industry analysis- pharma sector
DESCRIPTION
This is the PPT used by me for the Industry Analysis Competition held in the Finance Club of my college as on July'09. I did on Pharma Industry...Hope it will be useful for such similar presentation....TRANSCRIPT
ANALYSIS OF PHARMACEUTICAL INDUSTRY
BY VLSS CONSULTANCIES
INTRODUCTION
• Pharmaceutical Industry in India is one of the largest and most advanced among the developing countries
• The Indian pharmaceutical industry has come a long way from waiting for imports of bulk drugs from global players to breaking new grounds in medical research worldwide.
GROWTH OF THE INDUSTRY
• Worth of the industry – $ 6 billion• CAGR – 13%• Accounts for - 1% of the world's pharma industry
in value terms and 8% in volume terms. • M&As: Over 25 with 15 cross border transaction
worth $600-700 million. • Revenues generated - US$ 7.6 bn and have
grown at an average rate of 10% over last five years
STRUCTURE OF INDUSTRY
• Fragmented with 24000 players – 300 organized
• Leading 250 – 70% of the market
• Market leaders hold 7%
• Manufactures : Bulk drugs – APIs
Formulations (75:25)
• Adopts high technology & produces high value products
FRAMEWORK OF ANALYSIS:
• (A)QUALITATIVE ANALYSISSWOT ANALYSIS
MICHAEL PORTER 5 FORCES MODEL
• (B)QUANTITATIVE ANALYSISRATIO ANALYSIS
Strengths :- 1.Cost Competitiveness 2 Developed Industry with Strong Manufacturing Base 3.Well Established R&D infrastructure 4. Access to pool of highly trained scientists,
Opportunities :- 1. Significant export potential. 2. Marketing alliances for MNC products in domestic market and international market. 3.Contract manufacturing arrangements with MNCs 4. Potential for developing India as a centre for international clinical trials.
Weaknesses:- 1. Low investments in innovative R&D. 2. Lack of resources to compete with MNCs for New Drug Discovery & Research 3. Lack of strong linkages between industry and academia. 4. Low medical and healthcare expenditure in the country
Threats :- 1.Product patent regime poses serious challenge to domestic industry unless it invests in research and development 2. R&D efforts of Indian pharmaceutical companies hampered by lack of enabling regulatory requirement. 3.Drug Price Control Order puts unrealistic ceilings on product prices and profitability 4. Export effort hampered by procedural hurdles in India as well as non-tariff barriers imposed abroad.
Barriers to EntryVery low barriers to entryGovernment policies supportiveFor entry price regulation exists Economies of scale existProprietory technology andProduct will exist after 2005
Power of SuppliersVolume benefits occur
Inputs standard, available locallyNumerous suppliers-switching cost low Suppliers can go for forward integration
Raw material cost constitute more than 50% of the total expenses
Industry CompetitionHighly competitive.
Top five players have mere 18% market share
Lower fixed cost and high working capital
Power of BuyersEnd consumers do not have bargaining power
Brand identity exists but is in the handsOf Influencer (Doctors)Price Sensitivity is less
Highly fragmented market, so buyer Concentration v/s industry is low
Threats of Substitutes No substitutes for the medicines Biotechnology is a threat to synthetic pharma products
RATIO ANALYSIS
• We have analyzed the top five companies in the Indian pharmaceutical industry for the purpose of doing the quantitative analysis.
• Our rationale behind selecting the top five companies has been the –SALES AND PROFIT.
• The companies being: Cipla Ranbaxy Sun Pharma Piramal Healthcare Dr. Reddy’s Laboratories
YRCAggregate
CiplaDr Reddy's Piramal
Sun Pharma.
Ranbaxy Labs.
200803 200803 200803 200803 200712
Key Ratios
DE Ratio 0.98 0.1 0.09 0.43 0.18 1.37
Long Term DE Ratio 0.69 0.1 0 0.28 0.18 0.92
Current Ratio 1.58 2.66 2.37 1.54 3.04 0.98
Turnover Ratios :
Fixed Assets 1.78 2.05 2.27 1.74 3.62 2.04
Inventory 5.02 3.9 6.11 8.34 8.88 4.64
Debtors 4.53 3.38 3.53 7.5 3.96 4.72
Interest Cover Ratio 5.82 47.45 40.76 5.61 208.94 9.29
Sales: Segment -wise
EXPORTS
• BULK DRUGS
• FORMULATION
DOMESTIC EXPORTS(Source: DGCIS)
YEAR EXPORT (Rs. in Crores)
1998-1999 6256.06
1999-2000 7230.16
2000-2001 8757.47
2001-2002 9751.2
2002-2003 12826.1
2003-2004 15213.24
2004-2005 17857.8
2005-2006 22578.98
2006-2007 24942
India’s Bulk Drug Export
Source: (CRISINFAC)• Bulk Drugs Export- grew 28%CAGR (2001-02 and 2007-08)• Reached $4.2 billion
India’s Formulation Export
(SOURCE: CRISINFAC)
REGULATORY BODIES & PATENT – THE KEY FACET OF PHARMACEUTICAL
INDUSTRY IN INDIA
• National Pharmaceutical Pricing Authority (NPPA): Established to fix/ revise the prices of controlled bulk drugs and
formulations under the Drugs Prices Control Order, 1995.
• Central Drugs Standard and Control Organization (CDSCO) : Controls the quality of drugs imported into the country, co-ordinates the
activities of the State/UT drug control authorities, approves new drugs proposed to be imported or manufactured in the country.
• Department of Chemicals & Petrochemicals (DCP) : Provides prompt services to the public in matters relating to chemical,
pharmaceutical and petrochemical industries; take steps to speedy redressal of grievances received; formulates policies and initiate consultations with Industry associations and to amend them whenever required.
• Patent: a legal document granted by the government giving an inventor the exclusive right to make, use and sell an invention for a specified period of time.
• The Indian Patents Act of 1972: Granted the pharmaceutical sector the right to produce
any drugs the country needed. Also did away with the shackles imposed by monopoly.
• The Patent Amendment Act 2005: law only protects completely new compounds that were
invented after 1995.
US FDA
• Implemented for drug safety system.
• India has the highest number of US FDA approved plants outside the US at 75 plus.
• Of the overall Drug Master Filings to US FDA, Indian players has jumped from around 14% (2000) to 46% (2008).
• India has recorded 1671 DMF filings, whereas China shows a tally of 520 only.
Increasing share of Indian companies in DMF filings (US FDA)
(SOURCE: CRISINFAC)
GOVERNMENT POLICY
• POLICY MEASURES:
Lifesaving drugs, Clinical trials, Anti AIDS drugs – Exempted from excise duty
Permitting FDI for manufacture of drugs on certain conditional basis
Extension of deduction of R&D expenses from 150% to 200%
MERGERS AND ACQUISITIONS IN THE INDIAN
PHARMACEUTICAL INDUSTRY
Announce date Target Acquirer Reason Deal ValueTarget
Country
Feb-06
Betapharm Dr.Reddy’s Labs
Front end line in Germany
570 Germany
May-04
Espama Gmbh Wockhardt Front end line in Germany
11 Germany
Nov-05
Ranbaxy Daichii Sankyo Low cost manufacturing and supply chain management
33.5 Japan
Nov-05
Roche’s API Facility
Dr.Reddy’s Labs
Increasing presence in Contract Mfg
58.97 Mexico
Oct-05
Avecia Nicholas Piramal
Increasing presence in Contract Mfg
17.1 UK,Canada
CONCLUSION
• Pharma industry being a growth industry• Unaffected by the business cycle• As per the present growth rate, the Indian Pharma
Industry is expected to be a US$ 20 billion industry by the year 2015
• India has competitive strength in research services availability of low cost skilled doctors and scientists large patient population with diverse disease
characteristics adherence to international quality standards• VLSS agencies recommends investment in this industry
to be a wise decision.
THANK YOU