Indian pharma companies unfazed by US slowdown fears

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Indian pharma companies unfazed by US slowdown fears

The Indian stock market might dread a possible US recession but Indian pharma companies seem unfazed by slowdown fears, reports CNBC-TV18’s Vikas Dandekar. As contract research, manufacturing and big and small generic players are not expecting to be hit by a possible slowdown, the drug industry here seems prepared to do well in adverse conditions.

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Excerpts from Power Breakfast on CNBC-TV18 Watch the full show » ALSO READ See latest News about Piramal Health See previous management interviews See what other Experts & Brokerages are saying about Piramal Health Piramal Health BSE | NSE 25/05/12 Are Mutual Funds betting on Piramal Health? Other Stocks in this news Ranbaxy Laboratories | Unichem Laboratories |

The Indian stock market may be dreading a possible US recession but Indian pharma companies seem unfazed by slowdown fears, reports CNBC-TV18's Vikas Dandekar.

Nicholas Piramal chairman Ajay Piramal has grown his custom research and manufacturing business in the last four years from zero to around USD 300 million, that's more than half of his company's total sales of USD 550 million last year.

Custom manufacturing depends mostly on scientific research and manufacturing work dished out by multinational drug makers to low cost drug manufacturers. A majority of Nicholas Piramal's custom manufacturing revenues currently come from Pfizer and even as US drug makers look for cost efficiencies due to a likely slowdown, that number will keep growing. That's not just for Nicholas Piramal but also similar Indian companies.

Ever hungry for strategic acquisitions, Ajay Piramal says now with valuations reaching reasonable levels due to recession fears, acquisitions of American assets may also be looked at in the US. A similar optimism is expressed by Unichem's Dr Prakash Mody . Unichem is a late entrant in the US generics market and has only about 10 products in that market. Dr Mody says with bigger generic companies experiencing an unprecedented price erosion, the benefits of switching from branded products of multinationals to generics may now accrue to smaller Indian companies.

Even large generic companies like Ranbaxy feel that reduced margins from the US market is already factored in and a strategy to shift from generics to branded generics should help shore up profit margins in the US. So, as contract research and manufacturing and big and small generic players are not expecting to be hit by a possible slowdown, the Indian drug industry seems prepared to do well in adverse conditions.