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 '18 | Prospects | Sector Do's and dont's]

  • The Indian Pharmaceutical market (IPM) accounts for approx. 3% of the global pharmaceutical industry in value terms and 20% in the volume terms. Indian pharmaceutical market is the world’s largest supplier of generic drugs, accounting for 20% of global export volume. The growth in 2018 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 '18

  • India accounts for the second largest number of Abbreviated New Drug Applications (ANDAs) and is the world’s leader in Drug Master Files (DMFs) applications with the US Indian Drugs & Pharmaceuticals sector has received cumulative FDI worth US$ 15.83 billion. Low cost of production and increasing expenditure on R&D has led to competitive pharma exports. Increasing private sector investment in research and acquisitions are driving the sector’s growth. Pharmaceutical exports from India stood at US$ 17.30 billion in FY18 as compared to US$ 16.8 billion in FY17. The industry has been growing due to its key factors such as low manufacturing cost, technical growth, skilled workforce and a diverse ecosystem. The sector is highly developed and sources its own bulk drugs & intermediates for most of its formulations.
  • 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. 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.
  • The Indian pharma market size is expected to grow at 9-12% CAGR between 2018-21. 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-diabatization-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 ↑

Prospects

  • Pharmaceutical spending in developed markets is likely to grow at 2-5% CAGR between 2018-22 compared to 5.8% in the 2013-17 period. While launch of innovative products is likely to drive growth, is expected to be balanced by patent expiries of existing products.
  • Innovation in new drug development, immunotherapy, next generation biotherapeutics, including cell-based gene therapies and digital health tools will gain importance in the future of the healthcare industry.
  • India and Russia are expected to grow faster, in comparison, averaging at 10% in the same time span, while the other pharma emerging markets will average 6-9%. India’s spending on medicines will propel its entry into the top 10 countries in 2018, and to the ninth position overall between 2019 and 2022.

top ↑

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

Views on News

ADVANCED ENZYME TECHNOLOGIES Surges by 10%; BSE HEALTHCARE Index Up 0.0% (Market Updates)

Nov 21, 2019 | Updated on Nov 21, 2019

ADVANCED ENZYME TECHNOLOGIES share price has surged by 10% and its current market price is Rs 183. The BSE HEALTHCARE is up by 0.0%. The top gainers in the BSE HEALTHCARE Index is ADVANCED ENZYME TECHNOLOGIES (up 10.3%). The top losers are SUN PHARMA and ERIS LIFESCIENCES LIMITED (down 0.1%).

Aster DM Healthcare (IPO)

Feb 10, 2018

Should you subscribe to the IPO of Aster DM Healthcare Ltd?

Dr Reddy's: Milestone Payment Drives Sales (Quarterly Results Update - Detailed)

Feb 9, 2018

US business was hit by pricing pressure although there was growth sequentially led by new product launches.

Lupin: US market Declines Due to Higher Base Effect of FY17 (Quarterly Results Update - Detailed)

Feb 9, 2018

Price erosion in generic US drugs continues but seems to be bottoming out.

More Views on News

Most Popular

The Smartest Stock to Buy for 2020 (Profit Hunter)

Nov 14, 2019

Small-cap stocks are selling at bargain prices today and are poised to generate a lot of wealth in 2020 and beyond...

A Trade that Could Generate Profits for Decades

Nov 14, 2019

India's #1 trader is back on the Investor Hour. Vijay Bhambwani talks to us about his super-profitable trading system and shares with us his #1 long term trade. Listen in...

Why Moody's Rating Downgrade is a Strong Sign to Buy Stocks (The 5 Minute Wrapup)

Nov 8, 2019

Investors who took cues from Moody's rating downgrade in 1992 and 2002 created some of the biggest wealth of their lifetime.

The One Trade I'm Most Bullish on Now

Nov 12, 2019

A highly specific trade to potentially triple your money in just three months. You won't find this information anywhere else!

How the Modi Government is Helping My Top 7 Stocks (The 5 Minute Wrapup)

Nov 14, 2019

Recent reforms by the Modi government can give a big boost on your stocks, provided you buy the right ones.

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2020
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE HEALTHCARE


Nov 21, 2019 11:19 AM

COMPARE COMPANY

MARKET STATS