Indian Pharmaceuticals Industry Report - Pharmaceuticals Sector Research & Analysis in India - Equitymaster
X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.

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?  

Pharmaceuticals Sector Analysis Report 

[Key Points | Financial Year '17 | Prospects | Sector Do's and dont's]

  • The Indian Pharmaceutical market (IPM) accounts for approx.1.5% of the global pharmaceutical industry in value terms and 20% in the volume terms. The IPM is valued at Rs 1.11 trillion for the year ending March 2017 MAT (Moving Annual Total) by All India Organisation of Chemists and Druggists (AIOCD). The growth in 2017 stood at 10% over the same period last year. Owing to robust historical growth, many MNC companies have active presence in the Indian pharma space.
  • The IPM is highly fragmented with about 24,000 players (330 in the organised sector). The top ten companies including domestic and MNC companies make up for more than a third of the market. The market is dominated majorly by branded generics, which constitutes nearly 70% of the overall market. Over the counter (OTC) medicines and patented drugs constitute 21% and 9% respectively.
  • Besides the domestic market, Indian pharma companies also has a large chunk of their revenues coming from exports. Major companies have revenues coming in from the sale of intermediates, active pharmaceutical ingredients (APIs), and formulations in various global markets. These include developed markets like US, Europe and Japan and semi developed markets across the world. Markets. , Some companies also derive revenues by providing custom research and manufacturing services to innovator companies. Biopharmaceuticals is also increasingly becoming an area of interest given the complexity in manufacture and limited competition.
  • The past few years have been glorious ones for the Indian companies, as major blockbusters lost their patent protection, paving way for generics. However, every passing year is leaving lower patented drug opportunities for the Indian companies for the launch of generics. Thus, Indian pharma companies have increased their R&D expenses. The companies are spending more to establish niche product portfolios for the future.

How to Research the Pharmaceutical Sector (Key Points)

  • Supply
  • Higher for traditional therapeutic segments, this is typical of a developing market. Relatively lower for lifestyle segment.
  • Demand
  • Very high for certain therapeutic segments. Will change as life expectancy, literacy increases.
  • Barriers to entry
  • Distribution network, patents, developing and manufacturing capabilities,
  • Bargaining power of suppliers
  • Varies from market to market For instance, consolidation in US has led to pricing war in generics, In India, distributors are increasingly pushing branded products in a bid to earn higher margins.
  • Bargaining power of buyers
  • High, a fragmented industry has ensured that there is widespread competition in almost all product segments. Currently, the domestic market is also protected by the DPCO.
  • Competition
  • High and fragmented owing to many small players in the industry.

top ↑

Financial Year '17

  • FY17/CY16 was quite a challenging one, particularly on the export front. On the domestic front, the year was a mixed bag for Indian companies. Post the pricing policy announced by National Pharmaceutical Pricing Authority (NPPA) in 2013-14, many MNC pharma companies got impacted. This had resulted in poor performance being reported by major MNC companies. Their performance was even below the domestic players. The trend continued for FY17 too. Over and above, government’s ban on fixed dose combinations too impacted big MNC players like Pfizer. While the ban is still contested in courts, both domestic and MNC companies saw sluggish growth. Given these challenges, the MNC companies have been taking various measures to improve their margins.
  • In the US, generic companies witnessed mixed growth. While some of the companies benefited from low competition launches, others got impacted by delay in approvals. Though there were not many blockbuster launches during the year, there were just a handful companies that displayed robust performance. On the other hand, Indian companies having presence in emerging markets were too impacted. The currencies of major countries witnessed sharp depreciation, leading to poor realisations. Further, slowdown in some countries impacted their growth. Over and above, the companies also witnessed pressures owing to slower approval rate. This was seen in regions of Latin America.
  • The industry continued to face bigger challenges on the regulatory front. The companies faced issues from the USFDA, as they lacked good manufacturing practices (GMP). While big firms like Sun Pharma and Dr. Reddy’s struggled due to the increased scrutiny by the USFDA many mid and small sized companies generated decent sales from the US market.

top ↑

Prospects

  • The IPM size is expected to grow at 9-12% CAGR between 2016-21. The growth in Indian domestic market will be boosted by increasing consumer spending, rapid urbanization, increasing healthcare insurance, drugs and so on. On the global front, the IPM is ranked 13th in terms of value. Owing to robust growth, India is likely to be the 9th largest market globally in absolute size.
  • The life style segments such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers will continue to be lucrative and fast growing owing to increased urbanisation and change in lifestyle patterns. Going forward, better growth in domestic sales will depend on the ability of companies to align their product portfolio towards these chronic therapies (cardiovascular,anti-diabetes,anti-depressants and anti-cancer)as these diseases are on the rise.
  • In various global markets, the government has been taking several cost effective measures in order to bring down healthcare expenses. Thus, governments are focusing on speedy introduction of generic drugs into the market. This too will benefit Indian pharma companies. However, despite promising outlook, intense competition and consequent price erosion would continue to remain a cause for concern. Over and above this, following GMP will be an important criterion for companies in order to grow in the global markets.
  • For the US market, Indian companies are developing niche portfolios in various segments. High margin injectables, dermatology, respiratory, biosimilars, complex generics etc. have become an area of interest. Most of the Indian pharma companies have been working on these. Major companies have increased their R&D spend to build pipeline of niche drugs. This in turn will help the company to optimize growth and margins, Thus, post patent cliff, the companies which have developed their product basket in the niche category will be ahead in the curve. Moreover, generic penetration in the US is expected increase to 86-87% over the next couple of years from 83% currently.

top ↑

Related Links for Pharmaceuticals Sector
Quarterly Results | Sector Quote | Over The Years

Views on News

The BSE HEALTHCARE Index has hit an all-time high at 14,771 (up 2.0%) (Market Updates)

Oct 15, 2018 | Updated on Oct 15, 2018

The BSE HEALTHCARE Index has hit an all-time high at 14,771 (up 2.0%). Among the top gainers in the BSE HEALTHCARE Index today are MANGALAM DRUGS and GRANULES INDIA. Meanwhile, the BSE Sensex has surged 0.3% to 35,009.

The BSE HEALTHCARE Index has hit an all-time high at 14,766 (up 2.0%) (Market Updates)

Oct 15, 2018 | Updated on Oct 15, 2018

The BSE HEALTHCARE Index has hit an all-time high at 14,766 (up 2.0%). Among the top gainers in the BSE HEALTHCARE Index today are MANGALAM DRUGS and NATCO PHARMA. Meanwhile, the BSE Sensex has surged 0.5% to 35,009.

ADVANCED ENZYME TECHNOLOGIES LTD Surges by 5%; BSE HEALTHCARE Index Up 1.8% (Market Updates)

Oct 15, 2018 | Updated on Oct 15, 2018

ADVANCED ENZYME TECHNOLOGIES LTD share price has surged by 5% and its current market price is Rs 204. The BSE HEALTHCARE is up by 1.8%. The top gainers in the BSE HEALTHCARE Index are ADVANCED ENZYME TECHNOLOGIES LTD (up 5.1%) and NATCO PHARMA (up 6.2%). The top losers are PIRAMAL ENTERPRISES (down 0.2%) and CAPLIN POINT (down 0.4%).

The BSE HEALTHCARE Index has hit an all-time high at 14,747 (up 2.0%) (Market Updates)

Oct 15, 2018 | Updated on Oct 15, 2018

The BSE HEALTHCARE Index has hit an all-time high at 14,747 (up 2.0%). Among the top gainers in the BSE HEALTHCARE Index today are MANGALAM DRUGS and GRANULES INDIA. Meanwhile, the BSE Sensex has plunged 0.1% to 35,009.

NATCO PHARMA Surges by 5%; BSE HEALTHCARE Index Up 0.7% (Market Updates)

Oct 15, 2018 | Updated on Oct 15, 2018

NATCO PHARMA share price has surged by 5% and its current market price is Rs 717. The BSE HEALTHCARE is up by 0.7%. The top gainers in the BSE HEALTHCARE Index is NATCO PHARMA (up 5.1%). The top losers are IPCA LABS (down 0.3%) and SUN PHARMA ADV. RES. (down 0.4%).

More Views on News

Most Popular

Don't Panic in This Falling Market... Do This Instead(The 5 Minute Wrapup)

Oct 5, 2018

Find companies with long term durable moats, which are correcting with the current broader market sell-off.

Why You Should Be Excited, Not Sad, About the 30% Small Cap Crash(Profit Hunter)

Oct 4, 2018

Smallcaps have corrected over 30% since the beginning of the year. Find out why Richa Agarwal views this as an opportunity rather than a threat.

Taxpayers to pay salaries of CEOs/CIOs of Mutual Funds(The Honest Truth)

Oct 5, 2018

Ajit Dayal on the crisis in the market and in the mutual fund industry.

Why Are Investors In Sundaram Small Cap Fund Anxious(Outside View)

Oct 3, 2018

A small cap fund that aims to capitalise on emerging businesses and catch them young. However, its failure in keeping volatility under check is making its investors anxious.

Biggest Corrections in the Stock of Infibeam Avenues(Chart Of The Day)

Oct 3, 2018

Infibeam plunged over 70% last week. This was the second biggest single-day fall. But Infibeam witnessed such sharp falls earlier.

More

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE HEALTHCARE


Oct 15, 2018 (Close)

COMPARE COMPANY

MARKET STATS