Overview

The pharmaceutical business is a global industry that is in charge of drug research, development, manufacture, and distribution. The sector is a key contributor to economic growth and is projected to be worth more than $1 trillion.

The pharmaceutical industry is organised into several segments, including:

Generic medications are those that have lost their patent protection and are consequently less expensive.

Brand-name medications: These are pharmaceuticals that are still protected by a patent and hence more expensive.

Vaccines are medications that are used to prevent illness.

Biologics are medications derived from live organisms and frequently used to treat chronic disorders.

Despite these obstacles, the pharmaceutical industry is likely to expand in the next years. Factors such as the ageing global population, the increasing frequency of chronic illnesses, and the rising need for innovative pharmaceuticals will drive this increase.

Here are some of the important trends impacting the pharmaceutical industry's future:

Personalised medicine is on the rise: Personalised medicine is a novel method of medication development that takes individual patient features into consideration. This method is intended to change the way medications are created and prescribed.

Technology's rising use: Technology is becoming increasingly crucial in the pharmaceutical industry. For example, artificial intelligence is being utilised to generate novel medications and increase drug production efficiency.

Emerging markets' expanding importance: Emerging markets are increasingly significant in the pharmaceutical industry. This is attributable to increased income levels and the prevalence of chronic illnesses in these areas.

Key Facts

• The Indian pharmaceutical sector is the world's third biggest in terms of volume and the 14th largest in terms of value.
• Currently, the sector accounts for around 1.72% of the country's GDP.
• The Indian pharmaceutical sector exports a significant amount of generic medications, accounting for more than 20% of the worldwide market.
• India is also a significant vaccine manufacturer, meeting more than 60% of worldwide demand for DPT, BCG, and measles vaccinations.
• The Indian pharmaceutical business is poised for future expansion. The country has a robust manufacturing foundation, a huge pool of competent scientists and engineers, and a government policy climate that is favourable.
• The top 10 pharmaceutical companies in India generated over $20 billion in revenue in 2021.

Opportunities

The ageing global population: As the world's population ages, so does the prevalence of chronic illnesses. This increases the need for novel medications to treat these disorders.

Chronic illness prevalence is rising: Chronic illnesses including cancer, heart disease, and diabetes are becoming more common. This increases the need for novel medications to treat these disorders.

Personalised medicine is on the rise: Personalised medicine is a novel method of medication development that takes individual patient characteristics into account. This method is intended to change the way medications are created and prescribed.

The growing usage of technology: Technology is becoming increasingly significant in the pharmaceutical industry. For example, artificial intelligence is being utilised to generate novel medications and increase drug production efficiency.

Emerging markets' growing importance: Emerging markets are becoming increasingly crucial for the pharmaceutical industry. This is attributable to increased income levels and the prevalence of chronic illnesses in these areas.

Challenges

Rising medicine costs: The expense of creating new treatments is high, which is driving up prescription drug prices.

Increased regulatory scrutiny: Governments all around the world are increasing their regulatory inspection of the pharmaceutical business. This makes bringing new treatments to market more challenging and expensive for pharmaceutical corporations.

novel illness development: The advent of novel diseases, such as COVID-19, presents new hurdles for the pharmaceutical sector.

The counterfeit medication problem is a significant burden for the pharmaceutical sector. Counterfeit pharmaceuticals may be hazardous, and they can weaken the pharmaceutical industry's confidence.

Recent Acquisition

Curatio Healthcare is bought by Torrent Pharmaceuticals: In February 2023, Torrent Pharmaceuticals announced the acquisition of Curatio Healthcare, a dermatological firm, for 1,100 crores ($140 million). Torrent Pharmaceuticals will benefit from the purchase as it seeks to extend its footprint in the dermatological industry.

Mankind Pharma acquires Panacea's domestic formulation brands: Mankind Pharma announced in March 2023 that it had purchased Panacea's domestic formulation brands for 2,200 crores ($270 million). Mankind Pharma will benefit from the purchase by strengthening its presence in the home generics market.

JB Pharma buys Glenmark's cardiac brand Razel: In April 2023, JB Pharma announced that it had paid 200 crores ($25 million) for Glenmark's cardiac trademark Razel (Rosuvastatin and combos). JB Pharma will benefit from the purchase as it seeks to extend its footprint in the cardiovascular industry.

Syngene International gets a minority share from Abu Dhabi Investment Authority: Syngene International announced in May 2023 that it had purchased a minority stake from Abu Dhabi Investment Authority for 1,500 crores ($185 million). The acquisition will assist Syngene International in expanding its R&D capabilities.

Analysis

As can be seen, India's pharmaceutical business has been gradually rising in recent years. Over the last five years, revenue has climbed by 27% while operating profit has increased by 25%. This expansion is being driven by a variety of causes, including increased demand for generic medications, an increase in the frequency of chronic illnesses, and the government's emphasis on improving healthcare in India.

The Indian pharmaceutical industry is likely to expand more in the future years. By 2024, the Indian government hopes to have India established as a worldwide centre for pharmaceutical manufacture. This aim is likely to propel the industry forward. The pharmaceutical sector's income has steadily increased throughout the years, rising from 1.59 trillion INR in 2018 to 2.19 trillion INR in 2022.

During this time period, sales grew at a compound annual growth rate (CAGR) of about 9.6%. Overall, sales and operating profit increases in the pharmaceutical sector have been stable, reflecting a strong and lucrative business. The consistent operating profit margin indicates effective cost control and profit retention.

Debt-to-Equity Ratio: This suggests a conservative approach to finance since the industry has a low amount of debt in relation to its equity. The sector's debt-to-equity ratio is constant, indicating a balanced capital structure and decreased financial risk.

Return on Equity (ROE): The pharmaceutical sector's ROE has gradually improved from 13% in 2020 to 14% in 2021 and 15% in 2022. This suggests that the industry has been effective in delivering better returns on the equity invested by shareholders. The rising ROE demonstrates the sector's capacity to earn profits while efficiently using shareholder cash.

Both the ROE and ROA are in the 10-15% range, indicating that the industry is lucrative. The net profit margin is likewise in the 10-12% level, indicating that the industry is making a good profit from its sales.

Short-term View: The Indian pharmaceutical business has a strong short-term view. The industry is anticipated to expand more in the coming weeks, owing to increased demand for generic medications and rising healthcare spending in India.

Analyst  -  Roshan Patel

info@smartinvestment.in
 

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