Sandeep Tandon of Quant MF bullish on generic pharma, calls it a no-brainer trade

The Indian pharmaceutical sector captured investor attention past week, with the Nifty Pharma index gaining approximately 2%, outperforming the benchmark Nifty. This positive momentum is underpinned by two significant developments in the United States that have eased concerns for Indian drug manufacturers.

Against this backdrop, Sandeep Tandon, Founder and CIO of Quant Mutual Fund, expressed strong conviction in the Indian generic pharmaceutical space, describing it as a ‘no-brainer trade’ and a significant overweight position in his portfolio.

The first tailwind for the sector comes from the Trump administration, which has indicated it is not actively pursuing tariffs under Section 232 on goods deemed a potential threat to national security. This has been interpreted as a relief for Indian drug makers, as such tariffs could have theoretically included generic drugs and active pharmaceutical ingredients (APIs) due to the US’s heavy reliance on Indian imports.

Indian generic companies currently supply an estimated 40-50% of US formulation requirements, with manufacturing costs being just a fraction—around 1/5-1/8 of those in the US. Imposing tariffs would likely lead to higher drug prices for American consumers and could make manufacturing unviable for some firms, potentially creating drug shortages.

The second development is an amended version of the US Biosecure Act, which has been passed by the Senate. This act is generally seen as a positive for Indian contract development and manufacturing organisations (CDMOs).

However, there are indications that the amended bill may be a ‘watered-down’ version that does not explicitly name major Chinese biotech firms like WuXi. This could mean that the incremental business opportunity for Indian CDMOs might be less substantial than initially anticipated.

According to Tandon, the generic pharma trade was a clear opportunity he had been highlighting for some time. He argued that the US has no viable alternative to importing from India. “The US has no option but to import from India,” Tandon said, emphasising the high barriers to entry for new players.

He pointed out the stringent requirements for US Food and Drug Administration (USFDA) approved plants and other ‘hygiene factors’ that Indian companies have already met, making them difficult to replace.

Tandon further asserted that India’s market share in the US generics market, in volume terms, is “closer to 60%, which is a large number.” He also mentioned that a single large Indian company holds nearly 30% of this market share.

Also Read: Tariffs on generic drugs were always unlikely, exemption makes sense for all: Pharma Analyst

Furthermore, Tandon explained that other US policies, such as additional duties on branded and formulation drugs, indirectly bolster the case for generics. “If your consumption of these branded and formulated products comes down, then people will move towards generic.

Also Read: Indegene sees growth tailwinds from digital pharma shift, boosts US presence with BioPharm deal

So generic is anyway beneficiary,’ he said. Based on this structural advantage and dependency, Tandon reaffirmed his bullish outlook, stating, “We remain very excited about this space and that’s the reason generic has been a significantly overweight in our portfolio for a while now.”

For the entire interview, watch the accompanying video.