Just Released: "India Pharmaceuticals & Healthcare Report Q4 2013"

Pharmaceutical firms continue to post varying results in India due to the government's introduction of policies targeting the pharmaceutical industry. These include patent disrespect and pricecontainment policies for both generic and patented drugs. We maintain our bearish view on the sector and highlight that domestic firms with a large exposure to overseas markets will continue to fare well.

Headline Expenditure Projections

Pharmaceuticals: INR840.0bn (US$15.7bn) in 2012 to INR921.2bn (US$16.5bn) in 2013; +9.7% in local currency terms and +4.6% in US dollar terms. Forecast broadly in line with Q313, although growth in US dollar terms was impacted by the depreciation of the rupee.

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Healthcare: INR3,811.2bn (US$71.3bn) in 2012 to INR4,209.7bn (US$75.2bn) in 2013; +10.5% in local currency terms and 5.4% in US dollar terms. Forecast broadly in line with Q313, although growth in US dollar terms was impacted by the depreciation of the rupee.

Risk/Reward Rating: India's Pharmaceutical Risk/Reward Rating (RRR) score for Q413 is 53 out of the maximum 100, in our newly improved RRR system. The country scored above average for some indicators and sub-indicators including overall market expenditure, sector value growth, population growth. Nevertheless, it scored below regional average for most indicators under industry and country risks. Consequently with the moderate score, India is ranked ninth, behind Hong Kong, out of the 18 key markets in Asia Pacific.

Key Trends And Developments

In August 2013, the Indian government revoked a pair of patents covering products from GlaxoSmithKline (GSK) and Roche. The Intellectual Property Appellate Board upheld a patent granted to the original compound of GSK's Tykerb, but rejected the patent for the salt formulation of lapatinib used in Tykerb. Meanwhile, the Kolkata patent office has lifted the divisional patent for Roche's Herceptin (trastuzumab), stating that the patent application had not been submitted properly.

In the same month, Biocon launched the 'world's first novel anti-CD6 antibody' for the treatment of psoriasis in India. According to Kiran Mazumdar-Shaw, managing director of Biocon, Alzumab (itolizumab) will be about half the price of similar drugs offered by multinational pharmaceutical firms in the country. Other treatments for psoriasis include Enbrel, Remicade, Humira and Stelara. Most of these target the TNF factor, as opposed to CD6, which means that itolizumab is considered novel. The company is looking to form partnerships to market the product globally.

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