Industry Analysis (4/10)💊💉
The Indian Pharmaceutical Industry is 3rd largest in the world in terms of volume and 14th largest in terms of value. This industry contributes to 1.72% of Indian GDP and is a major component of India’s foreign trade (India supplies low-cost generic drugs across the globe). Major segments of the Pharmaceutical Industry are Generic drugs, API’s, Vaccines, Biosimilars and Biologics.
🌟 Cyclicity: This is a non-cyclical Industry because of the demand for
pharmaceuticals are present despite the economic condition.
🌟 Value Chain:
➡️ Research and Development (Drug Discovery, Formulation)
➡️ Testing and Approval (Clinical trials, group testing, Approval, Patent
➡️ Manufacturing (Production, Quality testing, Packaging, Waste Management)
➡️ Logistics (Storage, Transportation)
➡️ Marketing and Sales (Medical Reps, Free Samples, Referrals)
🌟 Revenue Drivers:
➡️ Product Sales (Sales of drugs or medicines produced)
➡️ Patent Income (Sale of patented product at a fee)
🌟 Cost Drivers:
➡️ Research and Development costs
➡️ Manufacturing costs
➡️ Patenting costs (Considerable time and money are required for the application
of a patent)
➡️ Freight charges, Distributor and Retailer margins
🌟 Growth Drivers:
➡️ Huge R&D network (With Horizontal Integration)
➡️ Low cost production (Economies of scale)
➡️ Policy changes (Compliance and Incentives for production)
🌟 Key Market Players:
➡️ Sun Pharma
Pharmaceutical stocks are termed to be defensive stocks as the demand for pharmaceuticals is there despite the economic conditions and consequently the company stock is expected to reflect its sales performance with its market price.
What is your take on Pharmaceutical Industry? Do you hold any Pharma stocks in your portfolio?