$1.6T market by FY25, Not investing in 🇮🇳's pharma growth story is a risk.
What makes us optimistic? $236B worth of innovator drugs patent expiry to happen in the next 4-5yrs.
Who are the most competitive players that will gobble up the opportunity? Indian Pharma cos.
Whether be it biosimilars or complex generics.
Src- Care Ratings
The costs of production in India is 50% cheaper than the developed markets
The cost of R&D is 1/8th the developed markets
The cost of clinical trials is 1/10th the developed markets.
+ Trained & specialized pharma workforce.
The biggest risk remains the compliance risk: as a stakeholder.
There are opportunities across the value chain (barring the very high risk- very high return NCE);
The future pipeline & market share ramp-up is the key.
The amount of PE deals this sector has seen has more than doubled, just in the last year.
Focused on Indian Pharma Market to Biosimilars to CDMO to Animal Pharma.
Why is the Indian Pharma underperforming?
No USFDA
1/ This doesn't allow regulatory approvals for new plants & products
2/ No bad compliance players are eliminated as FDA continues to renew their approval without visiting; most of the molecules are flushed with the competition.
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Semiconductor shortages are creating some fantastic opportunities in the broader stock market; think FY24 & swing the bat.
On the contrary, the current supply crunch will help the OEMs to pass on the increased RM costs.
This will reflect in the bottom line & gross margins (OEMs have seen a 6-7% reduction from FY18) when this normalizes.
High uncertainty in the short term is the best friend of a long-term patient investor.
Look for companies that have high operating leverage play (including financial leverage), are not being talked about in the investment circles & where the promoters have everything to lose.
"We are carrying Rs 27,936 crore of fixed-rate liabilities at 8.66%, largely legacy, and you can imagine the upsides when these are replaced by low-cost deposits." ~ V. Vaidyanathan, IDFC First Bank FY21 AR.
"We advise our product teams to design products in such way that it is meant to be sold to our 'near and dear' ones. We make products with transparent pricing and fees."
"We don’t pressurize our employees to 'somehow' sell high-margin products to meet fee targets. The list of our 'Customer First' features is long."
Fresh Issue of 165crs (50 for capex | 48 for Working capital | 20 for debt payment) + OFS of 237crs (Partially by promoter & PE Tano selling out as the fund tenure is up)
~ Total raise of 402crs
2/ About the company (Not a Biotech company)
A Contract manufacturer for formulation cos. (204 in total) for Indian markets & a small domestic OTC biz
3279 products, 4 plants with 700cr tablets/capsules capacity
Emphasis on chronic (60% of rev) & complex generics (70% of rev)