Baring India, a leading private equity fund, signals that Indian pharmaceutical sector seems to suggest two clear emerging trends. One is the greater interest in geographical diversification of the business especially in favour of other emerging markets. The other is the increasing focus and allocation of Indian companies in research & development.

The commentary across firms in the industry is giving the impression on the interest their focus is the emerging markets or rest of the world (ROW) markets as these are referred to. The number of patent expiries will peak in 2016 which will restrict the incremental market opportunity in the regulated markets. ROW markets have similar growth drivers like India in terms of higher healthcare spend and medicine consumption supported by improving affordability in turn led by increasing GDP levels. These markets are still dominated by global innovators and have limited maturity in terms of local manufacturing ecosystem, Amit Chander, Partner-Healthcare, Baring Private Equity Partners India told Pharmabiz.

Indian companies can be early movers in these markets and replicate the success they have experienced in the markets in these countries. They can build valuable franchises from a strategic perspective and monetize value without any of the regulatory hurdles they experience in similar situations in India, he added.

The second trend is the increasing focus and spend of Indian companies in Research & Development. Companies are trying to diversify their product portfolio from oral solid dosage forms to more complex forms like injectibles, transdermal patches or inhalers. This involves augmenting existing R&D capabilities in formulation design and development. The more forward thinking companies are going a step further and pursuing development of products through the 505 (b) (2) pathway in the US which if successful can result in windfall gains given the market exclusivity associated with products approved through this route, he said.

Baring India which is in the private equity (PE) space has been focusing on healthcare and pharma also noted that the investment appetite of PE investors in the pharma industry continued to be robust.

There is strong potential for exports of generic pharmaceuticals from India given the country’s comparative advantage in manufacturing of generics. India’s share in the global generic market is roughly six per cent and likely to reach 25 – 30 per cent over a period of time. Pharmaceutical exports from India continue to grow at a healthy rate of 18 per cent unaffected by the challenges that are being faced by other industries at a government level or at a macroeconomic level. In fact the recent depreciation of the Indian rupee has added to the attractiveness and growth potential of this business. Given the growth tailwinds and high profitability which is inherent in this business, on a relative risk return basis this sector continues to enjoy high rating in the investor community, the Baring India chief noted.