Biosimilars and innovation will drive Indian pharma's next growth phase: Vishal Manchanda

India's pharmaceutical industry is entering a new phase of transformation. While traditional generic medicines continue to provide stability, companies are increasingly looking beyond their core businesses to build the next wave of growth through biosimilars, innovation, nutraceuticals, consumer healthcare and contract manufacturing.

Speaking to ET Now, Vishal Manchanda from Systematix Group shared his outlook on the evolving opportunities across the pharmaceutical sector, highlighting where the biggest profit pools could emerge over the next few years.

US FDA approvals continue to be an uncertain factor

The pace of approvals from the US Food and Drug Administration remains one of the biggest variables for Indian drugmakers. According to Manchanda, approvals for complex generic drugs are difficult to predict, with several companies waiting for key clearances much longer than expected.

"US FDA approvals are generally erratic. It is difficult to predict them because, at least for the complex ones, the complex generics, you cannot really predict when they will come. Some companies have been waiting for certain large approvals to come through, so it has been more than a year since we have been waiting for these approvals to pan out. But unfortunately, they have not come so far. At least the smaller ones, the plain vanilla generic approvals, generally keep coming in and help companies maintain base revenues at a level where they can fight the erosion in the base business. Broadly, the larger ones that we are waiting for are yet to come because one thing that the industry has lost is generic Revlimid, and they want to offset this with newer products," he said.

He noted that routine approvals for simpler generic products continue to support companies by maintaining steady revenue streams, even as the industry waits for larger opportunities to materialise.

Pharma companies are widening their growth avenues
With growth prospects in the US generics market becoming increasingly limited, Indian pharmaceutical companies are actively expanding into adjacent healthcare businesses.

Manchanda believes nutraceuticals, consumer healthcare and biosimilars are becoming strategic priorities across the industry.

"Yes, you are right. Almost all companies are looking for multiple avenues to build from where they are today. As we see the US, which is a large component of the business, we see limited growth prospects there. So, what companies are actually looking at are nutraceuticals, consumer healthcare, and biosimilars as the new growth avenues. Both these would require a certain gestation period before these businesses become profitable. Companies have started investing and are probably getting more aggressive around these areas," he said.

He expects these businesses to take time before delivering meaningful profits but believes investments in these segments are likely to accelerate.

Biosimilars could become a billion-dollar opportunity
Among the emerging themes, biosimilars continue to attract significant attention. Manchanda believes companies that have invested early stand to benefit the most over the coming years.

"We know Biocon is something which has been there for a long time. They started very early in this space. Probably the next two years are expected to be very strong for Biocon. Companies that are progressing well and should be the next ones to look at would be Dr Reddy's and Lupin. These are the two companies that have a strong pipeline, and we should see that shaping up over the next three to four years. These companies can generate between half a billion dollars and a billion dollars in biosimilar revenue if we have a four- to five-year horizon," he added.

He expects Biocon to remain an early beneficiary, while Dr Reddy's and Lupin could emerge as the next major players as their pipelines mature.

Innovation and CDMO to create the next profit pools
Innovation remains one of the most promising long-term opportunities, although building meaningful businesses in this segment requires sustained investment.

Manchanda believes a few Indian pharmaceutical companies have already begun making meaningful progress.

"Innovation is something companies will need to invest in a lot before they start seeing profits coming from it. Sun has probably built a platform on the innovation front and created a large business. We will soon see Wockhardt entering this journey, wherein they will have a large profit pool coming from their antibiotic molecule. They are looking to commercialise this in the US and the rest of the world on their own. Zydus is also on an innovation journey and should probably launch its first NCE in the US around the end of this financial year or early next year. Multiple companies should enter the race, but it will take time for a large profit pool to reflect in their base earnings," he said.

On the contract development and manufacturing (CDMO) opportunity, he believes scale will remain a key differentiator.

"On the CDMO front, there are multiple companies, but the best would be the larger ones like Divi's, Laurus, and maybe one of the emerging names is Neuland. These are better poised in the race. Piramal Pharma is also a large name in the category. We will have to wait and see how CDMO outsourcing pans out. We have been optimistic about it, and certain companies are probably benefiting from the theme, but we will have to wait and see how it eventually pans out in terms of business moving out of China and coming more to India," he added.

GLP-1 adoption may begin slowly but the long-term opportunity remains intact
Although expectations were high after branded generic GLP-1 drugs entered the Indian market, initial demand has been slower than anticipated, with several companies launching competing products.

Despite the slower start, Manchanda remains optimistic about the category's long-term potential.

"Eventually, I would still believe this category will become very large, and it will be shaped by patient and physician experience as they prescribe it more—how patients experience the overall health improvement that the drug promises and how physicians see the response. Looking at global trends, I would stick to the view that we will see this category become very large in India, and every month we will see positive growth on the base. It will keep building from where it is today. In terms of the number of players, there are multiple companies that have launched, but what will happen is that maybe the top five or six players will capture a larger chunk of the market. Around 80% to 90% of the market could eventually be with the top five or six players," he said.

He expects the market to consolidate over time, with a handful of leading companies dominating the segment.

Sun Pharma remains the preferred domestic play
Despite already having the largest domestic presence, Sun Pharma continues to outperform both the broader market and its peers, according to Manchanda.

He believes the company's growth profile and valuation continue to make it an attractive investment.

"Among the fastest-growing companies on the domestic front remains Sun Pharma. Although it has the largest base here, it continues to outperform the market and also outperform its larger peers in the space. It is doing extraordinarily well in the India pharma market, and I would prefer Sun over the others because, from a valuation perspective too, it looks attractive, and obviously the growth is also there," he said.

The Road Ahead
While regulatory approvals in the US remain unpredictable, India's pharmaceutical sector is steadily diversifying beyond traditional generics. Biosimilars, innovation, CDMO, consumer healthcare and nutraceuticals are emerging as the industry's next growth pillars. Although these businesses require patience and sustained investment, companies that establish leadership early could be well positioned to capture the sector's next wave of value creation.