Most companies and industries from India are avoiding foreign shores like the plague. Understandable, in the wake of the financial crisis that is pummeling those lands and the weakness of the currencies. The one exception to that rule would probably be the pharma sector, which is actively seeking foreign lands for their growth and numbers.
“India is among the top exporting companies of bulk drugs and pharmaceuticals,” says Saket Lakkad, Assistant manager, Corporate Finance Advisory Services, BDO India. So what would be the rationale for the importance of foreign countries for Indian pharma companies? “The per capitia pharma expenditure in Western countries is very high as compared to India,” says Lakkad.
And besides markets there are other aspects too that will help India’s pharma sector. “Developed markets provide an excellent learning experience to local players in terms of quality, research & development,” says Rhunjhun Jain, Senior Research Analyst at Nirmal Bang Securities.
And then there is the generic market too, especially of drugs which are going to go off patent.
‘We do not share the general market apprehension of a steep dip in the revenue trajectory as the patent expiry opportunities recede post 2015, and we believe that growth opportunities abound in the US and global pharma markets,” notes Barclays Equity Research in a view of the India Healthcare & Pharmaceutical sector.
“Around 450 molecules are going off-patent in the next five to six years. This will give the Indian companies an immense opportunity to sell cheaper generic versions of these molecules globally,” says Lakkad. And the US is a particular focus for India’s pharma milieu. Products going off-patent in the US have unlocked huge growth opportunity for Indian companies. “As a result almost all Indian companies have posted strong sales in the US in the past six months,” says Jain of Nirmal Bang.
The global plate being ripe, the points that need to be asked are, if the Indian market is not longer lucrative for domestic pharma companies as also are Indian companies competitive?
‘Indian companies are quite competitive as compared to companies in other developing countries as well in developed markets,” says Lakkad.
And even going forward this competitiveness will continue. “With increasing pressure on healthcare costs all over the world, pharma players will be forced to look at developing markets like India where the costs are low without compromising on quality,” Lakkad.
And how important is the Indian market for pharma companies? “The Indian pharma market is very important for companies,” says Lakkad. Ironically growth will be driven by the increasing lifestyle diseases like blood pressure, diabetes, chronic diseases etc. “The availability of modern facilities, health insurance and the burgeoning middle class population with their increased spending power will be some of the other key drivers for the Indian market,” says Lakkad.
And then there is the fact they know the home battlefield too! “They are aware of the dynamics of the market and hence can explore it well,” says Jain.
Bottom-lines too are better in India than abroad. IMS Health forecasts global generics to grow at a 12 to 15% CAGR (Compounded Annual Growth Rate) over 2011-15 (estimated), with much of this growth coming from the markets of India, Brazil, Russia and Mexico, as well as the US generics market. Going forward R&D and India’s HR talent will come to the fore. “The next level of growth would come as Indian pharma companies are now seeking to move up the value chain to drug discovery and development by leveraging the country’s scientific talent,” says Lakkad.
“India has every chance to capitalise the opportunity to become a pharmaceutical superpower in 2020 and a hub for all pharmaceutical manufacturing and research needs,” ends Lakkad of BDO India.
- The largest number of US FDA approved facilities outside US is in India
- 1/3rd of all DMFs & 30% of all approved ANDAs in US are from India, ranking next only to USA.
- Conducting clinical trials in India can cost half as much as conducting a trial in the US
- Finished generics supplied from India account for 20% of the global generics market
- More Than 90% of WHO Prequalified API [ARVs, Anti-tubercular & Anti-malarials ] are sourced from India.
- They are aware about the dynamics of the market hence can explore it well
- Where global market provides volume growth to the Indian companies, local markets provides higher profitability to the companies
- Although Indian urban is getting saturated, rural region is still unexplored which provides huge growth opportunities to the companies.
- Cyclical recovery in the Indian equity market, with investment flowing out of healthcare;
- Regulatory action in the US;
- Unfavourable changes in domestic pricing policies;
- Unforeseen competition to the product pipeline;
- Adverse currency movements.