Synopsis: Generic medicines are cost-effective versions of patented drugs that meet identical safety and efficacy standards. India leads the global generics market due to scale, regulatory compliance, and export strength. Stocks like Sun Pharma, Cipla, Dr Reddy’s, Lupin, and Aurobindo dominate this segment with diversified portfolios and global presence.
India has emerged as a global powerhouse in the pharmaceutical industry, supplying affordable medicines to over 200 countries. Strong manufacturing infrastructure, a large base of USFDA-approved facilities, backward integration in APIs, and supportive government initiatives have strengthened its competitive edge. Leading listed companies continue to expand globally, reinforcing India’s position as the “Pharmacy of the World”.
What are generic medicines?
Generic drugs, also known as generic medications, are pharmaceutical drugs that have the same active ingredient, strength, dosage, safety, route of administration, and efficacy as an original branded (innovator) drug. They are launched after the expiration of the patent of the original drug, which enables several companies to manufacture and distribute the drug at much cheaper rates.
Although the brand name is different, generic drugs have to prove their bioequivalence, which means that they act in the same manner in the body and produce the same results as the branded drug.
The main point of difference between generic and branded drugs is not in their quality or performance but in their pricing. Generic drug manufacturers do not incur the same high costs of research and development and marketing as innovator companies, which helps them provide drugs at cheaper rates.
The U.S. Food and Drug Administration and the European Medicines Agency are some of the regulatory bodies that test generic drugs stringently before approving them for sale, and this helps generic drugs meet the same international standards as branded drugs.
Why is India leading this segment?
India is at the forefront of the global generic industry because of its efficient manufacturing infrastructure, strict regulatory adherence, and large-scale production capacity. India has one of the largest numbers of USFDA-approved manufacturing facilities outside the US, which helps the country meet the stringent requirements of regulated markets such as the US and Europe.
The country’s established Active Pharmaceutical Ingredient (API) industry and backward integration help keep production costs low. The country’s large-scale production capacity helps Indian generic manufacturers offer affordable and quality generics to the global market.
In addition, the country has a talented scientific community, export-friendly policies, and government initiatives such as Make in India and the Production Linked Incentive Scheme. These initiatives promote domestic manufacturing, cut down on import dependence, and make the country more globally competitive.
With exports to over 200 countries and a large share of the global generic drug market, India is poised to maintain its position as the “Pharmacy of the World” and help the global healthcare system with quality and affordable drugs.
Which are the top stocks leading this segment?
Sun Pharmaceutical Industries Ltd
Sun Pharma has robust scale advantages in the US, India, and the emerging markets. It has a diversified portfolio of chronic, speciality, and complex generics, which helps mitigate risks associated with plain generics. Its robust backward integration and speciality pipeline offer margin resilience even in the face of US pricing challenges.
With a market cap of Rs 4.14 lakh crore, the shares of Sun Pharmaceutical Industries Ltd are trading at Rs 1,725 and are trading at a PE of 34 compared to its industry PE of 27.7. The shares have given a return of over 180% over the last 5 years.
Cipla Ltd
Cipla is a leader in making affordable generics accessible, especially in respiratory and antiretroviral segments. The company has a robust franchise in India and is increasing exports of regulated market products. Its focus on differentiated inhalers and branded generics helps the company enjoy relatively resilient margins.
With a market cap of Rs 1.08 lakh crore, the shares of Cipla Ltd are trading at Rs 1,338 and are trading at a PE of 22.8 compared to its industry PE of 27.7. The shares have given a return of over 60% over the last 5 years.
Dr Reddy’s Laboratories Ltd
Dr Reddy’s has a broad, diversified portfolio of generics in the US, Europe, and India, which helps mitigate risks associated with geographic concentration. The company is actively pursuing complex generics and low-competition product launches in the regulated markets. Its R&D investments have helped enhance its pipeline in injectables and speciality generics.
With a market cap of Rs 1.07 lakh crore, the shares of Dr Reddys Laboratories Ltd are trading at Rs 1,277 and are trading at a PE of 19.1 compared to its industry PE of 27.7. The shares have given a return of over 35% over the last 5 years.
Lupin Ltd
Lupin has a robust presence in the chronic therapy areas of cardiovascular, diabetes, and respiratory. Its US generics business remains a core contributor to its revenues, with a focus on niche and complex product filings. Its operational restructuring has helped the company enhance cost efficiency and margin sustainability.
With a market cap of Rs 1 lakh crore, the shares of Lupin Ltd are trading at Rs 2,219 and are trading at a PE of 20.4 compared to its industry PE of 27.7. The shares have given a return of over 115% over the last 5 years.
Aurobindo Pharma Ltd
Aurobindo Pharma is a large exporter of generics, especially in the area of antibiotics and oral solids. It has a strong market presence in the US and is vertically integrated in API manufacturing. The strategy of focusing on injectables, biosimilars, and specialities is to move away from commoditised segments.
With a market cap of Rs 67,605 crore, the shares of Aurobindo Pharma Ltd are trading at Rs 1,164 and are trading at a PE of 19.1 compared to its industry PE of 27.7. The shares have given a return of over 30% in the last 5 years.
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