Can we Invest on a pharma company? Pharmaceuticals Benefits in business: This article is all about pharmaceuticals as investment options and the benefits of investing in a pharma company rather than any other industries. You can choose between pharma and biotech depending on your interest exposure and investment options you have. You can have R&D or F&D, manufacturing , marketing, sales or QA , QC departments.
When you think about the benefits of investing in a pharma company you can hear these two things.
- Pharmaceutical companies will always generate profits. I.e benefits
- Probability of getting good returns after investing in industry
The first statement is absolutely FALSE. But the second statement is Highly suportable. So now you got what I’m going to talk about this.
Before we approach towards investment perspectives , here are some facts regarding Pharmaceutical industry.
Pharmaceutical Industry Facts
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Pharmaceutical Industry size as per WHO – $300 BILLION. that’s why major pharmaceutical industries are called BIG PHARMA .
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Over 5000 drugs are under development 70% of these are first line or firsorder which means they can be used for major diseases and disorders.
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Indian pharmaceutical industry is growing at CAGR of 14% to 16% per annum.
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India is a hub of generic manufacturers and more than 70% of drugs manufactured in India are sent abroad to countries like USA and Azerbaijan as well.
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Indian pharmaceutical industry will suffer a decrease of 1% in terms of ROI (return on investment) but it shouldn’t bother first time investors.
Why you should consider pharmaceuticals as investment options?
There are few points you need to know regarding this which are really very crucial to know.
The share price is directly proportional to the industries approvals and development in pharma field .
Eg. The share prices soar if industry wins approval for clinical trials/therapy/drug launch.
The ROI for a person who invested in pfizer (listed in New York stock exchange as PFE) in 2009 and withheld the shares to 2014 got a return of 116%. The scenario isn’t different in India. I don’t have exact figures for Indian company but as its market based you can check any companies figures. You will find them to be great.
Profits- chances of pharmaceutical industry going bankrupt etc is almost impossible. Once a pharmaceutical industry starts failing it is taken over by a giant or Big pharma company so your money may see ups and downs in such case but you will get good returns for sure.
The Net profit of pharmaceutical industries is around 30% to 35% YoY basis. An exception is pfizer that showed a 40% net profit for f.y 2012-13. The profit margins and profits is much more than oil, gas, banks and car makers as well.
Pharmaceutical company capital investment Facts
Do you know how much capital investment could be typically required for a small sized pharmaceutical company to start with? Let me make you clear about this also to give you a vague idea before you go to your actual research and statistics. Capital investment for pharmaceutical company depends on the size and resources you keep in the pharma company. This cost will include different licences and deposits for the company along with machinery, sale point , godown, transporting van and especially manpower .
Land in commercial or industry area to set up industry.
Machines or equipments for various departments like QA QC MFG PACKAGING ETC.
man power (skilled) with B.pharm or M.pharma .
Marketing team .
Pharmaceutical industry involves various dependent and independent sections.
Dependent Sections of Pharma Company:
- Packaging material
- Raw materials
- API
- Instruments
- Apparatus
The industry depends on other industries as mentioned above to prepare its final dosage form.
Independent Sections of Pharma Company:
- QA QC
- engineering and maintenance
- Manufacturing
- Marketing
The above mentioned sections work independently but in coordination to run a particular pharma industry. The number of sections may vary .
The reason We need to focus on the nature of work is that it will decide the man power , equipments , technology that you will need in your industry. Let’s consider that you want to open a compressed unit oral dosage form plant i.e. tablet manufacturing unit. This is for tablet unit the cost and will not fluctuate much in case of other dosage forms except parentrals and sera products .
From Indian scinario pharmaceutical industries are typically segmented into two
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Manufacturing / + Marketing companies
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Marketing only companies
a) Manufacturing / + Marketing companies
Manufacturing co. would need a bit more investment depending on the sections to be started, sections could be Tablets, Capsules, Syrups, Dry Syrups, Ointments, Softgel Capsules etc. You could choose a single section or two to start with gradually adding sections as per the demand of your products in the market.
b) Marketing only companies
If you think that you are good at marketing, you can get your products manufactured from companies already engaged in production. We are one of them. The marketing co. conceives the product and look after the distribution and sales, the production hassles are taken care by the manufacturer, this is termed as Contract Manufacturing. Marketing co. could be started with a small amount starting from few lakh of rupees. Again it all depends how many products you wish to start with.
All of these things will cost you around 2cr INR approximately if you are planning to establish in a region like pune MIDC (out skirts) on a small scale .The cost may be brought down significantly by using varying quality of lab equipment and technology but for a long lasting and fine result generating professional units this is the price approximately. A HPLC unit will cost more than 10lakh INR itself.
Source: Quora-Suraj Thakur & Akshi Talwar
The fact is that, first two years will be of real struggle as failure is what you will face but it shall be followed by days of glory.I hope it gives you a reason why you should consider investing in pharmaceutical industry.So, do proper research on your business and also you can take ideas from some experts. Some business companies like Angel Investment Network has achieved higher success with good startups. They are also helping those startup companies find funding and guidance. It can be beneficial for you also to take some ideas about it. Good Luck.