Pharma: Wait and see! - Views on News from Equitymaster

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

  • MyStocks


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

Pharma: Wait and see!

Dec 13, 2004

The new patent regime is closing in the Indian pharmaceutical sector in few days from now. From January 2005, it will become applicable and Indian manufacturers will not be able to bring out generic version of patented drugs. Despite the ongoing debate concerning the implications of the patent regime, we believe that such a regime is here to stay. But it may be a refined one. The salient aspects of the 3rd amendment of the patents act are:

  1. It will help India to progress into product patent regime in field of technology.

  2. It will remove the EMR (exclusive marketing rights) provisions from the 2nd patent amendment act.

  3. It will make provisions regarding ‘Compulsory Licensing’ in case of national medical emergency.

  4. It will bring in provisions regarding the extension of patent.

While these are important features, which will ensure an effective patent act in the country, there are political issues, which might hamper the smooth transition. While several section of the government is against the extension of patent clause, we believe that other issues like compulsory licensing will become clearer after the bill is passed in the parliament.

As far as implications on the domestic pharma companies are concerned, investors need to understand that a majority of the branded drugs sold in India are outside the purview of product patents. So, the Indian manufacturers will continue to sell these drugs. Here companies like Cipla, Ranbaxy, Nicholas Piramal and Cadila will take the lead, as they have a strong brand portfolio. But at the same time, the impact on the domestic companies will be more apparent beyond 2007, as new product introduction by these companies might slow down in light of the new product patent law. However, there are some domestic companies, which have started strengthening their domestic field force to keep an option of partnering with MNC companies that do not have a presence in India. Companies like Nicholas Piramal and Cadila Healthcare are well into this process.

In the new regime, MNC pharma companies are likely to benefit the most. These companies will have advantage of their strong drug pipeline of the parent majors in the long run. We do not expect MNC pharmaceutical companies to register immediate gains post 2005. Some companies are planning to immediately launch new products while some have adopted a wait and watch strategy. According to us, companies like Glaxo, Pfizer and Aventis are likely to benefit the most in this scenario. This is also because of their strong marketing network.

This apart, Indian companies will also have opportunities in contract manufacturing, contract research and co-marketing. Further, R&D initiatives undertaken by Indian pharma companies could see the launch of innovative drugs by these companies. Moreover, the potential of the global generics market, given the fact that majority of the block buster drugs are expected to go off patent in the next few years, is also a good opportunity for domestic pharma companies.

Equitymaster requests your view! Post a comment on "Pharma: Wait and see!". Click here!


More Views on News

5 Stocks to Watch Out for Amid the Omicron Outbreak (Views On News)

Dec 3, 2021

As the new variant of Covid-19 emerges, keep an eye on these stocks.

3 Indian Pharma Companies that are Investing Big Time for the Future (Views On News)

Nov 9, 2021

In 2021, R&D of pharma companies roared to life in a never-before-seen way.

Demerger of Financial & Pharma Businesses puts Piramal Enterprises in Limelight (Views On News)

Oct 8, 2021

The company's shareholders will be issued 4 shares in the demerged entity for every 1 held in Piramal Enterprises.

This Stock Just Made a Historical Debut on the Exchanges (Views On News)

Nov 15, 2021

Shares of the company listed at premium of 253% from its IPO price, the highest ever.

Krsnaa Diagnostics IPO Opens Tomorrow: Key Points to Consider (Views On News)

Aug 3, 2021

Krsnaa Diagnostics grey market premium is at around Rs 440 from its issue price of Rs 933-954.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 9, 2021 03:37 PM