A new Covid variant is making the rounds and fears of another potential Covid wave are emerging in many countries. Even if the situation in India is still safe, infection risk led by China and spreading across Europe and the US is rising recently. While our hopes are that we will not revisit the dark and painful days of the earlier waves and are better prepared this time, there is as such no place for complacency.

However, if the unfortunate scenario of another wave plays out, investors can revisit their investment playbook regarding opportunities in pharma/healthcare sectors. With API, formulations and vaccines aimed at export market, opportunities may crystallise earlier than the domestic space, which is far more deeper. Although, the stocks may not trace the same journey as last time, which included a sharp rally and a steep fall in some counters, pre-emptive positioning by investors in domestic-focussed healthcare segments - diagnostics, API’s, hospitals and formulations may be beneficial only if cases in India rise exponentially. Even otherwise, the export opportunity may start playing out.

API manufacturers

API manufacturers, including Divi’s, Neuland Labs, Solara Active, Laurus labs and Granules gained significantly in FY21 with YoY sales growth of average 36 per cent per quarter. This gave way to a period of lull, as sales growth declined to 7 per cent in FY22 and 4 per cent in H1FY23.

In most iterations of Covid drugs from favipiravir to the latest molecule molnupiravir, Divi’s has exhibited significant scope in development from test quantities to large commercial scale API’s. The company has recently (in Q2FY23) shed most of the Covid portfolio, which otherwise has had the longest period contribution to sales growth (as compared to peers) from Q1FY21 to Q1FY23 and primarily from exports. If the demand for API’s, including Covid molecules is expected to increase internationally or domestically, Divi’s should get a strong boost.


Formulation manufacturers made an appearance worth mention only beginning Q1FY22 during the second wave, by when approvals and commercial launches for favipiravir, remdesivir, molnupiravir were in place and aided strong sales growth. Even as most companies had a covid-specific portfolio in place, Cipla, Glenmark and Alkem labs were successful in gaining significant traction in Q1FY22. With experienced sales reach in specific therapeutic segments, anti-infectives and nutraceuticals, the same three players could remerge as strong players if the infection risk increases domestically.


In the listed space, vaccine opportunity was largely missed even after the second wave. Development timelines were longer than that of unlisted Serum Institue or Bharath Biotech. Commercialisation failed to take off for listed players in the space as Covid wave waned by the time the products were introduced. Zydus Lifesciences, ZyCoV-D, Dr. Reddy’s Suptnik light and Biocon with its partnership with Serum institute could test the vaccine market again if the demand for booster shots goes beyond the original two, Covishield and Covaxin. The vaccine space in the domestic market has increased in competition on efficacy and dosage convenience and now includes the recently approved intranasal vaccine from Bharath Biotech. The export opportunity on the other hand, will depend on the approvals lined up by the companies in respective markets and the intensity of the virus spread.


The healthcare segment, including hospitals and diagnostics faced disruption to patient flow in early part of the pandemic in Q1FY21 and slowly gathered momentum. By Q1FY22, by way of testing volumes for diagnostics and covid treatments for hospitals, the segment more than recouped lost sales and gained significant volumes in the period. While hospitals have sustained the momentum beyond Covid treatment, it was a different story for diagnostics players as lab volumes failed to recover fully post Covid testing led peaks.

The diagnostics space could again witness surge in testing volumes, beginning with air travellers spreading to general population. Overall, the healthcare segment and the government machinery, are much more experienced in directing patient volumes to these institutions. This should make for an immediate uptake in covid volumes in healthcare segment but at the cost of non-covid treatments. Dr. Lal Path Labs in diagnostics and Apollo Hospitals should be primary beneficiaries in the segment along with other participants in the regional markets, should the spike reach Indian shores.