Pharma Sector: A growing impetus for research and innovation aiding the sector

The Indian pharmaceutical industry is the world’s third-largest by volume and the 14th largest in terms of value.

India's pharma sector has always been one of the biggest players globally which is currently valued at approximately USD 41.7 billion. The stated number is predicted to increase in the future and reach USD 65 billion by 2024 and USD 120 billion by 2030. The major segments of this industry include generic drugs, OTC medicines and API or bulk drugs, vaccines, contract research and manufacturing, biosimilars and biologics. India has the second-highest number of USFDA-approved plants outside the US and is a global leader in the supply of DPT, BCG and measles vaccines. India is also the largest provider of generic medicines globally and with Covid-19 still holding on, it caters to 62% of the global demand for vaccines.

In the pharma sector, the demand is always seen flowing in to incentivize research and innovation by adopting and adapting high-end technologies. High end technologies include Artificial Intelligence, Machine Learning, AV-VR, Digital Apps, Blockchain, 3D Printers, Genomics, and many other innovations that are already starting to transform the pharmaceutical industry. To assist with innovation, the government reinforced its confidence in the private sector’s expertise and skills. Scaling up to meet global and domestic demand in a short period has highlighted this sector’s capability in addressing the healthcare needs of the country. India’s pharma exports recorded Rs 1.8 trillion in FY22, a flat growth compared to the previous fiscal. In the pandemic year 2020-21, pharma exports improved by 18% to USD 24.4 billion. 

Outlook

Going forward to 2022, it is expected that the Indian pharmaceutical industry will foster a culture of research and development and innovation to enable rapid drug discovery and development to improve the health outcomes of people worldwide. Pharmaceutical companies are likely to focus on generating skilled human capital by upgrading the curriculum of pharmaceutical studies to meet industry prerequisites. With the addition of intellectual potential into business functions, the industry has the capability to increase its efficiencies and make true its vision of becoming a USD 130 billion industry by 2030.  

Market analysts predict that the Indian pharma market is likely to grow by 10-15% on the back of volume recovery and price hikes pushing up the market growth. With the stabilisation of the pandemic, the exceptional growth of the past in acute therapies is less likely to be repeated but emerging lifestyle diseases are more likely to improve the demand for the chronic drug. The Union Budget 2022 clearly reflected the government’s focus on boosting the healthcare and pharmaceutical sectors. Significant announcements were made aiming at infrastructure development, inclusive growth, productivity enhancement and impetus on digitisation opportunities. The government’s budgetary allocation for 2022-23 shows its focus on universal access to healthcare.

The pharma companies are well-placed for growth in the domestic are boosted by a new range of chronic care products. The June quarter may have posed challenges due to a high base on the back of extraordinary gains from sales of covid treatment products, in totality, the outlook for FY23 remains decently strong. India offers significant opportunities for the growth of medical tourism. The medical tourism market in India is expected to rise at a CAGR of 65-70% between fiscals 2021 and 2025. Medical tourists from South and West Asia regions continue to constitute the majority share. Growth in medical tourism is also happening due to technologically advanced hospitals, highly skilled doctors, lower cost of treatment and e-medical visas, holistic wellness - traditional healthcare therapies (Ayurveda & Yoga) combined with allopathic treatments.

Financial Highlights

During the fourth quarter of FY22, companies in the pharmaceutical sector witnessed substantial margin pressure due to pricing pressure in the US markets, increased costs of raw material, energy and inputs along with disturbed supply chains. Looking at the data of pharma companies in the sector and their performance of the companies in FY22 over FY21. Among them, according to market capitalisation, the top five players are Sun Pharmaceutical Industries, Divi’s Laboratories, Cipla, Dr Reddy’s Laboratories and Apollo Hospitals Enterprise.

Looking at the net sales, Apollo Hospitals Enterprise has shown a 38.85% growth in net sales on a YoY basis followed by Divi’s Laboratories and Sun Pharmaceutical Industries registering a growth of 28.56 %and 14.71%, respectively. In terms of operating profit, Apollo Hospitals Enterprise witnessed a jump of 91.41%, significantly higher than its other top peers. On the other hand, Sun Pharmaceutical Industries and Divi’s Laboratories posted an increase of 21.36 %and 36.67%, respectively.

Apollo Hospitals Enterprise has performed attractively with a massive jump in net profit of over 700% in 2022 compared to 2021. The US stance at the beginning of the pandemic was on the lenient side to ease off issues with regard to supplying chain for pharmaceutical and healthcare products globally. Currently, things are turning back to normal. USFDA is gradually going back to its stringent position. Opportunities from increasing digital adoption aided by favourable consumer behaviour and strong impetus by Covid are expected to augur well for the pharma companies.