7 Best Pharma Companies to Watch in 2025

The pharmaceutical industry in India is expected to reach $65 Bn by end of 2024 and to $130 Bn by 2030. India is a major exporter of Pharmaceuticals, with over 200+ countries served by Indian pharma exports. While Nifty’s performance has been lackluster over the past month, several pharmaceutical stocks have shown resilience

As the broader market index Nifty struggles with a monthly decline of -2.06 per cent, Nifty Pharma has stood out by delivering a positive return of 1.44 per cent, reinforcing its status as a defensive sector. While Nifty’s performance has been lackluster over the past month, several pharmaceutical stocks have shown resilience, with four companies – IPCA Laboratories (16.11 per cent), Mankind Pharma (12.57 per cent), Granules India (11.16 per cent), and Divi’s Laboratories (12.18 per cent) – posting impressive double-digit returns. On the other hand, companies like Sun Pharmaceutical Industries Ltd, Torrent Pharmaceuticals Ltd and many others managed to outperform Nifty 50.

Performance of Nifty Pharma Companies in Last One Month against Nifty 50

Data as on October 18, 2024

Pharma and healthcare sectors are commonly regarded as defensive due to several inherent characteristics. Firstly, the essential nature of healthcare ensures consistent demand irrespective of economic conditions. Whether in times of prosperity or downturns, people require medical treatments, medications, and healthcare services. Additionally, the non-cyclical nature of these sectors means that their demand remains relatively stable compared to other industries, which are more susceptible to economic fluctuations. Moreover, the inelastic demand for many healthcare products and services ensures steady revenue streams for companies operating in these sectors.

Regulatory protections, such as patents on drugs, further safeguard the market position and revenue of pharmaceutical companies. With an aging global population, the demand for healthcare services and medications is expected to continue growing, providing a long-term growth trajectory for the sector. Continuous investment in research and development drives innovation, fostering growth and investor interest even during market downturns. These combined factors make pharma and healthcare stocks a more reliable and less volatile investment option, particularly in uncertain economic times.

Triggers for growth

There are various short as well as long term reasons why we believe that Pharma Sector is going to perform going ahead.  According to a report by CRISIL, the Indian pharmaceuticals sector will log a revenue growth of 8-10 per cent this fiscal, after a 10 per cent growth last year, supported by healthy exports to regulated markets, recovery in exports to semi-regulated markets and steady domestic demand.

The resultant improvement in operating leverage along with easing pricing pressure in the US generics market will improve operating margins by 70-80 basis points (bps) to 22.5 per cent this fiscal. This will be on the back of an increase in margins by 100bps last fiscal.

Formulation exports are expected to grow 12-14 per cent in rupee terms this fiscal. The regulated markets of the US and Europe will witness growth of 13-15 per cent, driven by continued drug shortages, easing pricing pressures in the US generics market and the volume uptick expected from new product launches as well as players shifting focus towards niche molecules and specialty products. On the other hand, exports to semi-regulated markets will grow 8-10 per cent this fiscal, led by improving forex reserves, strengthening of local currencies against the dollar, and easing economic crisis in select African and Latin American countries.

The pharmaceutical sector revenue pie is split almost equally between domestic sales and exports. Domestic formulation revenue comes equally from chronic and acute therapeutic segments. As for exports, formulations and bulk drugs contribute 80 per cent and 20 per cent, respectively. For formulations, 58 per cent of exports is to the regulated markets and 42 per cent of exports is to the semi-regulated markets.

The pharmaceutical industry in India is expected to reach $65 Bn by end of 2024 and to $130 Bn by 2030. India is a major exporter of Pharmaceuticals, with over 200+ countries served by Indian pharma exports. India supplies over 50 per cent of Africa’s requirement for generics, 40 per cent of generic demand in the US and 25 per cent of all medicine in the UK. India also accounts for 60 per cent of global vaccine demand, and is a leading supplier of DPT, BCG and Measles vaccines. 70 per cent of WHO’s vaccines (as per the essential Immunization schedule) are sourced from India.

U.S. Drug Shortage and India’s Strategic Advantage

The U.S. healthcare system has been grappling with a critical issue: a surge in drug shortages. The first quarter of 2024 saw a decade-high, with over 300 medications across 22 therapeutic areas experiencing limited availability. This crisis stems from a confluence of factors.

One key factor has been increased regulatory scrutiny. Stricter audits have unearthed quality control lapses among companies heavily supplying the U.S. market. While these measures aim to improve patient safety, they’ve also led to temporary disruptions in production, further straining the drug supply chain.

Beyond regulatory hurdles, other culprits are at play. Shortages of raw materials, coupled with business decisions to discontinue less profitable drugs, particularly older generics, have compounded the problem. Additionally, sudden spikes in demand for specific medications due to outbreaks or seasonal illnesses have overwhelmed existing supplies. The impact is felt across diverse medication categories. Local anaesthetics, fundamental hospital pharmaceuticals, common oral and ophthalmic products, ADHD treatments, and even chemotherapy medications are experiencing inadequate availability.

Historically, drug shortages have often translated to price hikes. With limited supply driving up demand, pharmaceutical companies have the opportunity to raise prices for scarce medications. Given the substantial U.S. dependence on medication and intermediate supplies from India, domestic manufacturers and suppliers in that country are well-positioned to leverage this situation.

The Indian pharmaceutical industry, with its robust capabilities and numerous manufacturers engaged in active competition, is poised to maintain price competitiveness in the market. Increased U.S. demand could bolster Indian companies’ market share and potentially lead to a shift in the global pharmaceutical supply landscape.

India supplies over 50 per cent of Africa’s requirement for generics, 40 per cent of generic demand in the US and 25 per cent of all medicine in the UK. India also accounts for 60 per cent of global vaccine demand, and is a leading supplier of DPT, BCG and Measles vaccines. 70 per cent of WHO’s vaccines  are sourced from India. 

Here is a List of 7 Pharma Stocks to Watch in 2025

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