The coronavirus outbreak in China could cause a potential disruption for drug makers in India and experts say that if that happens, the impact well be felt globally.
The virus outbreak in China threatens to disrupt the supply of raw materials from the country, warns India pharma companies and this will have a global impact because Indian pharmaceutical companies account for more than 20 per cent of the drugs supply by volume of the world.
There is enough supplies of raw materials with Indian drug making companies core now, the companies said. However if the coronavirus outbreak is not contained soon in China, it would start impacting the production operations of the companies.
According to brokerage firm SBICAP Securities, imports from China accounts for almost 70 per cent of the total raw materials that are used by Indian companies for drug manufacturing. The major raw material production hub is the Hubei province of in China which is at the epicenter of the coronavirus outbreak in the country.
“A lot of our pharma value chain is linked to China,” Umang Vohra, the CEO of generics producer Cipla, told investors on February 5. “It is linked for the entire pharmaceutical industry.”
“If this coronavirus thing continues for more than a month or 45 days, that will begin to create a huge amount of issue for the pharma sector,” he added.
Will date more than 80,000 people have been infected by the coronavirus, which originated in Wuhan city in China, while killing more than 2700 all across the world – most of them from Mainland China.
While relaxations in movement restrictions and factory closures allowed by Chinese authorities has helped in the reopening of some factories in China, there are still many plants that remain shut since the Lunar New year Holiday season. Experts have said that production at full capacity at these factories can take weeks or even months.
India exports huge volumes of generic medicines to countries all across the world – including the United States, since India is the largest exporter of generic drugs of the world. The Indian companies that are at most risks with respect to shortages of raw materials are those that make anti-infective and hormones therapies, such as GSK India, Pfizer and Cipla, said Kunal Dhamesha, an analyst at SBICAP Securities.
Companies such as Aurobindo Pharma, Cadila Healthcare and Sun Pharma have already said that the supply situation from China is being closely monitored by them. Lupin said that there are enough supplies with the company to ride out the coronavirus issue for months. But the company’s vice chairman Kamal Sharma told investors on February 6 that its executives are “not getting visibility on shipment of containers” from China.
The inventory that is currently available with Sun Pharmaceutical will be able to meet demand in the short term, the company that mainly exports to the United States said. However the company said that the complicated nature of the supply chain in the industry means that the actual source of the raw materials is not always clear.
“Many of the raw materials, which we may be buying in India, may have dependence on the Chinese intermediate,” Dilip Shanghvi, the company’s managing director, said during an earnings conference call on February 6. “So we think we are buying from India, but there is a China link.”
(Adapted from CNN.com)