Niche Drug Revolution: Has India’s Generics Boom Peaked?

Friday 23 August 2013, Amsterdam

Many Indian pharmaceutical companies will increasingly look to the development of drugs within niche therapy areas and move away from the overcrowded and increasingly challenging generics landscape, says this new research.

The major pharmaceutical manufacturers in India will spend more on R&D in the near future as they target potentially lucrative and relatively underdeveloped niche therapy area drugs markets.

“Companies such as Ranbaxy, Dr. Reddy’s, Lupin and Wockhardt have already been making moves towards niche drug production, with R&D investments increasing in recent times,” says Adefemi Adenuga, analyst of the Healthcare Industry Dynamics Team.

“Many Indian companies already possess considerable manufacturing capabilities and would be able to leverage their experience and infrastructure into achieving scale economies in the development and production of niche drugs.”

The generics sector – which currently dominates India’s pharmaceuticals market – does not guarantee long-term profitability or sustainable financial growth, and there are fewer barriers to market entry than there are for branded therapeutics, which require significantly greater resources. Accordingly, competition in the generics sector is fierce and profit margins are slim.

Big Pharma’s rising interest in emerging markets is expected to further squeeze the profitability of India’s generics manufacturers, particularly that of smaller firms. Major players from Europe, Asia, and North America are investing significantly in India and taking advantage of the nation’s relatively cheap resources.

While this interest will inevitably put pressure on India’s domestic firms, it will also play a key role in driving the country’s pharmaceutical market value, with forecasting revenue to increase from an estimated $17 billion in 2012 to $54 billion in 2020.