Investment Opportunities in Pharmaceutical Industry in India


The pharmaceutical industry in India is among the most progressive and advanced among the developed countries and has provided great opportunities of employment to several thousands of people, apart from contributing greatly towards the Indian economy. This is a knowledge based industry and offers excellent investment opportunities for investors from all over the world. The pharmaceutical products from Indian companies are exported to some 200 countries worldwide with the annual turnover for products exported to the US along running to several billions. The industry has witnessed phenomenal growth in terms of product development, usage as well as infrastructure and technology in the past several years and is poised for greater growth in the years to come.

Wide Range of Trade Opportunities

One reason for offering increasing opportunities to investors is the huge population of India, which offers a tremendous potential for clinical trials in the country. Another factor pointing towards increasing investment opportunities is the availability of cost effective sources for production of generic drugs. The population of India is not only huge but is also rich in scientific and technical know-how and knowledge related to the industry. Research and development is being carried out on a steady scale and the costs incurred for such research are quite low, making it possible to continue these on a regular basis. When drugs are produced in bulk quantities, it becomes quite cost effective for the pharma companies in the country.

genetic engineering 7The laboratories in India are also of world class quality and are capable of making use of the latest technology. The balance of trade in the sector makes it more attractive for international company investments in the Indian pharma sector. The biotech industry is also showing a growth trend, making the pharma sector a more attractive investment opportunity. The Indian Pharmaceutical sector also presents a wide variety of medications, such as the Siddha and the Ayurveda, offering investors ample room to invest in it.

Indian Pharma Sector – Proactive Investment Policy

drug-app-pageIn the year 2005, the GATT (General Agreement on Tariffs and Trade) was signed enabling the country in recognizing global patents. Foreign companies are finding the Indian companies a good investment destination especially due to the abolishment of licenses for several drugs and pharma products. The Indian Ministry of Chemicals in charge of the pharma industry allows hundred percent foreign investment in Indian pharma companies, provided they follow certain government regulations and in case of indigenous products that have a patent recognized by the Indian Patent Act, there is also no price regulation or control. These steps by the government make investment prospects very attractive, as foreign companies as well as Indian organizations can derive great benefits from the advances in the industry. The Indian government has also streamlined procedures for enabling drug development and included tax breaks for the sector and is planning to create additional support for Yoga, Siddha, Homoeopathy and Ayurveda drugs, making investment opportunities more attractive to big players, both national and international.

 Many pharmaceuticals, who are multinational players, are investing in the Indian sector due to the patent regime. The Indian pharma segment is strong in its contract manufacturing and is also considered an excellent location for R&D.  The sector has been able to make remarkable advances with clinical trials and this has led to several Indian as well as foreign companies making launches of patented drugs in India.

Attracting the Attention of Multinationals

Untitled-1Multinational companies have also entered the Indian pharma segment, as they are interested in cornering the skills of the country for their research and manufacturing and would like to tap this growing market. Many big Indian pharma companies are now getting increased exposure on a global scale with increasing international markets and markets for generic drugs that are more affordable. There are several overseas acquisitions by Indian companies making them come into contact with lucrative markets in other countries, as demand for the products increase. The cost efficiency in India is also higher when compared to other countries, especially in case of manufacture of US FDA accepted plants functioning in India. The costs of manufacturing products in India are almost 65% lower than that incurred in the US and about 50% less than the cost incurred in Europe. There is also a great potential or underlying opportunity in the Indian market for drug consumption, as the per capital drug consumption in the country is the lowest when compared to other countries, such as Japan and Germany.

Key areas for Investment

 pharma_techIn addition, the country has a population with skilled manpower and offers low cost benefits in the fields of manufacture and research. This will attract a lot of investment related to the outsourcing of R&D and manufacturing from foreign companies. These countries are experiencing spiraling costs in manufacture coupled with patents that are expiring. This will drive these companies to outsource their manufacturing and research activities to India and invest in Indian companies. Both capital and recurring costs in India are much less compared to their western counterparts. Several Indian pharma companies have made changes to their plants in order to become compliant to cGMP and it now has the largest number of plants approved by the US FDA outside the United States.

It makes sense for foreign players to invest in the Indian pharma segment, as the Indian companies have proved that they are better at production of APIs or Active Pharmaceutical Ingredients, when compared with their competitors. Indian companies are entering into alliances with generic companies for development of molecules that are off the patent and are also undertaking contract jobs for multinational pharma companies in the US and Europe. Contract manufacturing is a sphere of investment by foreign companies that is showing a growing trend with many top players, such as Shasun Chemicals, Jubilant Organosys and others entering the contract manufacturing of APIs to get additional revenue. Many top multinational pharma companies, such as Pfizer and Novartis rely on Indian companies for the supply of APIs as well.

Indian pharma companies can enter into licensing deals and contracts with multinationals for new product deliveries and for generics in case of patent expiries.

India also offers great potential as a center for clinical trials for international companies and a center where they can expand biosimilars and biopharmaceuticals.

Thus, the Indian Pharma industry has established its presence in the international scene and proven its determination to flourish. It ranks third in the world for volume of production and ranks 14th in value of the products. All this makes it the right time for investing in the industry.

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