By – Prathamesh Masdekar, Research Analyst, StoxBox
The pharmaceutical sector has demonstrated notable improvement in recent quarters, driven by better performance in the US generics market, robust results in branded markets, and a moderation in raw material costs. These factors have collectively contributed to the healthy earnings of pharmaceutical companies despite global headwinds. As we advance, most pharma companies are expected to achieve 12-15% growth in 2025 amid a focus on new product launches, increased volume growth, and rising demand for generics and branded products. Additionally, pharmaceutical companies have strengthened their presence in chronic therapies, prioritized new product introductions, and explored new therapies to capitalize on emerging opportunities.
India is marking its rising position in pharmaceutical manufacturing by being the primary producer of generic drugs. During FY24, India’s pharmaceutical and drug exports were ~$27 bn, which made India one of the top global exporters. India’s Drug and pharmaceutical exports soared from $15 billion in 2013-14 to $27.85 billion in FY24. Ranking third globally in drug and pharmaceutical production by volume, India exports to ~200 countries. The top five destinations for these exports are the USA, Belgium, South Africa, the UK, and Brazil. With a 10-12% growth rate, India’s pharmaceutical sector is expected to reach $100 bn by 2025, fuelled by its robust domestic manufacturing base. During 2024-29, 15 blockbuster drugs (including biological products) will be off-patented, worth $112 billion, providing a tremendous growth opportunity for Indian pharmaceutical companies by another $10 billion. The patent on Revlimid expires in January 2026, and the pharma majors, which have seen strong growth on the back of this drug, are looking for other opportunities to keep their growth path.
The US Bio Secure Act is also poised to positively influence the Indian API CDMO industry as global pharmaceutical stakeholders increasingly seek alternatives to China. The Indian CDMO sector will likely thrive, bolstered by a robust capital expenditure cycle focused on capacity expansion, a strong USFDA compliance track record, sustained M&A activity, and investment in niche technologies. India’s unique positioning in the changing global API dynamics and continued strong presence in the US pharmaceutical market supply chain further strengthen this outlook. US Bio Secure Act will positively impact the Indian API CDMO industry with US$ 7 Bn accruing over the next five years as global pharmaceutical stakeholders look for alternatives to China. It is believed that China still commands around 30-34% of the global API/CDMO industry market share. Meanwhile, fruitful discussions by US firms with Indian peers will lead to investment in capability enhancement and capacity expansion that could range from two to three years to commercialize. Indian CDMO industry will likely remain in a sweet spot due to a strong capex cycle across the sector in capacity expansion as well as capability enhancement backed by a healthy balance sheet, proven capabilities of executing complex molecule development, strong USFDA compliance track record, sustained M&A activity and investment in niche technologies to gain foothold in complex projects for innovator clients and India’s unique positioning in the changing global API dynamics and continued strong presence in the US/regulated pharmaceutical market supply chain.
Overall, we expect domestic-focused pharma players to report 8-10% growth driven by an uptick in the chronic segment, higher MR productivity, new product launches and a focus on cost optimization. We expect pharma companies focusing on US business to grow strongly due to ongoing drug shortages, new product launches, and a shift towards specialty products and niche molecules. The sector is also likely to benefit from steady cash flows and low financial leverage, which will help maintain stable credit profiles, even as pharmaceutical companies pursue acquisitions in niche therapeutic areas.
Indian API Market Overview
