JPMorgan Conference: Indian Generics' US Edge- 45-50% Share Shields From Tariff Overhang|Bansi Desai

ET NOW

🌍 Welcome to Global News Hub – your trusted source for fast and reliable updates from 🇺🇸 USA, 🇮🇳 India, and 🌐 worldwide. From 🔥 breaking news and 🏛️ politics to 💼 business, 💻 technology, 🎬 entertainment, and more, we bring you daily updates ⏰. Follow now to stay informed anytime, anywhere 📲.

Transcript

00:00Welcome back. We are at the JP Morgan India Conference and with me is Banshee Desai,

00:18who is the India Healthcare and Pharma Analyst at JP Morgan. Banshee, thank you very much for

00:24joining us on ETNOW. Healthcare, especially generic companies are in focus because of the Trump

00:32tariffs. Of course there hasn't been much, they've been under exempted pending an investigation. How

00:38do you see the generics playing out from here? Sure, thanks for having me. So if you look at

00:45India's generic business, this largely accounts for one third of Indian companies' revenues

00:51and we've come a long way here. We account for almost 45 to 50 percent of U.S. generic drugs

00:57consumed in the U.S. market. So we've really scaled our business quite well here. We play an important

01:04role in the U.S. Generics does reduce healthcare cost burden for the U.S. economy. So it plays a very

01:11pivotal role. In terms of tariffs, at present the pharma sector is exempted from tariffs.

01:18We will await Section 232 investigation to probably get more clarity in terms of whether and if

01:25tariff is proposed and at what magnitude. Until then, we believe this definitely presents and

01:31overhang. But fundamentally speaking, this is a space which is offering the U.S. government to lower

01:39cost. It is saving cost for them. Plus, we are a very big part of their supply chain. So it's very

01:45critical from that standpoint. But, you know, we are awaiting more clarity from the government.

01:50You know, but, you know, the Trump government also wants pharmaceutical sector to set up shop in

01:56the U.S. Do you see that in some of the Indian generates moving to the U.S., setting up

02:01plants and manufacturing lines there for the U.S. market? So if you see, a lot of leading companies

02:08already have manufacturing presence in the U.S. So for some of those, you know, it will be easier for

02:14them to manage the supply chain if at all, you know, tariffs are imposed. But largely speaking,

02:19from a cost economic perspective, it usually takes three to four years for Indian companies

02:25to go and put up plants, have your approvals in place. At the same time, if you look at the cost,

02:30the cost of manufacturing runs between U.S. and India, there is a huge difference. You know,

02:34it's almost 50-60 percent higher than, you know, manufacturing in India. So keeping cost economics

02:42in mind, keeping the lengthy approval process in mind, we really need to see whether, you know,

02:48those decisions will be made or not.

02:50Among the Indian generics, which companies are much more, you know, safe with respect to this

02:56entire headwind which you're seeing or the overhang which is there?

02:59So as I mentioned, a lot of large companies... It's relative in nature, but yes.

03:02Yeah. So if you see companies like Lupin,

03:06Cipla, Sun, they do have manufacturing footprint. I would say generally from a tariff implication

03:12standpoint, we believe larger companies would be better, you know, will be in a better position

03:18to withstand any implications of tariff compared to the smaller one, purely because of their scale,

03:23purely because of their experience. You know, they'll be able to, you know, tide this through.

03:28I'm sure whatever is the tariff, you know, these companies will have a combination of strategic

03:34and operational responses.

03:36Have you also looked at the scenario where the India-U.S. tariff trade, you know, comes into play,

03:43agreement comes into play and there is a base tariff which comes into play?

03:47How does the Indian generics, you know, stand to gain or, you know, lose in that scenario?

03:53Well, I mean, it remains to be seen. We don't have a precedent of any tariff level,

03:57but our sense is that a modest tariff level, say for instance, if it's in the range of 10-20%,

04:03you know, maybe industry will be able to absorb some, pass on some of it and, you know,

04:08you would not see probably much impact on the PNFs. But if you're talking about a tariff levels,

04:13which are like 20-30% and higher, then one really need to see, you know, whether you'll be able to

04:18pass that on completely. If yes, then, you know, you see minimal impact. But then we ourselves account

04:24for 45-50% of the U.S. generic volumes. Also, at the same time, one has to think about the second

04:30order impact here, right? So, say for instance, if tariff is levied uniformly across all the regions,

04:37then again, you know, comparatively speaking, India does stand out. India does have an edge

04:43because of its cost leadership and because of its scale. So, second order impact, in our view,

04:48could actually turn out to be even favorable. But we need to see, you know, how those trends evolve.

04:53You know, you spoke about the supply chain. The CDMO is one sector that you track very closely.

04:58How do you see that industry? Because in the last couple of quarters, we've been talking about

05:03the coming back of the CDMO. But, you know, every company talks about the next quarter is going

05:08to be better, but it doesn't happen that way. What's ailing this sector? I mean,

05:12and what are the triggers that you see for this sector? So, firstly, from a CDMO perspective,

05:18let me clarify that from a tariff implication standpoint, this is one sector which we believe

05:24will be insulated. The reason being the burden of tariff actually lies on the clients. That's number one.

05:29Second, also the supplies of CDMO to the large innovators form very small portion of their P&L.

05:36So, it's also easier for them to absorb those kind of costs. But talking about the sector and its

05:41longer-term potential, we believe we are very, very small in overall scheme of things. So, overall,

05:48global CRDMO market, as we speak, is over $200 billion in size. And India accounts for only 4% market

05:55share today. We are one of the fastest growing countries globally speaking. And we are also

06:01fast emerging as a preferred partner. And this is because of multiple reasons. A, we see structural

06:07macro tailwinds. So, rising outsourcing penetration, diversification strategies by large innovators,

06:14be it EU plus one, China plus one, US-China tensions. All of this is driving incremental business to

06:21Indian companies. The second is India also offers cost advantages. It also offers large pool of

06:27scientific capabilities. The regulatory and compliance track record is also solid. In fact,

06:32in terms of labor cost, you know, we compare favorably to China. So, there are these, you know,

06:38inherent cost advantages as well. We are known for our cost-efficient manufacturing. And last but not

06:44the least, when we look at the companies, all of these companies are expanding their capacities.

06:50They are also enhancing their capabilities. For instance, traditionally, we Indian companies have

06:57been known for our strength in small molecule segments, you know, which forms 50% of the overall

07:02CDMO market. But gradually, we are moving into complex domain, such as advanced drug conjugates,

07:09which is ADCs, oligonucleotide, peptide. Our capabilities are nascent here, but surely,

07:16you know, we are advancing on the space, which is all driving higher TAM, which is target addressable

07:21market for Indian companies.

Category

Transcript

Be the first to comment

Recommended