India's pharma industry seeing rapid growth: Wockhardt

Q: We have seen multiple deals take place in pharmaceutical space, Strides Arcolab to Elder Pharmaceuticals, GSK Pharmaceuticals and several non-listed private equity deals such as KKR in Gland Pharma, Blackstone in Emcure Pharmaceuticals. What is making Indian pharmaceutical space so attractive and what do you think of the valuations at which these deals have been done?

A: We need to appreciate the very fundamentals of India’s position in pharmaceutical industry as a whole. There are two things happening here. One is that pharmaceutical industry is growing rapidly in India and so, there is a great future in India. This is why you have deals with GSK and others where there is a high valuation and they are increasing their stake holding at a multiple of 5-10 times of sales.

The other element of transaction taking place is that India is becoming a research and manufacturing base for global pharmaceutical generic companies. As a result, Indian companies who have bases as well established base in the generic space like Stride transaction and few others are getting high valuation. Therefore, the high valuation, we look at it in more traditional manner of what is P/E multiple or sales multiple but what Indian pharmaceutical is offering is a great future both in terms of growth in India and a growth strategic advantage available for doing business outside India.

Q: How have you read the trade disruptions that have taken place in domestic market? The margin issues continue to remain unresolved with chemist, how much is that affecting sales for companies like yours?

A: When government evolves a policy like New Drug Policy, it is important that the government discusses it with all stakeholders and arrive at a policy. Most of the times the policy that government has arrived at, do not involve all stakeholder and therefore, after the policy is announced this kind of challenges and disruption takes place.

The ideal situation is, it is not a problem between industry and the trade because the trade is affected and the only way they are trying to do is, push the industry to compromise but what industry is doing is following the policy that is announced. It will be ideal if government intervenes and makes it fair for everyone concerned and understand the trend renewing concern and resolve that.

Q: What has the domestic growth slowed down to?

A: In the last few months it has slowed down mainly because of new drug policy, which reduced the prices across the board and is a temporary reflection. India fundamentally is growing and continues to grow at a double digit.

Q: Issues raised by the USFDA have become increasingly common with Indian companies, do you see a pattern, any reason why this trend is simply not dying away?

A: Yes, in last few years India has become a very important supplier of medicine to USA. Ten years back, Indian companies were negligible. In 2007, five years later, it had about 7 percent of market share. Now it is having around 14-15 percent. Since we have become more important, they have established their offices in India in various cities. This is a joint collaboration between the US and European authorities, it is a part of the deal they have arrived several years ago. Now, they are in process of implementing it in India and this only reflects the sheer size and importance of India vis-à-vis the US market.