• Over the last four years through FY 2014-18, the developed markets have grown at 5.7% CAGR. While growth is expected to slow down to 3-6% CAGR over the period FY 2019-23, these countries will continue to cumulatively account for the largest amount of pharmaceutical spending. The launch of specialty products and orphan drugs (i.e. drugs intended to treat rare diseases) will drive spending in this region.
  • The US pharmaceutical market is the world’s largest pharmaceutical market with medicine spending exceeding US$480 billion in 2018. It is also the largest importer of drugs in the world and hence the growth and dynamics of the US market has a considerable bearing on the overall growth of the industry. Generics are estimated to make up to 90% of the US prescriptions, up from 72% in 2008. Biosimilars will also emerge as a new market potential as biologics worth nearly US$ 16 billion lose exclusivity over the next five years.
  • Pharmerging Markets As per the IQVAI Institute Report, the Pharmerging markets is valued at US$286 billion in 2018 and constitutes about one-fourth of the global pharmaceutical markets. While the pharmerging markets grew at 9.3% CAGR through 2014 to 2018, it is expected to grow at 5-8% CAGR through 2019 to 2023 as economic growth and past healthcare expansions are likely to contribute less to the growth. However, it would still grow faster than the developed markets on account of rising income levels, increased drug affordability with the launch of low-priced generics, higher incidence of chronic diseases due to shift in lifestyles, growing health awareness, increased government healthcare expenditure and deeper insurance penetration.
  • The Company is engaged in the development, manufacture and sale of highquality pharmaceutical and nutraceutical products, which are marketed in India and over 50 countries internationally. Supported by an extensive portfolio of over 800 brands, robust sales and distribution network and an experienced management team, the Company has been consistently ranked amongst the top ten pharmaceutical companies in India for over 15 years.
  • In terms of secondary sales performance reported by IQVIA (MAT March 2019), the Company outperformed the IPM with a year-on-year growth of 14.3% compared to IPM growth of 10.5%. In most of the major therapy areas, the Company grew ahead of the market. In its established therapy segments of anti-infectives, gastro intestinal and VMS, the Company significantly outperformed the market growth, thereby consolidating its position amongst the top companies in these therapeutic segments.
  • A fundamental part of the Company’s strategy is to invest in its Research & Development to strengthen its product portfolio and hence the future growth. Thus, the Company spent Rs. 4,622 million or 6.3% of its revenues on R&D during the financial year 2019 compared to 5.7% invested in the previous year. The Company’s R&D team comprises about 500 scientists working across its 5 R&D centres located in India and the US to develop products for its key focussed markets.
  • Alkem’s products face fierce competition from multiple pharma players, which may lead to shrinking revenues and impact its competitive advantage.
  • The Company has also made substantial investments in the biosimilar segment through its subsidiary Enzene Biosciences – a biotech focussed R&D company situated in Pune, India. Over the medium to long-term, Enzene aims to launch its biosimilar products, which are presently in preclinical and clinical development stage, in India and key international markets.

Disclosure: I have recently taken a position in Alkem, hence my views maybe biased. The company witnessed strong growth across most of the major therapeutic areas in Q2 FY20. As per the company’s quarterly report, anti-infectives and gastro-intestinal segments grew 30.8% and 17.5%, respectively, whereas Indian pharma industry in that space grew only 19.9% and 12.1%, respectively. The stock can do well especially because majority of the market is looking at MNC companies and ignoring other quality companies.

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