The company booked 65% and 50% growth in the pandemic years of 2020-21 and 2021-22 respectively. A huge chunk of this came from its Covid-19 portfolio but BDR was not just making Covid drugs. It quietly launched nearly a dozen drug molecules to treat critical ailments such as cancer. It has also started work on a range of fifth-generation antibiotics that it says could come handy for doctors treating patients with severe and resistant infections.
The pandemic paved the way for BDR to, as Shah says, “follow the disease pattern in India” since the company now had enough surpluses to expand its product profile. “This is a good time to do incremental research and find cures for diseases that affect our people. Pharma companies should research affordable therapies for our people which can then be exported to the world. That is the best way to stay in the market – and India is a large market, ”he says.
Shah’s confidence in the Indian pharma sector stems from the enormous successes several companies have had over the past two years. “While the Covid segment has plateaued now, we are seeing a massive push in our cardiac, urological, lifestyle diseases and dermatology portfolios,” he says.
Covid-19’s impact on the pharma sector has been unlike anything else of late. It was chaotic in the beginning of the pandemic, but most firms found their feet in a few months. Large multidivision pharma companies began benefitting immensely from their new Covid portfolios although they lost out heavily on nonCovid segments as people stopped visiting hospitals and elective surgeries got postponed in the middle of an infection wave. Mid-sized, branded generic drug manufacturers like BDR flourished as sales of Covid peripherals such as anticoagulants, antipyretics, antihistamines, painkillers and multivitamin tablets went through the roof. Companies that were narrowly positioned, in terms of product profile, had to wait a little longer – till the second wave of Covid subsided and people started visiting hospitals. Now, as Covid cases have dropped, and the fear of getting out for a hospital visit has subsided, most pharma companies see a thrust in their non-Covid portfolios.
Kirti Ganorkar, CEO (India Business),
, said in an investors’ conference call recently: “We have witnessed growth across most of our therapies. This was driven by a combination of factors such as improved demand for non-Covid treatment, which led to higher growth in the chronic and semi-chronic segments, better patient flow to doctor clinics and increased healthcare awareness. ”
Growth is there for everyone to see. Quarterly revenues of pharma companies such as
,, Dr Reddy’s and have grown from 5-6% in pre-Covid years to 15-18% in FY2022, according to ETIG database. Profitability has kept pace with topline growth, with many companies almost doubling their profits in recent quarters. This, say analysts, could also be a result of lower profit base in 2020-21.
“If you take a two-year timeframe, growth is on a slightly higher side for the whole industry. But even now, demand is fluctuating. Some players are sitting on Covid-specific idle stock. Now, that’s a nightmare, ”says an ED of a mid-sized pharma company on conditions of anonymity. “We did not benefit much from Covid as our product profiles were not directly aligned to the disease. But we are doing well now. Higher number of elective surgeries and hospital admissions for general medical procedures is helping us big time.
There’s a rise in prescriptions by GPs (general practitioners), which is an encouraging sign. Covid has made people health-conscious – and that’s good news for the pharma sector, ”he adds.
According to Elara Capital, a global equities broking outfit, Indian pharma companies booked nearly $ 4 billion of cash flow during Covid. Of this, about $ 1.8 billion is now getting reinvested to add capacities while $ 1.7 billion would flow into R&D. Many API and on-contract drug manufacturers have already begun expanding their facilities. There are also a few full-suite pharma companies that are setting up plants, as part of their strategy to enter US or European market. In R&D, companies are looking at differentiated segments such as injectables, biosimilars and transdermals. A lot of research is also being done on high-cost specialty drugs and development of novel drug molecules.
“Pharma companies benefited from lower product promotion cost in the last two years. But that is coming back now. So cash flows will moderate over the next few quarters, ”says Abdulkader Puranwala, pharma analyst at Elara Capital. “Demand for drugs is also going up across segments as medical procedures at hospitals have reached or even surpassed pre-Covid months. Drug stocking levels have also normalized over the past few months. With drug prices at elevated levels, pharma companies will see better margins. The industry growth rate may also improve to 12-13% per annum, ”says Puranwala.
Drug prices have already surged 8-15% over the past two months on the back of rising fuel costs and fall in imports from China (because of rising Covid infections in that country). The Russia-Ukraine war has also made drug packaging material (such as aluminum foil) dearer, adding to the already high cost. Even price-controlled essential drugs (coming under GoI’s National List of Essential Medicines) have seen an almost 10% price hike since April. Inflation hits drug manufacturers too. Apart from logistics, they also incurred higher costs on ‘key starting materials’, solvents, gelatins, packaging, additives and other intermediates, ”says Sumeet Chandna, business consulting partner for EY’s pharma & health sciences practice.
TONIC FOR TOMORROW
The pharmaceutical industry in India is currently valued at over $ 50 billion – and ranks third globally in terms of production by volume. Consulting firm KPMG predicts the market to touch $ 130 billion by 2030. While India is a powerhouse when it comes to supplying low-cost generic drugs to the world, it is heavily dependent on China for nearly 70% of APIs.
The government has rolled out production-linked incentive schemes for critical API manufacturers to reduce import dependency. “New players are entering contract manufacturing and API space now. The existing ones are expanding their capacities. The API market is still dominated by China, but India is gradually becoming competitive – and a strong alternative – for global companies to source intermediates from, ”says Chandna Pharma companies like Cipla, Glenmark, Sun and Macleods have plans to expand their product profiles.
Divi’s Laboratories is working on newer drug molecules and have already signed contracts with a few global pharma majors.
is sharpening its injectables portfolio and is looking at entering the Chinese market. has plans to double its formulation capacities to 10 billion units; the company is also setting up two manufacturing plants and an R&D center. Sun Pharma is hoping to ride on the success of its specialty drugs portfolio, which has grown nearly 50% in the first three quarters of last fiscal.
Cipla has successfully launched its range of respiratory drugs in the US to drive growth in the coming quarters. Macleods has resumed its expansion activities, which were put on hold for two years due to Covid. “We have added two more sales divisions to our portfolio – one in the chronic therapy area and the other in acute therapy. The construction of our new API production facility at Dahej, Gujarat, has also resumed, ”says Macleods spokesperson.
Large multi-division pharma companies are not investing much in physical infrastructure. Their focus is mostly on automating supply chains and strengthening CRM (customer relationship management) systems that include doctor networks and direct-toconsumer linkages. While companies like
, Glenmark and Dr Reddy’s are still investing in new drug discoveries, mid- and small-sized ones are focused on systems that will bring them closer to their suppliers and customers. Digital channels are being extensively used to connect with consumers directly.
PATIENT IS IN
“Patient visits to hospitals have gone up significantly over the past eight-nine months. Post-Covid, people are signing up for health check-ups, taking food supplements and vitamins. This is good for the pharma sector, ”says Vivek Tiwari, founder-CEO of Medikabazaar, a B-to-B medical goods supplier.
The pandemic has also brought GPs back in prominence. The number of prescriptions by GPs has grown significantly during Covid. This has forced pharma companies to focus on them. “GP prescriptions could have grown because of increased teleconsultation. You can consult a doctor online for as low as `100; some platforms also give ‘free consultation’. So GP networks have again become critical for pharma companies, ”says Medikabazaar’s Tiwari.
Indian drug manufacturers launch 300-350 new brands (mostly repurposed or combinations of two earlier drugs) every year. This had slowed down in the initial months of Covid-19 as most companies were trying to assess the situation. But with Covid cases falling, new launches are almost back to preCovid levels, say drug wholesalers. “Almost all large companies have rolled out new product lines or brand extensions. These companies are very aggressive in their marketing, too, ”says Gilan Ferzandi, MD of Meher Distributors, a leading drug stockist and wholesaler. “The specialty drug segment is growing in a big way. Also, medical electives such as dermatology, dentistry, fertility-related medications and gynaecology are coming back; these segments had come to a stop during the first two Covid waves, ”he adds.
If Covid-19 gave a booster shot to Indian pharma companies, they are feeling even better in post Covid days.