Analysis of the Indian Pharmaceutical Sector
Essay by Priyank Khandelwal • October 31, 2018 • Research Paper • 9,143 Words (37 Pages) • 675 Views
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ANALYSIS OF THE INDIAN PHARMACEUTICAL SECTOR
Subject: Financial Modeling
TYBBA ‘A’
Nirvan Tibrewala 026
Pooja Almal 027
Prachi Keshan 028
Pranav Khandelwal 029
Priyank Khandelwal 030
ACKNOWLEDGEMENT
We would like to convey our deepest regards and sincere gratitude to our professor Dr.Akshay Damani for giving us this opportunity and letting us showcase our skills. It wouldn’t have been possible without the constant guidance and support we were given.
EXECUTIVE SUMMARY:
The global pharmaceutical sector is on an upbeat. In the coming years, the world market is expected to be dominated by USA, European Union and Japan with major contribution from the pharmerging economies. The future of the sector depends upon the non-communicable diseases and original branded generics. In the years ahead, the Indian pharmaceutical industry is expected to grow at a compounded annual growth rate that is higher than the global industry. It has evolved over the years to reach where it is today. Presently, generic drugs dominate it. The unrealized potentials await government support.
TABLE OF CONTENTS
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Chapter Headings | Page Number | |
1 | Introduction | 5 |
2 | Industry Analysis | 8 |
Industry Statistics | 8 | |
Latest Laws Affecting The Industry | 12 | |
Government Initiatives | 13 | |
SWOT Analysis | 17 | |
PESTLE Analysis | 19 | |
Porters Five Forces Analysis | 21 | |
3 | Company Analysis | 23 |
NIFTY Pharma | 23 | |
Company Profile | 24 | |
4 | Ratio Analysis | 29 |
5 | Valuation | 39 |
6 | Conclusion | 40 |
7 | Abbreviations Used | 41 |
8 | References | 42 |
9 | Annexure | 43 |
INTRODUCTION
India is a major producer of pharmaceutical products worldwide and especially in USA; this is due to India’s capability of producing patented drugs at a much lower rate. The local laws allowed this copying of drugs only because the producers used a different method of manufacturing the drugs.
Post liberalization India opened up and managed to take the entire world by a storm.
Dr. Reddy Laboratories Ltd. was one of the first Indian Pharmaceutical based company to enter the USA market in 2001 with anti depressants of a more generic nature, they managed to earn high profits. This further attracted the other players of the pharmaceutical market and they too decided to enter USA. Cipla Ltd. introduced drugs that fights AIDS in Africa, which was highly appreciated by them, as the cost was 30 times lesser than what was already available to them. Hence, Cipla Ltd. attained a good market share.
However, in 2017 the stocks of the Indian Pharmaceutical companies had gone for a toss due to the low amount of profits earned in USA. This was due to the stringent laws of the US FDA and price correction in the USA. There was a lot of speculation about the quality of the drugs, which led to receiving warnings from the US. Renowned companies like Divis Laboratories Ltd., Dr. Reddy and Sun Pharmaceutical have had to endure the most of such scrutiny and disapproval in 2009.
This shook the trust of the investors even from the best of the companies operating in this sector, therefore, the market value of the stocks fell drastically.
Moreover, the approximate margin earned by a company from generic drugs fell down from 40-60% to around 20%.
From 2005 to 2015, the exports from the pharmaceutical sector increased 20 times, however, this trend could not continue due a reduction in the growth of the generic drugs. The Indian pharmaceutical companies are now expected to change their business structure and model since they majorly exported generic drugs.
The Compounded Annual Growth Rate of the generic sector in the USA was expanding phenomenally for a 5 year period after 2010, but it seems to have taken a dip and will continue to do so until 2020. This can be attributed to the fact that very few patents are going to get expired in this period and therefore not a lot of drugs can be replicated by the Indian companies, who mainly thrive on generic drugs.
The pharmaceutical sector is also facing issues with maintaining their market share because of the increase in competition in the USA market. The entry of Chinese players to the US market has changed the dynamics of the sector as China is known for its low prices but over and above that they have also hired great minds who will improve their formulations and make Chinese pharmaceutical companies a tough competition to the Indian sector.
The future for the pharmaceutical sector will be secured only if they develop special drugs with special formulations that will help differentiate their drugs from that of the world and enhance their product portfolio that will drive their market value. Biosimilars too are the ‘new thing’ in the market which should be focused on.
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