Pharma sector

2024
Prepared By:
Group-3
Jatin Wadhwa
Priyansha Ahuja
Table of Content

Industry Overview

Exports

Key Players and KPIs

Government Initiatives

Industry Trends

M&A Trends

News

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Industry Overview

Executive summary •

India is the largest provider of generic drugs globally and is known for its affordable vaccines
and generic medications.
1 to around 1.72% of the country’s GDP.
The Pharma sector currently contributes
The Indian Pharmaceutical industry is currently ranked third in pharmaceutical production by
volume and 14th largest in terms of value.
Generic drugs, over-the-counter medications, bulk drugs, vaccines, contract research &
manufacturing, biosimilars, and biologics are some of the Major segments of the Indian
pharma industry.

The Indian Pharmaceutical Industry,

Indian Pharmaceutical encompassing both domestic and export,
market (US$ Bn) demonstrated a robust CAGR of 8% from
FY18 to FY24.
This growth was driven by an 8% increase in
exports and a 7% rise in the domestic
market during the same period.
In FY24, the Indian pharmaceutical industry
expanded by nearly 9% year-over-year,
reaching approximately USD 65 billion.
Exports experienced a healthy growth rate of
10%, while the domestic market saw a
consistent increase of 9% compared to
FY23. .

Structure of Pharma Sector

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Exports
Pharmaceutical is one of the top ten attractive sectors for foreign investment in India. The
pharmaceutical exports from India reach more than 200 nations around the world, including
highly regulated markets of the USA, West Europe, Japan, and Australia. India’s exports of
Drugs & Pharmaceuticals stood at US$ 27.9 billion during FY24 and US$ 7.2 billion in FY25
(April-June). India is the 12th largest exporter of medical goods in the world. Indian drugs are
exported to more than 200 countries in the world, with US being the key market. Generic drugs
account for 20% of the global export in terms of volume, making the country the largest provider
of generic medicines globally. Indian drug & pharmaceutical exports stood at US$ 25.36 billion
in FY23, US$ 24.60 billion in FY22 and US$ 24.44 billion in FY21.

Value of Indian pharmaceutical exports from financial year 2012 Distribution of pharmaceutical exports
to 2024 (in billion U.S. dollars) from India as of April 2023, by segment

Generics: The majority of Indian pharma exports, especially for companies like Sun
Pharma, Aurobindo, and Dr. Reddy’s.
Biosimilars: Led by Biocon and Dr. Reddy’s, targeting diseases like diabetes,
oncology, and autoimmune disorders.
APIs: Divi’s Laboratories and Aurobindo are leaders in exporting APIs to global
markets.
Specialty and Niche Segments: Companies like Glenmark and Cipla focus on niche
therapeutic areas such as respiratory and dermatology.
In a study done in the United States in 2022, it was found that 50 per cent of all
generic drugs and 40 per cent of all prescription medicines were sourced from India.

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Key Players and KPIs

Key Players by Market Capitalization

Sun Pharma's Dominance:

Diversified Product Portfolio - well-balanced product mix that includes both branded and generic drugs
across a wide range of therapeutic areas such as dermatology, cardiology, neurology, and oncology.
Strategic acquisitions - such as the $4 billion purchase of Ranbaxy Laboratories in 2015, gave it access
to new markets like the U.S., Europe, and Japan.
The company has a high success rate in gaining regulatory approvals, particularly in key markets like the
U.S.

Cipla's higher revenue of INR 234 billion suggests strong market presence, but Divi's Lab's similar market cap
and much higher profit margin (30.5% vs. Cipla's 13.8%) indicate greater operational efficiency driven by
controls multiple stages of API production, reducing dependence on third parties and lowering production
costs .Divi’s Labs maintains high profitability and and stable revenue due to API demand. Cipla is a slow
growing company and prone to regulatory challenges in generics, with net profit margin of ~14%.

Torrent Pharma has high growth potential too due to high-demand for chronic therapies, alomgside it
maintains high profitability of ~17% net profit margin.

Aurobindo Pharma, with a revenue of approximately INR 245 billion, has a lower market capitalization
compared to Cipla and Divi's Laboratories. This situation could indicate potential undervaluation, or reflect
concerns over its profit margins, which are around 14%, due to competitive pressures in the generics market.

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Government Initiatives

Some of the initiatives taken by the Government to promote the pharmaceutical sector in India are
as follows:

Three more medicines viz. Trastuzumab deruxtecan, Osimertinib, and Durvalumab have been
exempted from Customs Duties.
Allocation of Rs 1 lakh crore for spurring private sector-driven research and innovation at
commercial scale could give a boost to pharma R&D.
The total outlay for the development of the pharmaceutical industry for FY25 was increased to
Rs. 1,300 crore (US$ 156.5 million) while the budget for the promotion of medical device parks
was raised to Rs. 150 crore (US$ 18 million) for FY25.

Ayushman Bharat Digital Mission (ABDM):

Objective: Create a digital health ecosystem to integrate healthcare services, improve access
and quality, enhance efficiency, and empower patients to manage their health records.
Digital Health Incentive Scheme (DHIS): incentives of up to 4 crore.
Unified Health Interface (UHI): Facilitates the discovery and delivery of health services, thereby
streamlining healthcare interactions and improving service accessibility. A unique Health ABHA
ID for every individual establishing a strong and trustworthy identity to store and manage health
records.
Budget: ₹200 crore allocated in the Union Budget 2022-23 to support the mission's digital
infrastructure.
Impact: Better patient care, streamlined services, increased access in remote areas, reduced
costs, and data-driven policy-making in the healthcare sector.

Production Linked Incentive (PLI) Scheme for Pharmaceuticals including APIs and
creating bulk drug parks
Budget: INR 15,000 crores (approx. USD 2 billion), INR 6,940 crores (approx. USD 940
million) for APIs and INR 3000 Cr. for Bulk Drug Parks
Objective: Boost domestic manufacturing of high-value pharmaceutical products and
complex generics, 53 crtical APIs, financial assistance of upto INR 1,000 cr per park.
Impact: Expected to generate an incremental revenue of INR 2.94 lakh crores (approx.
USD 39.2 billion) by 2027 and create 20,000 jobs; reduce mfg costs by 25-30% through
parks.

Export Promotion Council for Pharmaceuticals (Pharmexcil): Increase exports to USD 60 billion
by 2030.

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Industry Trends
Revenue Contribution
OTC (over-the-counter) Revenue
100% FDI permitted by GoI (Greenfield) 10%
Exports are at $25.3B for FY23 (12th largest exporter)
Union Budget 2023-24: Mission for eliminating sickle
cell anemia by 2047 Domestic Drug Sales
Digitization of value chain 50%
Exports Revenue
Increase in M&A activity for diversification in emerging 40%
markets (Biosimilars, biologics)

Growth Drivers Top funded health sectors in 2021

Increased healthcare spend in India due to

increasing insurance penetration
Growing market for generic drugs
Government initiatives like tax incentives for
manufacturing APIs

Recent M&A Deals in the sector

Dr. Reddy's - Expanded cardiology and pain management with Cidmus and Vooveran brands
JB Chemicals - Boosted consumer health and probiotics portfolio, entry into injectables
Mankind Pharma - Strengthened domestic market reach in pain and chronic segment
Torrent Pharma - Enhanced position in dermatology through new brands
Eris Life’s stake in Swiss Parenterals (2024) aim to build capabilities in specialized product
segments like injectables, which are becoming increasingly important for maintaining a competitive
edge.

Partnerships with international firms (e.g., Mankind's acquisition from Panacea) indicate the intent of
Indian companies to leverage global expertise and expand internationally, as well as foreign firms
seeking a foothold in the growing Indian market.

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M&A Trends

The singular deal by IQuest

Enterprises of active
pharmaceutical ingredients
(API) operations of global
pharmaceutical company Viatris
in India, valued at $6.9bn, is
reflected in the abnormal 2023
Q4 spike. The sector continues
similar trajectory from 2024 Q1
onwards.

Increased Small and Mid-Sized

Acquisitions of SMEs by large
companies to expand reach.

Focused on mostly generics

and biosimilars, which have
lower margins.

The pharma and healthcare sector witnessed significant deal flow in Q2 2024 with 55 deals
totalling $4.1 billion marking an a 8x increase in values and a 10% rise in volumes over the
previous quarter. The average deal size, surged from $9.7 million in Q1 2024 to $74 million this
quarter, driven by 11 high-value deals worth $3.4 billion, compared to just one high-value deal
worth $150 million in Q1 2024.

Large and mid-sized Indian companies are acquiring existing divisions of smaller Indian
companies as well as those of foreign companies to get a direct access to an established
product domain in specific therapeutic segments, whereas some prefer brand acquisitions to fill
product gaps in their portfolios and strengthen weaker divisions. For example, Dr. Reddy’s
acquired select business divisions of Wockhardt4 to strengthen its presence in the Indian market.
Mankind acquired select brands of Dr. Reddy’s.5 Cipla also bought brands Vysov and Vysov M
from Novartis AG for India.

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NEWS

Per a study conducted by Department of Pharmaceuticals Ministry of Chemicals & Fertilizers

Government of India in August 2023, around patent expiration of international companies, Sun
Pharma, Intas, Glenmark, Dr. Reddy’s, Cipla, and Lupin appear frequently under the "moderate
ease of technology transfer" category. They tend to focus on cardiovascular, neurological, and
respiratory conditions, reflecting these drugs' broader use cases and relatively simpler
(compared to biologics) manufacturing and regulatory paths.

The US Biosecure Act, which will prevent drug companies from doing business with certain
Chinese biotechs within eight years, has led larger multinational corporations to cautiously
explore ways to diversify their supplier base. These latest developments put the spotlight on
Indian Pharma companies like Laurus Labs, Neuland Laboratories, Syngene and Piramal
Pharma. Challenge - Indian companies lag behind in terms of experience, trust, technology, and
large-molecule capacity.

The GST council decided to cut taxes on cancer drugs to 5% from the earlier 12%. One key
beneficiary of these tax cuts is Astra Zeneca, as it is the major manufacturer of these drugs in
India, making 62 percent of sales from oncology drugs. It will also provide incentives to other
drugmakers to dive into oncology drugs.

Dr. Reddy's biologics licence application for the proposed biosimilar rituximab candidate in the
U.S. got accepted for a review by the U.S. Food and Drug Administration in July 2023.The
biosimilar has been approved for marketing in India and more than 25 emerging markets -
Given there is relatively limited competition for biosimilars in India (with few local competitors like
Intas Pharmaceuticals offering similar products), Dr. Reddy’s could capture a significant share of
this growing market, potentially achieving $30–$50 million in annual revenue from this biosimilar
in India alone, enhancing its oncology segment growth.

India’s drug regulator, the Central Drugs Standard Control Organisation (CDSCO), has
withdrawn powers delegated to State licensing authorities to issue NOCs (no objection
certificates) for manufacture of unapproved, banned or new drugs for export purposes - this could
stricten the drug approval process, leading to increased waiting times for drug manufacturing
approvals, potentially affecting their ability to meet foreign demand in a timely manner, especially
for highly export dependend companies like Sun Pharma and Dr. Reddy’s.

Pharma stocks maintained their bullish momentum for the third consecutive month in August,
with the Nifty Pharma index posting a gain of 6.61%. This rally has driven the index to a 36%
gain so far this year, marking its largest annual increase since 2020. Major factors - recovering
sector - higher sales in US market, new product launches and approvals, higher revenue from
domestic market.