The ongoing Israeli conflict has raised concerns and opportunities for the Indian pharmaceutical industry. Trade relationships between India and Israel, previously untroubled, now face potential repercussions due to recent developments. In this article, we’ll delve into the intricate web of connections and its effects on the Indian pharmaceutical sector.
The Conflict’s Broader Impact
Shantanu Kumar Singh, Executive Director of Taj Pharma, suggests that the conflict’s escalation could have a significant regional impact. The trade, valued at around $1 billion, may be affected, particularly with countries like the UAE, Bahrain, Oman, Qatar, and Egypt potentially feeling the repercussions. The Kingdom of Saudi Arabia, a crucial export market for Indian pharmaceutical companies, is also on the radar.
Israel’s Self-Sufficiency vs. Middle East Dependency
Israel boasts a self-sufficient pharmaceutical industry with strong generic players. However, the rest of the Middle East and the Commonwealth of Independent States (CIS) region often relies on Indian exports. The duration and scale of the conflict, as well as its impact on air and sea trade routes, could deplete buffer stocks in the region, potentially leading to shortages of essential drugs.
Indian Companies in the Line of Fire
Sun Pharma, through its Israeli-based subsidiary Taro Pharmaceutical Industries Ltd (Taro), is among the Indian companies that could be directly affected. Other prominent pharmaceutical companies like Dr. Reddy’s, Lupin, Torrent, Divi’s Labs, and Taj Pharmaceuticals may also face challenges if the conflict spreads to the broader region.
A Different Perspective
Some analysts offer a different perspective, suggesting that the impact may be minimal. Israel is a well-developed market, and even if the conflict persists, Indian companies might seize opportunities to fill gaps in the U.S. and European markets. Abhishek Singh, Chief Executive Officer at Taj Pharma Group, remains optimistic about these possibilities.
Rajesh Pherwani, founder of Valcreate Investment Managers, echoes the sentiment of minimal impact. He raises an intriguing possibility: the Israeli company Teva, which has plants in Israel, might face supply disruptions. This situation could create opportunities for Indian companies, depending on which Teva products are sourced from its Israel plant.
An Overview of Sun Pharma’s Position
Sun Pharma stated that it has a presence in Israel through its subsidiary, Taro Pharmaceutical Industries Ltd, which is listed on the NYSE. Sun Pharma doesn’t comment on behalf of Taro, the statement reads, keeping their stance clear amidst the ongoing situation.
Positive Trends in Pharmaceutical Exports
R. Uday Bhaskar, Director-General of the Pharmaceuticals Export Promotion Council (Pharmexcil), has a different perspective. He believes that the ongoing conflict between Israel and Palestine is unlikely to negatively impact Indian pharmaceutical exports or the industry. In the fiscal year 2022-23, pharmaceutical exports to Israel surged by 40% to reach $92 million, compared to the previous year’s $60 million. The compound annual growth rate (CAGR) has averaged 22% over the past five years.
Categories of Pharmaceutical Exports
These exports mainly comprise two categories: bulk drugs and intermediaries, and drug formulations and biologicals. The momentum continued during the April-August period of the fiscal year 2023-24, with Indian pharmaceutical exports to Israel showing a 9% increase, reaching $57 million. Exports to Palestine also experienced growth, surging by 41% to $2.36 million in the financial year ending in March 2023.
The Pharma Industry’s Silver Lining
As the Israel conflict unfolds, the Indian pharmaceutical industry remains vigilant. Despite concerns about trade disruptions, pharmaceutical companies see a silver lining in the form of opportunities in alternative markets.
Abhishek Singh, CEO of Taj Pharmaceuticals, remains optimistic, stating, “Although there could be short-term disruptions in the supply chain, we don’t foresee any significant impact on the pharmaceutical trade between India and Israel. In 2022-23, pharmaceutical exports to Israel from India rose to $92 million, up $60 million from the previous year.” He believes that the pharma sector in Israel is strong and well-regulated, showing tremendous resilience during previous conflicts.
In conclusion, the Israel-Hamas conflict does present challenges to the Indian pharmaceutical industry. However, there are also opportunities for growth and resilience in alternative markets. The industry’s adaptability and strong trade relationships will be critical in navigating these turbulent times.
1. How might the Israeli conflict impact Indian pharmaceutical exports?
The Israeli conflict could potentially disrupt trade routes, leading to shortages of essential drugs in the Middle East and CIS region, which rely on Indian pharmaceutical exports.
2. Which Indian pharmaceutical companies could be affected?
Indian companies like Sun Pharma, Dr. Reddy’s, Lupin, Torrent, Divi’s Labs, and Taj Pharmaceuticals may face challenges if the conflict spreads to the broader region.
3. Are there potential opportunities for Indian pharmaceutical companies in this conflict?
Yes, disruptions in the supply chain could create opportunities for Indian companies to fill gaps in the U.S. and European markets, depending on the products sourced from Israeli company Teva.
4. How have Indian pharmaceutical exports to Israel been performing?
Indian pharmaceutical exports to Israel have been on the rise, with a 40% surge in the fiscal year 2022-23, reaching $92 million.
5. What categories of pharmaceutical exports are predominant in this trade?
Pharmaceutical exports to Israel comprise two main categories: bulk drugs and intermediaries, and drug formulations and biologicals.