Key Points
Aditya Khemka, Fund Manager, InCred Healthcare PMS, says if one were to take a 2-3-year view, the highest amount of risk reward and a big alpha can be generated in branded generics and diagnostics segments..
There was probably lack of aggression or lack of execution on the management side but they did a management change sometime in 2017-18, they got a professional manager to come and run the business and since then the company has staged a very strong turnaround in terms of their margins, their growth rate, their return on equity, their cash flow everything is looking better than the historical numbers...
Remember, they are still a very small company in the context of the Indian pharma market so there is a lot of room for them to launch new products, increase sales value, increase demand productivity and therefore increase margins and return on equity and cash flows..
In the North American market, specifically the United States, there are only three large buyers who buy 90-95% of the volumes from the suppliers and therefore, it is a very tender, competitive pricing because there is so much competitive pressure, because there is so much pricing pressure that structurally these markets seem to be low ROE, low margin, and to add to that high asset intensity markets, high capex intensity markets...
Again, we like biosimilars, but from an emerging market branded opportunity. We do not like biosimilars in the unbranded regulated market space, which is where we are seeing again a lot of pricing pressure and not so great margins...
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