Quick analysis of major shares in the Indian Pharmaceutical Industry: There is no other industry in the country that has achieved a global stature as that of the Indian Pharmaceutical Industry. The fact that the Indian Pharmaceutical industry has the possibility of soon being called the ‘Pharmacy to the World’, speaks volumes.
Today, we are going to discuss Indian Pharmaceutical Industry along with the major pharma shares in India. Here, we will give you an insight into the current state of the Indian Pharmaceutical Industry and the top-performing Indian companies.
Role Played by the Indian Pharmaceutical Industry
The Indian Pharmaceutical Industry plays a very important role in the global pharma markets. The industry supplies over 50 percent of global demand for various vaccines, 40 percent of generic demand in the US, and 25 percent of all medicine in the UK. Presently, over 80 percent of drugs used globally to combat AIDS are sourced from India.
India also constitutes 40 to 70 percent of supply to the World Health Organization’s demand for DPT and BCG vaccines and 90 percent of the global demand for the measles vaccine. Indian drugs are exported to more than 200 countries in the world making it the largest provider of generic drugs globally.
The Indian Pharma industry has been able to achieve this because of its unique characteristics. The drugs produced by Indian companies are low priced but still maintain the high regulatory standards of markets like the US and Europe. The reason for the drugs being of low price is mainly due to the large labor pool available. This also includes scientists and engineers with potential in comparison to their counterparts abroad.
The industry also reveals a highly competitive domestic environment which keeps the prices low. The low prices are one of the reasons why although India ranks tenth globally in terms of value but third in volume. The low prices coupled with the high quality offered which fall in line with the USFDA standards make the drugs not only accepted but also demanded everywhere in the world.
Growth prospects of the Indian Pharma Industry
Data from 1969 would help us better understand the growth prospects and the potential of the Indian Pharma industry. As of 1969, the Indian domestic market was dominated by foreign players holding a 95% market share. As of 2020 Indian pharma has an 85% domestic share and alone accounted for 15% of the global market. Pessimistic estimates have shown that the Indian Pharmaceutical market is expected to reach a value of between US$50 billion and US$74 billion by 2020.
This growth is mainly driven by the growth in medical infrastructure within the country. This would extend the accessibility to sections that lacked such healthcare before. The rising awareness and the ability to afford medicines will also account for a significant portion of domestic growth. India is projected to become one of the top 10 countries in terms of medical spending.
By 2040, India is also predicted to be the most populated country on earth, overtaking China. Other reasons for a boost in the global growth of Indian pharma would be the increase in branded drugs becoming off-patent over time. All these reasons coupled up would account for domestic growth making India attractive to international investors.
As global developed markets slow down, emerging markets like India, Russia, China, Brazil will account for greater roles in the pharma industry both as producers and consumers.
Pharmaceutical Industry – Best Pharma Shares in India
Sun Pharmaceuticals is Indias largest pharmaceutical company and the fifth largest specialty generic company in the world. The MNC was established by Mr. Dilip Shanghvi in 1983 offering products to treat psychiatry ailments.
Today the company offers its capabilities by producing branded generics, specialty, OTC products, antiretrovirals (ARVs), active pharmaceutical ingredients (APIs), etc. Its formulations treat various areas like cardiology, psychiatry, neurology, gastroenterology, and diabetology.
Aurobindo Pharma was established in 1986 by Mr. P. V. Ramprasad Reddy, Mr. K. Nityananda Reddy, and other committed professionals. The company first began operations in a single manufacturing unit of Semi-Synthetic penicillin in Pondicherry. Today Aurobindo Pharma sells over 300 products in over 125 countries.
About 35% of sales are generated through APIs, 65% from the formulations business, of which 63% of formulation sales are from the United States. It is noteworthy that Aurobindo Pharma has one of the highest exposure to imports of APIs from China, mainly for antiretroviral and antibiotic drugs.
Lupin Ltd. was established in 1968 and is currently amongst the top 10 generic companies in the world. Its businesses include formulations, Active Pharmaceutical Ingredients (API), drug delivery systems, and biotechnology. It is also known for growth therapies like Cardiology, Central Nervous System, Diabetology, Respiratory, Gynecology, Anti-Infective, Gastro-Intestinal, and Oncology.
Dr. Reddy’s Laboratories was founded by Anji Reddy in 1984. The MNC manufactures and markets a wide range of pharmaceuticals in India and oversea,s and has over 190 medications, 60 active pharmaceutical ingredients (APIs) for drug manufacture, diagnostic kits, critical care, and biotechnology products.
Cipla formerly known as Chemical, Industrial & Pharmaceutical Laboratories was founded by Dr. K.A. Hamied in 1935. The company has its presence around the world and is a therapy leader in India for anti-malarial with a market share of over 34%. The company also has a vast portfolio with more than 1,500 products in the market.
Cipla is known for its key role in selling HIV medicines in sub-Saharan Africa at one–twenty-fifth of the cost of medicines sold by other manufacturers.
Pharma Industry amidst COVID-19
The Covid-19 pandemic has exposed the reliance of the Indian pharma on China for the procurement of API (Active Pharmaceutical Ingredient). China was one of the leading countries to produce and sell APIs to the rest of the world until recently. The early effects of the coronavirus on China impacted the supply of such API throughout the world.
Pharma’s use Chinese ingredients to produce one-fifth of the world’s supply of medicines. For the number of medicines manufactured the reliance on Chinese APIs is as high as 70%. The figures in the manufacturing of antibiotics are much worse as they rely as high as 90% on Chinese imports.
Despite this Indian pharma’s have still strived to meet up to the added expectation during COVID-19. The industry has been able to also view the pandemic as an opportunity by providing drugs to many friendly countries. This was seen in situations when countries like the United States requested India to export the anti-malarial medicine — Hydroxychloroquine — in order to combat COVID-19. The industry rising up to the occasions have made global powers realize the potential of Indian pharma’s in becoming the Pharmacy to the world.
Despite the COVID-19 impact, the domestic pharma industry will grow between 4-6 percent in FY21. Following this it is also expected to have an 8-11% compounded annual growth rate (CAGR) in the FY 2020-2023 period.
- Investing in Incredible India – Companies to Look Out!
- 5 Top FMCG companies in India in 2020 – Best FMCG Shares
- Socially Responsible Investing (SRI): Why it matters?
As seen above, the Indian pharma industry has unlimited potential especially in the post corona environment as global powers become skeptical towards China. In order for the industry to take advantage of the global scenario, the government’s role is of paramount importance.
It is important that the government raises its healthcare spending to 3% of GDP YoY. The lack of focus on directing adequate spending towards healthcare was seen in the shortages of healthcare personnel, equipment, and infrastructure. It is also necessary that both the increase and reduction in prices are regulated.
Extremely low prices have the possibility of making Indian pharma’s an unattractive investment opportunity. This may wipe out up to a $20 billion market opportunity. Another aspect that requires attention is the increased focus required in the AatmaNirbhartha of API. COVID-19 has shown both the cracks and the possibilities that the Indian pharma industry possesses.
With the right policies ensuring growth and guiding the industry it is entirely possible that India becomes the “Pharmacy to the World” in the future.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.