3 Indian Pharma Stocks Gearing Up to Manufacture a Revolutionary Obesity Drug

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Regular readers would know we spend a lot of time reading up on the recent developments in the pharma sector.

This isn't just to prepare for meetings with some of the more dynamic managements. We also want to see some very clear signals of megatrends emanating from this sector.

Ever since Morgan Stanley released its report on obesity drugs, there has been a lot of speculation about its impact on long-term consumer behavior and whether the drug could actually create a disruption in the healthcare industry.

Just to throw some numbers out there, the global market for obesity drugs could skyrocket more than 15-times - from today's $6 billion to $105 billion by the year 2030.

With Indians turning to quick commerce for convenient food solutions, the growing focus on health and the rise of obesity drugs is becoming more evident.

Some global companies have already announced plans to introduce weight loss drugs in India. Nordisk is planning to introduce them in India by 2026. Eli Lilly also plans to bring its weight-loss drug to India in 2025.

But are there any Indian companies that are looking at this opportunity and getting themselves future ready?

You bet!

Here are 3 Indian companies that are gearing up to manufacture more affordable versions of these weight-loss drugs.

#1 Dr Reddy's Laboratories

First on the list is Dr Reddy's Lab.

Dr Reddy's is an Indian multinational pharma company based in Hyderabad.

With a vast portfolio that spans oncology, gastroenterology, and cardiovascular treatments, it operates in over 25 countries, including the US, Europe, and other key emerging markets.

Known for its robust research and development (R&D) focus, the company continually innovates new products and formulations. It holds a prominent position in the global generics market, offering affordable, high-quality medicines worldwide.

Its business model is segmented into global generics and proprietary products, pharmaceutical services and active ingredients (API), branded generics, biosimilars, and over-the-counter drugs, covering a broad range of therapeutic needs.

The company stands out for its innovation in drug development and discovery.

Back in October 2023, Dr Reddy's received a go-ahead from the subject expert committee (SEC) under India's drug regulatory authority to conduct a bioequivalence study required to establish the safety and efficacy of the blockbuster weight loss drug Semaglutide.

Initially, Dr Reddy's had approached the SEC in April 2023, but it was turned down after the committee asked the company to conduct study and submit a protocol for review.

Where does Dr Reddy's stand now? Well, in its September 2024 earnings call, Dr Reddy's CEO has said that it aims to have about 15 GLP-1 drugs, used to treat obesity and diabetes, in its portfolio.

With Danish company Novo Nordisk's patent on Semaglutide set to expire in India, Dr Reddy's is trying to bring the drug to India.

This development comes at a time when Dr Reddy's is rising multiple tailwinds... it stands to benefit from a weaker rupee as it enhances its export potential.

Additionally, the new US government's approach to drug pricing may create a supportive environment for Indian pharma exports.

Coming to its financials, Dr Reddy's has achieved a compound annual growth rate (CAGR) of 12.6% in revenue and an impressive 23.4% growth in net profit over the past five years.

The company is currently developing a new small molecule for immuno-oncology and differentiated products to improve existing therapeutic agents. The company is also investing in digital therapeutics and cell and gene therapies.

The company also aims to be carbon neutral in its direct operations by 2030, and to reduce indirect carbon emissions by 12.5% across its supply chain by the same year. The company also plans to use 100% renewable power by 2030.

In the past 1 year, shares of the company have gained 19%.

For more details, see the Dr Reddy's Lab company fact sheet and quarterly results.

#2 Sun Pharma

Next on the list is Sun Pharma.

India's largest pharma company is engaged in the manufacturing, development, and marketing of an extensive range of branded and generic formulations as well as APIs.

Its diverse portfolio includes generics, branded generics, and speciality products, allowing it to cater to a wide range of therapeutic needs.

With approximately 43 manufacturing facilities spread across India, the Americas, Asia, Africa, Australia, and Europe, Sun Pharma has established a robust global presence.

Additionally, the company operates six advanced research and development (R&D) centres in India, Israel, Canada, and the USA, focusing on generics, biological support, and new drug development.

The company's distribution network spans over 150 countries across six continents. It also holds a prominent position in India, with its top 30 brands featured in India's top 300 pharma brands.

The US market contributes over 60% of Sun Pharma's annual revenue, making it a significant player in one of the world's largest healthcare markets.

In June 2024, Sun Pharma announced results from its study of the weight loss drug - Utreglutide.

While other companies are taking the generic path, Sun Pharma wants to be the innovator and is working on its own experimental drug.

Coming to its financials, Sun Pharma has achieved a CAGR of 10.8% in revenue and an impressive 24.6% growth in its net profit over the past five years.

Going forward, the company plans to focus on four key areas.

For its US business, it's planning to enhance its share of branded products and ensure broad product offerings to customers across multiple categories.

For India's business, the focus is on productivity enhancement and innovation.

It also plans to enhance its speciality product basket for its emerging market business, maintain leadership, and enhance its presence in a high-growth market in its global consumer business.

In the past 1 year, shares of the company have gained 45%.

For more details, see the Sun Pharma company fact sheet and quarterly results.

#3 Biocon

Last on the list is Biocon.

Biocon is India's largest and fully integrated innovation-led biopharmaceutical company.

The company is engaged in manufacturing of biotechnology products and research services. It focuses on the research and development of therapies for the treatment of chronic conditions.

It offers a range of APIs, branded formulations, complex biologics and biosimilars, including monoclonal antibodies (MAbs), RH-Insulin and insulin analogues.

Interestingly, Biocon is the first company to win UK authorisation to offer a generic version of Novo Nordisk's Saxenda weight treatment.

The company's CEO Siddharth Mittal has said that they expect Biocon's generic version of this obesity drug to be approved in the US by 2025.

In March 2024, Biocon, through its European partner Zentiva, received approval for its complex formulation Liraglutide injection, used in the treatment of weight management.

In April 2024, the company entered into an exclusive licensing and supply agreement with Biomm SA, a specialty pharma company in Brazil, for the commercialisation of Semaglutide, a drug product used to improve glycemic control in adults with type-2 diabetes.

In fact, in recent months, the company has received multiple approvals for a variety of drugs. In September 2024, Biocon Pharma, a wholly owned subsidiary of Biocon, received approval for its ANDA for Sacubitril/Valsartan tablets. This combination drug is crucial in treating chronic heart failure in both adults and pediatric patients.

Earlier in August 2024, Biocon secured another important USFDA approval for its ANDA for Daptomycin for injection. This drug is used to treat complicated skin infections and Staphylococcus aureus infections in the bloodstream.

In addition to these approvals, Biocon also received an establishment inspection report (EIR) from the USFDA for its greenfield API facility in Visakhapatnam. This facility is now cleared to begin commercial supplies to the US market, a move that is expected to significantly boost Biocon's manufacturing capacity and revenue potential.

Coming to its financials, Biocon has achieved a CAGR of 22% in revenue and a 5% growth in its net profit over the past five years.

In the past 1 year, shares of the company have rallied 32%.

To know more, check out Biocon's financial factsheet.

In Conclusion

Apart from the above 3 companies, there's also Cipla which could partner with Eli Lilly to market their obesity drugs in India.

In conclusion, global giants like Novo Nordisk and Eli Lilly have seen impressive revenue growth in recent years, fueled by popular weight loss products such as Ozempic, Wegovy, Mounjaro, and Zepbound.

This success even propelled Novo Nordisk to become Europe's most valuable company in September 2023.

So, can Indian companies chart a similar trajectory?

Well, they sure are up for the task...

The Indian pharma sector has undergone a remarkable transformation from its nascent stages to being the pharmacy of the world.

Today, India caters to 60% of the world's demand for vaccines, 40% of the generic demand in the US, and 25% of the medicines in the UK.

India's cost competitiveness has given it the power to manufacture and sell medicines at a competitive rate.

To add to this, government boost to the sector, growing population, increasing awareness of health, and high ageing population across the globe are all the driving factors taking the industry to a staggering US$ 130 bn valuation by 2030.

Nevertheless, it's crucial to be aware of potential challenges.

Regulatory hurdles, global demand fluctuations, and intense competition could impact profitability and market share.

For investors, thorough evaluation of each company's financial health, market position, and adaptability is essential.

You can get started with the best Indian pharma stocks on the Equitymaster Screener.

Happy Investing!

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...