Pharma

Business model

Indian pharma companies make money in roughly three buckets:

1. Domestic formulations - branded generic drugs sold via 6 lakh+ retail pharmacies. Doctor + brand loyalty drives pricing power; new launches drive growth. Stable, 60-70% gross margin businesses.

2. US / EU generics - bioequivalent versions of off-patent drugs sold abroad. Higher volume, lower margin, much more competitive. US FDA inspections matter critically.

3. APIs (Active Pharmaceutical Ingredients) - selling the raw drug substance to other pharma companies. Lower margin, more commodity-like, but India has scale advantages.

4. CDMO / CRAMs - contract development and manufacturing for big pharma. Steady but lumpy revenue.

Key metrics

• Revenue mix by geography - India / US / EU / RoW / API. Tells you growth driver and risk profile.
• EBITDA margin - 18-25% for diversified players; lower for pure US generics.
• R&D as % of revenue - 5-8% is typical; higher for specialty / complex generics players.
• Number and value of US ANDA filings + approvals - pipeline strength.
• Inspection history - US FDA, EU EMA observations and Form 483s. Adverse observations can shut down a plant for months.
• Domestic brand growth vs IPM - Indian Pharmaceutical Market growth is the benchmark.