Are golden days ahead for Pharma stocks?
I have recently come across an interesting article in ET, that claims that the Pharma companies that are making Generic Drugs and have a global foot-print esp in USA markets, are going to grab a great opportunity that comes in the form of expiry of patent worth a market share of $100-140 billion and a surge in demand for generic drugs owing to the landmark Heath Care bill recently announce by the USA President Obama.
Here are some excepts from the article..
Industry experts have heralded the five-year period between FY10 and FY15 as the golden period for generic companies in view of the patent expiries worth $100-150 billion. Nearly 40 Indian companies are geared up with US FDA approved facilities and Abbreviated New Drug Applications (ANDA) approvals to meet the huge opportunity.
The passing of the landmark Healthcare Bill in the US holds a lot of promise for generic companies. With emphasis on increasing the coverage of health insurance and cutting down costs of healthcare, the Bill is likely to provide a big fillip to the usage of low-cost generic drugs. The Bill seeks to bring an additional 40 million Americans under comprehensive medical insurance. This will lead to large incremental demand for drugs and other healthcare goods and services. Bulk of this incremental demand is likely to be captured by generic drug makers. The Bill may also encourage Americas insured population to increase the usage of generic drugs and curtail the use innovative drugs.
Indian pharma companies — most of them being exporters of generic drugs and intermediates to the US, the world’s largest drug market — are going to gain by the passage of this Bill. While the impact is long term in the form of increase in procurement of generic drugs by US, it is nevertheless a positive sign.
Leading Indian drug makers like Cipla, Dr Reddy’s Labs (DRL), Lupin and Cadila Healthcare have the potential to become leading global generic players. They have healthy para IV pipeline, are geographically well diversified, have lean cost structure and at times have dominance in certain niche segments. However, they are still quite small compared to large global generic players. For instance, Teva, the Israeli generic pharma company with more than one-fourth the share in the US generic market, is more than thrice as big as the combined size of all Indian companies.
Read the full article here
