In its latest note, Bernstein has given an 'Outperform' rating to the shares of Zydus Lifesciences, Lupin, and Sun Pharma, while Aurobindo Pharma has been rated as 'Market Perform'. Biocon and Mankind Pharma received an 'Underperform' call. The brokerage highlights three major waves expected to drive the healthcare sector in the coming years.
Bernstein identifies the artificial intelligence-led humanity theme as a key driver for innovation in healthcare. The theme 'live longer, look fitter, invest in healthcare' is expected to enhance access to next-generation medicines, obesity control, mental wellbeing, nutraceuticals, and preventive medicine. The brokerage estimates these innovations will add 100 million patients annually, creating a $400 billion opportunity.
Incremental innovation in the pharmaceutical space is another focus area, with six niches including metabolic peptides and NDAs expected to create 'Rainmakers' for Indian biopharma. Bernstein projects these rainmakers will contribute $70-75 billion to the industry, potentially growing it fourfold to $195 billion over the next decade, benefiting companies like Zydus Lifesciences, Lupin, and Sun Pharma.
“Access will be key to this theme as global workforce upgrades to next generation medicines, obesity control, mental wellbeing, nutraceuticals and preventive medicine (vaccines, wearable), personal hygiene, and digital healthcare.”
Bernstein
The report also emphasizes the role of quality culture and agentic AI gains in building an innovation ecosystem. Bernstein suggests that Indian biopharma is on a transformation path, with future-ready plants and AI-driven efficiency improvements expected to add three to four percentage points to profit margins over the next decade.
Bernstein notes that valuations in the healthcare sector are attractive, with policy uncertainties diminishing. The Pharma Nifty index has accelerated to slightly above its ten-year average of 30.5x. The market appears to be pricing in domestic growth and US market challenges but not the potential from rainmakers and emerging markets.
“Our proprietary model suggests that over the next decade Indian biopharma will have the largest network of future-ready plants globally.”
Bernstein
Background
The healthcare sector has been undergoing significant transformation with the integration of AI and other technological advancements. This shift is crucial as it aligns with global trends towards personalized medicine and preventive healthcare, positioning Indian biopharma companies to leverage these opportunities.
Looking ahead, the healthcare sector's trajectory will be shaped by these innovation waves and the strategic positioning of key players. Investors should watch for further developments in AI integration and incremental innovations that could redefine the industry's landscape.
