The Indian pharmaceutical industry is coming into its own as technology and the marketplace mature. But it has some tricky negotiations ahead if it wants to prosper and coexist with the multi-national giants in the business.
Analysts at ICICI Securities expect 3QFY12 to be “impressive” as Indian pharma companies benefit from depreciation in the rupee and U.S. product launches. Ranbaxy has launched a generic version of Lipitor, for instance, for which it is paying a licensing fee to Pfizer (PFE, quote).
The trade goes both ways, though. Pfizer and Sanofi-Aventis (SNY, quote) made substantial inroads in the Indian domestic market in 2QFY12, racking up 24% and 22% growth rates that are well in excess of the market’s 13% overall growth. Local players like Ranbaxy and Dr. Reddy’s Laboratories (RDY, quote) may find it difficult to compete.
The interplay between local and multi-national has been attracting attention in India. The Economic Times recently printed an editorial about Strides Arcolab, a mid-sized Indian pharma company that has sold its international business to Watson Pharmaceuticals (WPI, quote). While expressing some reservations, the Times ultimately deemed this process “potent creative destruction” as local companies build up new business and then spin them off.
Most Indian pharmaceutical companies do not trade in the U.S., but are tracked by the S&P India Nifty Fifty Index. Interested investors may want to look at the iShares S&P India Nifty Fifty Index Fund (INDY, quote).