Even as China is recovering from the virus, Europe is becoming the new epicentre of Coronavirus pandemic. The death toll in Italy at above 3500 has now overtaken China. The Southern European nations like Italy, Spain and France are the worst affected, partly due to their large ageing population (most vulnerable to the virus). The actual loss to the world economy will only be known when the dust settles. But the UN estimates 25 million job losses due to the pandemic and production and monetary losses to the tune of $1.3 trillion. The eventual loss will depend on the policy response.
A large part of the policy response will predicate on governments and the pharmaceutical and healthcare sectors. Interestingly, Indian pharma has been doing much better than the overall index. Since the beginning of March 2020, the Nifty is down by 25.77% while the NSE Pharma index is only down by 11.67%. What exactly explains this disparity? Of course, one factor is the rupee weakness which has weakened well beyond the Rs.75/$ mark. This is the lowest level for the rupee. A weak rupee helps exporters and pharma obviously benefits. But the real benefit for pharma sector is a lot more fundamental.
Ever since the contagion was first identified, pharma companies across the US, Europe and Asia have been on a race to find a vaccination for Coronavirus. India’s Serum Institute, appears to be the first to find the vaccine and could launch it as early as 2021. Animal trials have already begun. The US vaccine would still be about 3 years away. But a large part of the focus has also been on finding an antidote to cure Coronavirus, which is a priority. Recent research has showed that Choloroquine (an anti-malarial drug) has the potential to cure Coronavirus and also build immunity. The drug has been tested in a small sample with about 70% success. It still needs intensive scientific validation, but research appears to be on the right track.
Indian pharma sector is betting that once the drug is approved, it would have to be manufactured on a mass scale for global distribution. Clearly, India with its generics capacity will have the edge. That explains why Indian pharma is suddenly looking smart. The Coronavirus crisis may just be the big break for Indian pharma.