India is expanding its generic drug industry and supporting a sector-related exchange traded fund as the emerging market plays a greater role in the global health care sector.
“Indian generic drugmakers have moved upwards on the global value chain and managed to gain a foothold in regulated markets such as the US and Europe,” according to indxx.
Indian generic drugmakers now make up 40% of generics and 10% of finished dosages by volume. In the decade ended 2014, Indian generic drug sales surged to $17 billion from $4 billion, with an annualized growth rate of 16%, and foreign sales grew to $12 billion from $1.7 billion.
“Backed by the success of Indian companies in tapping the US generic drug market, a largely underpenetrated but fast-growing local healthcare market and strong fundamentals, Indian generic drug firms may be a compelling investment case for investors,” according to indxx.
Indian drugmakers make up the dominant share of abbreviated new drug application, or ANDA, drug approvals in the U.S. – applications for the approval of generic drugs. Indian companies are second to US-based companies in ANDA approvals and have accounted for 20$ to 25% of the first ANDA-approvals for a specific drug over the last few years, which may reflect their strong research and develop capabilities, according to indxx.
“This is a key statistic, as first ANDA-approval is considered a major reward in the generic drug industry and comes with the exclusive right to sell the generic version of a drug for the first 180 days after patent expiry,” indxx said.
Moreover, indxx argues that Indian drugmakers have strong balance sheets and may continue to expand through merger and acquisitions.
ETF investors may look to the Market Vectors Generic Drugs ETF (NasdaqGM: GNRX) as a way to tap into the growing generic drugs space. GNRX tries to reflect the performance of the Indxx Global Generics & New Pharma Index, which tracks a number of global drug makers that generate significant revenue stream from generic drug sale.
The generic drug ETF includes a hefty 20.2% tilt toward Indian companies, such as Lupin (LPC), Dr. Reddy’s Laboratories (DRRD) and Sun Pharmaceuticals (SUNP), which are in strong positions to take on additional debt to merge with or acquire others in the industry.
Max Chen contributed to this article.