Indian pharmaceutical market, which is expected to grow to $55 billion by 2020, is likely to create 45,000 new jobs next year.
According to the McKinsey report “Indian Pharma 2015 – Unlocking Potential of the Indian Pharmaceutical Market” this industry, with tremendous growth opportunities unfolding, has the potential to grow more than twice in the next six years, from a projected market growth of $24 billion by 2015 to $55 billion by 2020.
Metro and Tier-I markets would make significant contributions to this growth, driven by rapid urbanisation and greater economic development. Rural markets will grow the fastest driven by step-up from current poor levels of penetration. The hospital segment will increase its share and influence, growing to 25 per cent of the market in 2020.
These observations were made by pharmaceutical professionals at the National Seminar organized by the Indian Institute of Health Management Research (IIHMR) University, Jaipur, last week, in association with the Association of Pharmaceutical Teachers of India (APTI), and Indian Pharmaceutical Association (IPA) Rajasthan State Branch.
Dr B P Nagori, Vice President, APTI, quoting a PwC study, said the Indian Pharma industry is likely to be in the top 10 global markets in value terms by 2020. Credit for this development would go to growth factors such as new market creations, growth in the SME sector, enhanced medical infrastructure, pace of innovation in business models, and rising consumer incomes, among others.
But the industry would also face challenges like the need for better talent, rising customer expectations and restricted discovery and developing process, he added.
Pharma stocks can see an upside of 15-18% this year in line with earnings momentum on the back of strong prospects expected in the US and India markets.
According to analysts, most pharma stocks will outperform as growth in the sector is intact.
Abhishek Sharma, pharma analyst, IIFL, said, “The pharma pack looks good this year because of strong growth prospects in the US and India markets. Some of the large-caps and mid-caps have reported upside in stock prices on the back of strong growth in the US, and we anticipate that kind of growth this year.”
Sarabjit Kour Nangra, VP – research, pharma, Angel Broking, said, “This year many companies have reported good developments which indicated that the sector will continue to do fairly well. And the numbers of most of the companies are improving, sequentially and year-on-year basis too. So the growth momentum will be maintained.”
Analysts feel there is a lot expected from the pharma sector this year.
“Next year, we will see the Sun-Ranbaxy entity coming together, and how that synergy plays out in the market will be something to watch out for. Among the stocks, Dr Reddy'sLaboratories and Lupin would benefit from strong product pipeline in the US. Dr Reddy's has a strong pipeline for complex products, many of which have come this quarter and we expect that kind of a momentum to continue next year. Lupin again has a strong pipeline of first-to-file, some of which will be monetised next year,” an analyst said.
Big launches have been lined up by Torrent Pharmaceuticals, and Cadila Healthcare has a huge product pipeline. For Glenmark, apart from its US approvals, analysts will keenly watch for the out-licensing efforts on their pain molecules and any progress on vatelizumab if that gets reported by its partner Genzyme, she said.
While share prices of Lupin and Cipla has increased by over 55% last year. Dr Reddy's, Sun Pharma, Ranbaxy and Glenmark stocks grew between 25% and 45%. Shares of Cadila Healthcare almost doubled during the one-year period while Torrent Pharma, Aurobindo and Wockhardt grew over 100%.
“There is a re-rating on Aurobindo this year. It is no longer a mid-cap and has become a large-cap stock because the numbers it has given on topline and bottomline along with the couple of acquisitions it has done recently has further increased its size. In the case of Torrent, the domestic portfolio is decent. Actually, the whole pharma set has moved up, and whatever significant set of deviations from valuation were there that has corrected. Most of pharma stocks have given that kind of rise. So from this year they can give returns in line with earnings momentum with decent 15-18%,” said Nangra.