAs), biosimilars, and novel drug delivery system (NDDS).

Over the past one year, shares of the company have gained 52%.

For more details about the company, you can have a look at Wockhardt's factsheet and quarterly results on our website.

#3 Alembic Pharma

Alembic Pharma is in the business of development, manufacturing, and marketing of pharma products i.e. formulations and APIs. It has 3 R&D facilities.

It has high R&D allocation with new capabilities being developed across injectable, oncology, dermatology, and ophthalmology in the last 5 years.

The company has a large product basket in the US.

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For fiscal 2021, the company spent Rs 6,944 on R&D, which accounted for 14.1% of its turnover. In the previous year, it had spent Rs 6,216.5 m, or 15% of its turnover.

Alembic Pharma's R&D spend has been online since March 2017. Since then, it has spent a minimum of 14% of its turnover on R&D.

This year, Alembic's partner Rhizen Pharmaceuticals AG, a clinical-stage, oncology-focused biopharma company, received approval from USFDA for its anti-blood cancer drug.

The company also added 3 new plants for international sales. It cumulatively invested over Rs 18 bn in all these projects.

Alembic Pharma has over 200 products in the R&D pipeline.

Major trends it's betting on include needle-free injectors as diabetes, cancer and several other chronic diseases are domains where injectables are increasingly becoming the chosen alternative.

Shares of the company has underperformed its peers and has fallen 23% in the past one year.

They have been on a downtrend after the company withdrawn its fiscal 2022 earnings guidance and also heightened concerns about sales in the US, going ahead.

To know more, check out Alembic Pharma's 2020-21 annual report analysis.

Which other pharma companies are spending heavily on R&D?

Apart from the above, here are other pharma companies which are spending huge amount in absolute terms on R&D.

Largest Spenders of R&D in Absolute Terms

(Rs m) R&D Expenses % of Turnover
Lupin 13,477.50 11.5
Dr. Reddy's Laboratories 13,104.00 9.8
Sun Pharma 10,374.10 8.3
Cadila Healthcare 9,184.00 12.3
Aurobindo Pharma 8,404.60 5.3
Cipla 8,254.90 5.7
Data Source: Ace Equity

Apart from these, there are a few pharma companies which need a special mention because of their massive capex and new product launches.

One of them is Sequent Scientific, which is mainly engaged in the business of animal pharmaceuticals.

The company's API facility at Visakhapatnam is the only USFDA-approved dedicated facility for animal API production in India.

It has a pipeline of 35 formulation products with more than 10 pending filings in the US targeted over the next 2-3 years. A majority of the products are the high-margin injectable dosage forms and animal targeted drugs.

Sequent Scientific, through its animal health business subsidiary Alivira, is the largest animal healthcare company from India.

It has 4 global R&D centers and a capex of Rs 900 m, planned for the next two years.

Another company which needs a special mention is Sun Pharma, which has spent massive capex for specialty molecules.

Sun Pharma has been developing a portfolio of niche and complex molecules for the US market. It has invested in growing its specialty business with products launched in dermatology and ophthalmology.

In 2019, the company launched Cequa for the treatment of dry eye disease in the US. Since then, Cequa has become the fastest growing molecule in the market.

Two other companies which are a part of this list are Biocon and its sister firm Syngene International.

Biocon is a pure play R&D company.

Over the last year, the Indian pharma industry played a crucial role in developing diagnostic tests and manufacturing drugs for Covid-19 treatment.

The pandemic may as well turn out to be a blessing in disguise for pharma companies as it pushed them to expedite focus on R&D.

Pharma companies' efforts have been further supplemented by the government's production-linked incentive (PLI) scheme. The department of pharmaceuticals has initiated a PLI scheme to promote domestic manufacturing by setting up greenfield plants with a cumulative outlay of Rs 69.4 bn from fiscal 2021 to fiscal 2030.

As the third-largest producer of pharma products in the world, India has received global attention with expectations to meet global demand.

However, for a brighter future, pharma companies will need to embrace the right opportunities and spend as more as possible on R&D.

All being said, it must be noted that getting permission for clinical trials in India is still very difficult.

While some companies do it abroad, that's not very cost effective. That's the problem with new pharma technology in India.

We may see a different picture if companies optimise the potential of digital technologies and if the drug development process, from discovery to trials to regulatory approval, becomes faster and cheaper.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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...

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