The accompanying table includes the Top 25 rated companies with market caps over $50M U.S. Dollar which are included in the ETF Innovators [ETFI] Indian Generic Drug Index as a major component in the Global Generic Drug Index. The index also includes three companies based outside of India – Akorn (AKRX), Caraco Pharma (CPD), and Taro Pharma (TAROF).
Akorn has a joint venture with Strides Arcolab (Akorn-Strides, LLC) which is focused on the hospital market for generic injectables, dominated by Hospira (HSP) and APP Pharma, which was acquired by Fresenius Medical (FMS).
Taro is involved in litigation with India's largest generic drug company by market cap, Sun Pharma, to fend off a tender offer which Taro claims undervalues the company since its has completed a turnaround from the brink of bankruptcy in mid-2007. Sun Pharma is also a major shareholder and has a distribution agreement with Caraco Pharma, which is due to file a response today to a May 2008 FDA warning letter for a Detroit manufacturing facility.
The companies in the Indian Generic Drug Index are highly leveraged to the favorable trends in the generic drug industry since they are trading at a 30% discount on a price/sales ratio [PSR] basis to the overall Generic Drug Index and have lost nearly 42% of market value in the past year compared to 67% for the iPath MSCI India Index ETN (INP) and 18% for all generic drug companies.
Dr. Reddy's Labs (RDY) is the only major Indian generic drug company with a U.S. listing on the NYSE or Nasdaq and the company has fared worse than its peers with a loss of 46% in the past year on falling profit concerns. Also, Mylan Labs (MYL) owns a majority stake in Matrix Labs, which serves as a low-cost supplier for active pharmaceutical ingredients [APIs] and solid dosage forms.
While U.S. investors currently have relatively few options to invest in the Indian generic drug market, many of the component companies are included in the ETFI Healthcare Cost Containment Index with the goal of commercializing the idea as an exchange-traded fund for a low-cost investment vehicle which is highly leveraged, but not limited to, to the global generic drug industry.
$3.41 (11/24/08)
