Healthcare has become one of the largest sectors of the Indian economy, in terms of both revenue and employment. It has been growing at a CAGR of 22% since 2016, employing 4.7 million people directly. The sector has the potential to generate 2.7 million additional jobs in India between 2017-22 — over 500,000 new jobs per year.
Several factors are driving the growth of the Indian healthcare sector including an ageing population, a growing middle class, the rising proportion of lifestyle diseases, an increased emphasis on public-private partnerships as well an accelerated adoption of digital technologies, including telemedicine, besides heightened interest from investors and increased FDI inflows over the last two decades.
Digitization, technological enablement, and automation are affecting industries today in profound ways. Healthcare is no exception. The paradigm of healthcare delivery is changing and is poised for a big leap forward. Healthcare and drug innovation have come into sharp focus as never before. The COVID-19 pandemic has demonstrated that health care organizations become more resilient, agile, and innovative through digitally enabled business models with data at the core. The pandemic added urgency and accelerated the process of change for healthcare to become more digitally enabled.
Healthcare delivery is moving outside the four walls of the traditional health system. Health care providers have realized that products or services alone, no matter how strong they are technical, will not be enough in future. They should look into the future to engage with their users across the health care value chain, whether that be physicians or patients, and deliver to them not just a better care product or care service, but a better care experience. Also, one needs to keep an eye on developments coming from non-core sources like technology companies which could further help in diagnosis or early detection and aid the healthcare ecosystem.
The Pharma sector is one of the most loved sectors in the Indian stock market, the Pharma stocks gave a return of 30% CARG between 2009 and 2016 which was the golden time for the best pharma stocks.
The S&P BSE Healthcare Index jumped almost six times in seven years in its previous bull run from 2009 to 2016. That gives a handsome CAGR of almost 30% in 7 years. However, the story turned sour in the four years that followed with the index losing around a third of its value in absolute terms. The 11-year CAGR of the index still stands at a respectable 14% and that came with a stomach-churning roller coaster ride. Pharmaceutical sector as a whole had underperformed due to several factors such as pricing pressure in the USA, stringent regulatory requirements by the US Food and Drug Administration (USFDA) and delays in drug approvals. But, Indian Pharma companies have always maintained good standing in the global pharmaceutical industry.
List of 5 Best Pharma Stocks to Buy In India
1) Dr Reddy’s Laboratories
With a growing emphasis on other key priority markets including India, Russia, and China, Dr Reddy’s Laboratories is one of the leading Indian generic players in the US market. The new leadership team’s targeted strategy, together with the already-existing non-core assets, has increased profitability. With increased US launch size and speedier execution of multiple medications in emerging markets, profits are anticipated to increase. The Company has successfully managed the ex-US business, as seen by the recent improvement in its profits performance.
Regulatory problems, delays in product releases in the US, and unfavourable foreign exchange swings are all risks, but they are by no means the only ones. Over the previous three years, Dr Reddy’s has been able to produce a compounded profit increase of 12 per cent and a compounded revenue growth of 6 per cent. Over the same time period, the firm consistently reported a strong ROE of 13%. The company plans to enter the biosimilar market, which will support growth even further.
Before investing, check out the share price of Dr Reddy’s Laboratories.
2) Divi’s Laboratories
The largest provider of contract research and manufacturing services (CRAMS) in India is Divi’s Laboratories. The business focuses on backward integration and expansion CAPEX. Due to the nature of its company, Divi’s benefits from price, volume, and currency tailwinds. An atmosphere of strong demand is favorable for the company. Additionally, Molnupiravir, an oral medication under research for the treatment of COVID-19, is manufactured by Divi’s under license.
The execution of its Rs. 17 billion in capital expenditure plans will be a crucial area to watch in the future. It has been said that Rs. 5 billion would be used for debottlenecking, which will promote supply assurance, and Rs. 12 billion will be used for two projects to promote faster growth starting in FY22. It has a 14.5 per cent ROCE. The ROE for the previous year was 11.8 per cent, in line with the five ROE average.
Investment comes with various risk. Please check the share price of Divi’s Laboratories before starting your investment journey.
In the home market, Cipla is a dominant force. The business is well-established in the chronic market and has market dominance in certain chronic therapies including inhalation and respiration. With an emphasis on launching complicated generics for sustained growth, the company is establishing a US brand. Additionally, it has moved its attention to India, which will quicken the trend of domestic demand. Given the US respiratory medicine scarcity brought on by COVID-19, the approval of albuterol would guarantee an increase in US growth and profits over the medium term.
Cipla’s One-India Strategy has been successful so far and is anticipated to continue to spur significant economic expansion. Pharma giants do not have a sizable US portfolio, but the approval of albuterol inhalers should result in excellent profitability in the following years due to an increase in respiratory exposure in the home market. Future cost-cutting initiatives by the corporation are anticipated to continue, which will enhance the margin trajectory. Additionally, the board’s approval of Mr Umang Vohra’s request to continue serving as MD and Global CEO is encouraging for Cipla’s future expansion.
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4) Biocon Ltd
With a portfolio of biosimilars from Mylan (two of which have been marketed in the US), a relationship with Sandoz, and its own biosimilar medicines available worldwide, Biocon Ltd. is a major biosimilar firm. Over the next two to three years, it is anticipated that the monetization of Glargine and other biosimilar pipeline products, the scaling up of Peg-filgrastim and Trastuzumab, and the value unlocking through the IPO of Biocon Biologics’ biosimilar business will increase sales of biologics.
By FY22, Biocon wants to earn USD 1 billion (about Rs. 7,460 Crs.) in revenue from the biosimilars market alone. The firm benefits since price erosion in the biosimilars market is now substantially lower than in other markets. In order to improve the company’s biosimilars business, Biocon recently announced that its subsidiary Biocon Biologics Limited (BBL) is purchasing Viatris’ biosimilars business for $3.3 billion. Although the purchase puts BBL into the value chain for biologics, the price paid for purchasing Viatris’ commercial infrastructure in developed areas is high.
Since the stock price keeps changing, track live, Biocon LTD updates before investing.
5) Aurobindo Pharma
Leading US generic company Aurobindo Pharma has a significant foothold in established areas like Europe. Thanks to the growing demand for generic injectables (with very little competition), a robust product pipeline, and anticipated demand for newly introduced medications, the US company has a positive long-term growth outlook. Earnings would be driven in the coming years by a diversified portfolio in the US and the expansion of the injectable business.
Issues with the US Food and Drug Administration persist in all of its plants. Despite obstacles from the USFDA, it anticipates sustained growth in the US and improved profitability in the EU (for the purchased Apotex portfolio) in the upcoming years. While USFDA overhang still exists at a few locations, the recent approval of the Unit 4 injectables plant removes the risk to the whole firm and increases the sight of expansion. The company is still the best-positioned Indian generic pharma provider to take advantage of any new business prospects brought on by supply-chain effects or brief portfolio reductions in the US and Europe.
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The omicron wave contribution has decreased dramatically as the Covid-19 wave has started to fade away. Additionally, unlock has been announced in significant cities, which will have a negative impact on Covid income. Therefore, in order to expand their business, corporations will need to generate more non-covid revenue.
However, we will never, under any circumstances, compromise on our health, therefore the healthcare sector will always be in the public eye.
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Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory
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