{"id":11493,"date":"2022-12-26T14:54:50","date_gmt":"2022-12-26T09:24:50","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=11493"},"modified":"2022-12-26T14:57:22","modified_gmt":"2022-12-26T09:27:22","slug":"is-this-the-right-time-to-invest-in-pharma-stocks","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/is-this-the-right-time-to-invest-in-pharma-stocks\/","title":{"rendered":"Is This the Right Time To Invest in Pharma Stocks?"},"content":{"rendered":"\n<p>The Indian pharmaceutical sector is known as the \u2018Pharmacy of the world\u2019. However, this reputation didn\u2019t come overnight. In the years following independence, the Indian pharmaceutical industry was still at its nascent stage with a handful of manufacturers. Over the years several factors such as government policy initiatives, low manufacturing costs, and a highly skilled talent pool helped India in becoming a leading exporter of generic drugs.&nbsp;<\/p>\n\n\n\n<p>The Indian pharmaceutical sector has undergone several transformations \u2014 but where is it headed in the coming years? Most importantly, is it the right time to <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> in pharma stocks? We\u2019ll tackle these questions in this article.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/is-this-the-right-time-to-invest-in-pharma-stocks\/#Indian-pharmaceutical-industry-%E2%80%93-market-overview\" title=\"Indian pharmaceutical industry &#8211; market overview\">Indian pharmaceutical industry &#8211; market overview<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/is-this-the-right-time-to-invest-in-pharma-stocks\/#Business-segments-in-the-pharma-industry\" title=\"Business segments in the pharma industry\">Business segments in the pharma industry<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/is-this-the-right-time-to-invest-in-pharma-stocks\/#Pharma-stocks-slowed-down-post-2015\" title=\"Pharma stocks slowed down post-2015&nbsp;\">Pharma stocks slowed down post-2015&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/is-this-the-right-time-to-invest-in-pharma-stocks\/#Factors-shaping-the-future-of-pharma\" title=\"Factors shaping the future of pharma&nbsp;\">Factors shaping the future of pharma&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/is-this-the-right-time-to-invest-in-pharma-stocks\/#In-export-markets\" title=\"In export markets\">In export markets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/is-this-the-right-time-to-invest-in-pharma-stocks\/#In-domestic-markets\" title=\"In domestic markets\">In domestic markets<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/is-this-the-right-time-to-invest-in-pharma-stocks\/#Is-it-the-right-time-to-invest-in-the-pharma-sector\" title=\"Is it the right time to invest in the pharma sector?\">Is it the right time to invest in the pharma sector?<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Indian-pharmaceutical-industry-%E2%80%93-market-overview\"><\/span><strong>Indian pharmaceutical industry &#8211; market overview<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li><strong>Market size<\/strong> &#8211; The Indian pharmaceutical industry was valued at $42 bn in 2021 and has grown at a <a href=\"https:\/\/www.tickertape.in\/blog\/compound-annual-growth-rate\/\">CAGR<\/a> of 9.43% in the past 9 yrs. The total market is likely to reach $130 bn by 2030.&nbsp;<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/LXH8prO6JJMSt5N9dbOzSnof83Zs6ajrjDh0Dg6fr9JXHkwSzAkeEg857w0kJhJwQ5QV5oVYY8s9f01w_Td1NNmqo-7QEKQA-AszQWITKAUeZxmaJ5S-YEw5BZXayXSVEtLk89zjsuQUU4_rYP5JNrhqFJtieJW7_G6IFjyhLxGMKz6CHAAx-rB8PHW_sQ\" alt=\"\"\/><\/figure>\n\n\n\n<ul><li><strong>Global leader<\/strong> &#8211; The Indian pharma market is the 3rd largest in the world by volume of production. It is also the world\u2019s largest supplier of generic drugs and caters to 50% of global vaccine demands. India also has the highest number of pharmaceutical manufacturing facilities that comply with the US Food and Drug Administration (US FDA), which is reputed for its stringent compliance policies.&nbsp;&nbsp;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Business-segments-in-the-pharma-industry\"><\/span><strong>Business segments in the pharma industry<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol><li><strong>API (Active Pharmaceutical Ingredient)<\/strong> &#8211; The main ingredient in any drug that produces the intended effect. The Indian industry is currently heavily dependent on China for APIs \u2013&nbsp; 50% of APIs used in domestic manufacturing are currently imported. In 2020, prices of API imports increased substantially as supply chains were affected due to COVID-19.<\/li><\/ol>\n\n\n\n<ol start=\"2\"><li><strong>Formulation<\/strong> &#8211; It refers to the final medicinal product manufactured using the active ingredient and other chemicals. Formulations make up 50% of the total pharmaceutical exports from India.&nbsp;<\/li><\/ol>\n\n\n\n<ol start=\"3\"><li><strong>Biosimilars<\/strong> &#8211; It refers to a biological product similar to an approved reference product. The biosimilar market is expected to grow to $30 bn by 2030. The government has also allocated $70 mn to local players to improve the production of biosimilars.&nbsp;<\/li><\/ol>\n\n\n\n<ol start=\"4\"><li><strong>CRAMS (Contract Research And Manufacturing Services)<\/strong> &#8211; Global pharmaceutical companies outsource manufacturing to CRAMS in India to benefit from the low production cost and highly skilled talent pool. The CRAMS sector has already posted a 48% CAGR in 2015-2018 and is expected to reach $40 bn by 2030.&nbsp;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Pharma-stocks-slowed-down-post-2015\"><\/span><strong>Pharma stocks slowed down post-2015&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Companies that witnessed growth in generic business in US markets started witnessing increased competition and regulatory challenges. From 2015 onwards, the number of US FDA inspection visits to Indian manufacturing facilities rose significantly, which caused a delay in production, as certain plants were forced to revamp to align with regulations.&nbsp;<\/p>\n\n\n\n<p>Though pharma companies continued to witness revenue and profit growth, stock prices did not display commensurate growth due to regulatory overhangs. Between March 2015 &#8211; December 2022, <a href=\"https:\/\/www.tickertape.in\/indices\/nifty-pharma-index-.NIPHARM?utm_source=blog&amp;utm_medium=gart&amp;utm_campaign=abhijadon\" target=\"_blank\" rel=\"noreferrer noopener\">Nifty Pharma Index<\/a> was flat with 1.74% in returns, while <a href=\"https:\/\/www.tickertape.in\/indices\/nifty-50-index-.NSEI?utm_source=blog&amp;utm_medium=gart&amp;utm_campaign=abhijadon\" target=\"_blank\" rel=\"noreferrer noopener\">Nifty<\/a> rose by 9.89%. <em>\u00a0<\/em><\/p>\n\n\n\n<p><strong><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/QJaJFde3EHJ6hUfptZsusUmqB22f5afOc6Xc80xF7s8RI5aMlgvWGcCIQx54SFL3NPLAkbm2Crzg4X_nqZkPywELLuTtPaAyOWNOP_7NYCb8LXVqABPq_VVCLDwwMeQmEfRWSMDKf0hvmXXfUTus9VDrkxEO9Rn6H1PKjB7678GKTaATLwyfYNoL1Du2WQ\" width=\"508\" height=\"303\"><\/strong><\/p>\n\n\n\n<p>Indian pharma companies also experienced slow growth in their US generics business as seen in the chart below.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh6.googleusercontent.com\/fMzISXZG8QmnbRKs26w14MQ5vWpg1pAVbfHPX8A4bIG_Popv1tGlvFsA2wCyCkzx9V1SG8CQMNlrSPLSZSwzjU-awaH_GlLWPlBFRyH43Dr6-_Je1rJfoFQio_lK0lq24GE9rQODgY6wrs7W8FSDlH7XVEIjU3_A-dmGcgl1qiP-XmjbGxNIKasnjSk52Q\" alt=\"\"\/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Factors-shaping-the-future-of-pharma\"><\/span><strong>Factors shaping the future of pharma&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In-export-markets\"><\/span><strong>In export markets<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul><li><strong>Price pressures in US &#8211; <\/strong>US generics is a $128 bn industry, an opportunity that most Indian pharma companies cannot afford to miss. However, the price erosion in the US due to lower-priced competitors and government regulations has affected profit margins of pharma companies. Companies are taking various measures such as controlling R&amp;D spends, closing unviable facilities and launching new products to protect their margins.&nbsp;&nbsp;<\/li><\/ul>\n\n\n\n<ul><li><strong>Search for new markets<\/strong> &#8211; Companies are attempting to diversify their business by looking to expand into newer markets such as Latin America, Russia and other East European countries.<\/li><\/ul>\n\n\n\n<ul><li><strong>Complex generics<\/strong> &#8211; In the US, Indian companies have only dominated in the simple generics market so far while the complex generics market is yet to be explored. This market requires companies to adapt to a complicated drug development process but it can be a good growth opportunity with the rising competition in the simple generics space.&nbsp;&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In-domestic-markets\"><\/span><strong>In domestic markets<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul><li><strong>Improved logistics<\/strong> &#8211; The COVID-19 effect is starting to wane and supply chain costs are returning back to normal. This will help in reducing the cost of importing raw materials for many Indian pharma companies.<\/li><\/ul>\n\n\n\n<ul><li><strong>Boost to API business<\/strong> &#8211; The government plans to reduce the dependence on China for API imports from 70% to 25% in the next 5 yrs. A $955 mn Production-Linked Incentive (PLI) scheme was also launched to encourage the domestic production of APIs.&nbsp;<\/li><\/ul>\n\n\n\n<ul><li><strong>Growth in chronic formulation segment <\/strong>&#8211; Formulations manufactured to treat chronic diseases are growing faster than those used to treat acute diseases. This opens up a new opportunity for companies to diversify in the chronic formulation sector.<\/li><\/ul>\n\n\n\n<ul><li><strong>New product lines &#8211; <\/strong>With the changing lifestyle trends and growing awareness around diagnostics, domestic players can start focusing on newer services like digital healthcare, biologics and cell and gene therapy, and disease management etc.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is-it-the-right-time-to-invest-in-the-pharma-sector\"><\/span><strong>Is it the right time to invest in the pharma sector?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While Indian pharma companies have several challenges ahead, the growth opportunities are too big to ignore. They have successfully proved their execution capabilities in the past and we hope that they will continue doing so. Safe to say, we\u2019ll be watching the <a href=\"https:\/\/www.tickertape.in\/blog\/indian-pharma-sector-before-during-and-after-covid-19\/\">pharma sector<\/a> with interest.<\/p>\n\n\n\n<p><em>If you\u2019re looking to efficiently track and invest in the Indian pharma sector, explore our smallcase&nbsp; Pharma Tracker <a href=\"https:\/\/www.smallcase.com\/smallcase\/pharma-tracker-SCTR_0009\/stocks?utm_source=blog&amp;utm_medium=gart&amp;utm_campaign=abhijadon\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Indian pharmaceutical sector has undergone several transformations \u2014 but where is it headed in the coming years? Read our expert Abhishek Jadon discuss if this is the right time to invest in pharma stocks. <\/p>\n","protected":false},"author":38,"featured_media":11496,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[1770],"tags":[],"acf":[],"modified_by":"Aradhana Gotur","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2022\/12\/21-Dec-2022-Is-this-the-right-time-to-invest-in-pharma-stocks_-Abhishek-Jadon-03.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/11493"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=11493"}],"version-history":[{"count":4,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/11493\/revisions"}],"predecessor-version":[{"id":11498,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/11493\/revisions\/11498"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/11496"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=11493"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=11493"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=11493"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}