Markets

Making of an FMPG? Pharma MNCs brand push pays off

ET Intelligence Group: Multinational pharmaceutical companies, including Abbott India, GlaxoSmithKline Pharma, Pfizer India and Merck, are increasingly looking to increase their market share in the $33-billion local industry.

According to reports, the Indian pharma industry, which is 10 per cent of the global pharmaceutical business by volume but only 3.3 per cent in value, is estimated to touch $55 billion by FY2020.

By FY2025, Indias pharma industry size is estimated to rise to $100 billion, thanks to various government initiatives to increase the healthcare spend and quicker government approvals.

Seeing this opportunity, the global pharma majors, which together control over 80 per cent of the branded products, have aggressively started launching products from their global portfolio into India.This has started reflecting in the profit growth of these companies. “We are at the cusp of a new era,” A Vaideesh, MD, Glaxosmithkline Pharma, said in the latest annual report. For instance, the company launched globally leading DTP vaccines in April. The market size of this is only ?275 crore but is growing at 135 per cent annually. Similarly, the company has launched several other such products, thanks to which, its net profit in the June quarter soared 235 per cent.

GSK Pharma is not alone. Abbott India, the largest foreign pharma player in the country by sales, has set an aggressive launch programme. The company launched 21 products last year and is gearing up to add another 100 products in the next five years. Its sales grew 138 per cent last year and by 71 per cent in the June quarter.

Pfizer, the third-largest global player in India, too, will be launching several new products in the coming years. Pfizer India has witnessed 54 per cent and 60 per cent net profit growth in the last two quarters, respectively. “Indeed, in the next few years, new introductions and volumes will be among the most important drivers of growth,” S Sridhar, managing director, Pfizer India, said in the annual report.

Further, most of these products are on the branded side and are expected to deliver higher margins. Due to rising competition from domestic players, global pharma giants have increased their focus on the over-the-counter space that does not require a prescription.

For instance, branded products now account for almost two thirds of Abbott Indias revenues. This space operates more like FMCG and can lead to re-rating of the stocks. Earlier in April, Procter & Gamble acquired Merck Indias business and the market has already started giving it multiples of FMCG companies. The Merck stock has more than doubled from the open offer price. Stocks of other foreign pharma companies too have seen partial re-rating; each stock is up at least 40 per cent since April beginning.

Analysts are expecting these companies to deliver at least 17 per cent-20 per cent CAGR for the next three to five years.

Original Article

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