industry risk analysis report - indian pharmaceuticals industry

8/12/2019 Industry Risk Analysis Report - Indian Pharmaceuticals Industry

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1. Evolution of the Industry:

1.1. Evolution of Indian pharmaceutical industry

Indias pharmaceutical industry is one of the fastest growing segments of the Indianeconomy with an average annual growth rate of 14 percent during 2008-2012. verall! theIndian mar"et for pharmaceuticals is pro#ected to grow at an average annual rate of 21percent during 2012 - 201$1. %he surge in production has &een driven &y legislative reforms!the growth in contract manufacturing and outsourcing! value added foreign ac'uisitions and#oint ventures! Indias mastery of reverse engineering of patented drug molecules! andIndias efforts to comply with its (orld %rade rgani)ation *(%+ %rade ,elated Intellectualroperty greement *%,Is+ o&ligations.

rior to 200/! the Indian regulatory system recogni)ed only patents. %his helped to &uild afirm foundation for the strong and competitive domestic pharmaceutical industry. uring thisphase! the prevalent price control mechanisms helped companies delivered medicines at

afforda&le prices! to patients across India *reene! 200+.

1.1.1. re-patent regime *&efore 200/+

t the time of independence in 134! Indias pharmaceutical mar"et was dominated &y(estern 56s that controlled &etween 80 and 30 percent of the mar"et primarily throughimportation.

ppro7imately 33 percent of all pharmaceutical products under patent in India at the timewere held &y foreign companies and domestic Indian drug prices were among the highest inthe world. %he Indian pharmaceutical mar"et remained import-dependent through the 13$0suntil the government initiated policies stressing self-reliance through local production. t that

time! 8 of Indias top 10 pharmaceutical firms! &ased on sales! were su&sidiaries of 56s.%o facilitate an independent supply of pharmaceutical products in the domestic mar"et! thegovernment of India founded / state-owned pharmaceutical companies.

lso process patents helped the Indian pharmaceutical sector flourish! amid a fast growinggenerics industry. uring this regime! multinational companies *56s+ were reluctant todirectly introduce new products in India. omestic companies leveraged this situation! &y re-engineering these products and mar"eting them in India.

1.1.2. ost-patent regime

In line with its commitments to the (%! the Indian government passed an ordinance to

introduce the product patent regime w.e.f. anuary 200/. %his aided the integration of Indiainto the glo&al pharmaceutical mar"et and rendered duplicating of post-133/ patented drugsillegal. (hile this discouraged process re-engineering of products patented post 133/! theamendment aimed at gradually enhancing confidence of large glo&al players on Indiancompanies.

In 200/! the Indian pharmaceutical industry witnessed a series of regulatory developments!ranging from the implementation of value added ta7 *9%+! shift from e7cise duty levy to an,-&ased levy system and :chedule implementation to recogni)e the product patentregime. (hile implementation of the 9% and shift in the e7cise duty regime had short-termimplications! the implementation of :chedule *compliance with tenets of c+ andadherence to the product patent regime will have medium and long-term implications!

respectively.16omputed from 6, for world vs India in fig ;;;.


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%oday! India is the worlds third largest producer of &ul" drugs.

1.1.ecause thesemeasures lowered &arriers to entry! thousands of medium and small Indian pharmaceuticalcompanies entered the mar"et challenging the 56s for control. %hese actions laid thefoundation for todays highly competitive domestic industry that is capa&le of offering someof the lowest drug prices in the world. %hese policies ended Indias dependence one7pensive foreign drugs! fostered the development of a competitive pharmaceutical industry!and guaranteed the Indian pu&lic access to ine7pensive drugs. 5onetheless! the Indianpharmaceutical industry also &ecame one of the countrys most heavily regulated. *reene!200+

Enactment of ?product patent regime2

Patents (Amendment) Act, 2005.India entered the product patent regime on anuary 1! 200/.%his mar"ed the end of a protectionist era and &etter integrated India with the glo&alpharmaceutical mar"et. (hile the earlier process patent regime helped the Indianpharmaceutical industry develop into a world-class generics industry! the product patentregime aimed at encouraging new drug discoveries over the long-term. %raditionally!pharmaceutical 56s had maintained a low-"ey presence in the Indian mar"et! due to thea&sence of product-&ased patents and rigid price controls. @ence! the recognition of productpatents will gradually &oost confidence levels! placed &y large glo&al players on India.

Arom anuary 200/ till date! India has seen a handful of patented product launches. fi)erhas launched three of them! while ,oche and :B launched two and one! respectively. %helaunch of patented products in India has &een slow as innovators are ta"ing their time! to

see" clarity on data protection! patenting of derivatives and pre- and post-grant opposition.

ffi7ing of prices &y 5ational harmaceutical ricing uthority *5+

Drug Pricing Control Order,1970 (DPCO).%he government fi7ed prices of nine commonly useddrugs! in cases where it was noticed that companies have increased prices for no legitimatereason. s a result! pharmaceutical companies will no longer &e a&le to increase medicineprices! at their discretion. a#or companies were as"ed to revise drug prices to level fi7ed &ythe 5ational harmaceutical ricing uthority *5+. %he regulator directed companies toma"e relevant changes in their ma7imum retail prices *,s+. rugs! which have comeunder the scanner! cater to ma#or therapeutic areas! such as dia&etes! cardio-vascular!

allergies and infections.

%he 6 currently controls pricing for around 2/-ased on the review! the regulatorissued directives for withdrawal of certain A6s. %hese norms! coupled with few others!point towards a more stringent drug regulatory environment! which could increasecompliance and facility up gradation costs! for the industry! over the medium term.

2

mendment of %he atent ct! 130. %his was a process &ased patent that allowed Indiancompanies to reverse engineering or copy foreign patented drugs without paying license fees. %hisfostered the development of an indigenous Indian pharmaceutical industry for


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roposed new drug pricing policy 2012

In :eptem&er 2012! the roup of inisters *o+ set up to determine IndiaDs drug pricingpolicy has proposed that retail prices of 6ountry 200 2008 2003 2010 2011 2012 201< %otal

: 1$$ 181 1$3 134 13 18< 113 1191India 1


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Snapshot:

Indias Pharmaceutical Industry in FY2012-13

Share of global sales 9olume 10C ! 9alue 1.8C

Global raning


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2. Global Market

rowth in regulated mar"ets remains tepid! amid patent e7piries! lac" of new drugs In

2012! glo&al pharmaceutical sales *including audited and unaudited mar"ets+ grew &y a

modest


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2.


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variety of immunological diseases. nti-dia&etics grew &y a&out 11 per cent! due to growingprevalence of the disease

2./. %op &rands &y glo&al :ales

1. &ilify2. 5e7ium

n*harma :ales+

. stra Oeneca - K 28.>n

8. ohnson L ohnson - K24.3 >n

3. &&ott Na&oratories

10. Nilly

2.. atent e7piry &y value=

20 20

28 282

3

20

22

8

1/

0

/

10

1/

20

2/


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%he industry has seen tremendous progress in terms of infrastructure development!technology &ase and the wide range of products manufactured. emand from the e7portsmar"et has &een growing rapidly due to the capa&ility of Indian players to produce cost-effective drugs with world class manufacturing facilities. >ul" drugs of all ma#or therapeuticgroups! re'uiring complicated manufacturing processes are now &eing produced in India.harma companies have developed ood anufacturing ractices compliant facilities forthe production of different dosage forms.

In addition! IndiaDs long-esta&lished position as a preferred manufacturing location formultinational drug manufacturers is 'uic"ly spreading into other areas of outsourcingactivities. :oaring costs of ,L and administration are persuading drug manufacturers tomove more and more of their discovery research and clinical trials activities to thesu&continent or to esta&lish administrative centres there! capitali)ing on IndiaDs high levels ofscientific e7pertise as well as low wages.


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i. Increased dependence on generics production due to patent e7piry which has &eenestimated at some : K 4.00 &n during 201ul" drugs are raw materials used to ma"e formulations! which are ready to use forms ofone or a com&ination of &ul" drugs and include capsules! ta&lets! syrups! in#ections. >ul"drugs are intended to have a direct effect on the diagnosis! cure! mitigation! treatment andprevention of a disease. >ul" drug e7ports! which account for 80-30 percent of the total &ul"drug production! are posed to grow at a ro&ust pace of 14-1$ percent over the ne7t fiveyears.

6hart= ictorial view of structure of II

Aormulations are ready to use products! are prepared with one or a com&ination of &ul"drugs. Aormulations are administered directly to end users. Aormulations are sold &oth in thedomestic and e7port mar"ets. omestic formulation consumption constitutes around $0percent of the total formulation sales in 2011-12. @owever its share has declined graduallyfrom nearly 4 percent in 2002! as the generic opportunity in the regulated mar"ets hasaided formulation e7ports to grow at a faster pace. (ith the rising incidence of lifestylediseases in India! incremental growth in the domestic formulations mar"et is e7pected to &eprimarily driven &y healthy volume growth in chronic medications. (ith a large value of dugsgoing off patent! and the increasing emphasis on generics &y governments of ma#or mar"ets!the glo&al generics mar"et is poised for health growth of around -3 percent.


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etro and %ier-I mar"ets each account for a&out 6hart = >rea"up of drug manufacturing industry

:ource= nnual ,eport 2011-12

Indian pharmaceutical companies operate

larely from Maharashtra! Gu"arat! #est

$enal and %ndhra &radesh. 'o(ever! inthe last fe( years! many players have

shifted their manufacturin bases to

e)cise*free +ones like $addi ,'imachal

&radesh-! 'arid(ar ,ttaranchal- andSikkim! after the overnment imposed an


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M/&*based e)cise duty system in

200.&harmaceutical manufacturin units

are larely concentrated in Maharashtra

and Gu"arat. hese states account for

about 4 of the total number of

pharmaceutical manufacturin units inIndia.

6hart = >rea"up of state-wise concentration of

pharmaceutical industry

:ource= nnual ,eport 2011-12


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raph= % margin and ,6E in II.


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ran"s tenth glo&ally in terms of value! it is ran"ed third in volumes. %hese characteristicspresent their own opportunities and challenges.

highly fragmented industry! the Indian pharmaceutical industry is estimated to have over


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6ounterfeit medicines are a danger to patients all over the world! as they may containharmful su&stances! the wrong dose of the active pharmaceutical ingredient *I+ or no Iat all. %he International edical roducts nti-6ounterfeiting %as"force *I6%+ of the(orld @ealth rgani)ation *(@+ estimates that appro7imately 10 to y contrast! in developed countries with effectiveregulatory systems! counterfeits represent less than 1C of the mar"et.

4.# !rug $uality "afety

iven the widespread impact that prescription drugs may have on the health of large patientpopulations! pharmaceutical! &iopharmaceutical and medical device companies have!historically! &een suect to large product lia&ility damages claims! settlements and awardsfor in#uries allegedly caused &y the use of their products. roduct lia&ility claims! regardlessof their merits or their outcome! are costly! divert management attention! and may adverselyaffect our reputation and demand for our products. dverse pu&licity relating to the safety ofa product or of other competing products may increase the ris" of product lia&ility claims.

4.% &hanging patent laws with change in central'state government

Each government has got different views a&out the industry and specific aims. @ence thegovernment policies on patent conduct and servicing varies from one another.

4.( )thical &onduct of &linical *rials

Nac" of availa&ility of patients and testing suects. dverse reactions to the productcandidate or indications of other safety concerns. ,egulatory approvals for clinical trials.nfavora&le data from "ey studies! e7cessive cost are driving the ethical conduct of clinical

trials into difficult situations.

4.+ ,elatively low per capita consumption of medicines amongst emerging markets

sian 6ountries li"e India depend on other methods of medicine li"e @omeopathy!yurvedic! 5aturopathy! etc. according to their ease of access and &elief. %his adverselyaffects the mar"et share of the allopathic drug companies. Especially in India the per capitaconsumption of allopathic drugs are lower compared to other peers! though which is ingrowing stage now.

4.- alse /arketingE7tensive and profit targeted mar"eting is pushing off the drugs even towards theunintended patients which are in turn causing a&normal conditions in patients causing anegative mar"eting to the company.

4.10 &orruption

6orruption at various levels causes the deterioration of the product 'uality and sometimesover pricing.

4.11 ore' &urrency ,isk


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%he currency fluctuate su&stantially and should devalue without it &eing possi&le to offset thedevaluations with price increases! products may &ecome less profita&le.

4.12 &hanges in government policy and regulations

%he pharmaceutical industry has &een highly regulated worldwide &y virtue of its direct&earing on pu&lic health. main feature of governmental regulation affecting the industryhas &een the e7plicit control on drug prices in the form of the drug price control order*6+. (hile 6 fulfils the socialistic oective of ensuring availa&ility of drugs atreasona&le prices! it restricts the pricing fle7i&ility of companies! there&y adversely affectingprofita&ility. ,etail prices of In India! a&out 80 percent of the medical spending is out-of-poc"et e7penditure! wherein theconsumer directly pays for the medicines. nli"e in :! India lac"s a strong health insurancesector that can share healthcare costs with the patients. In the :! governmentorgani)ations and managed care organi)ations reim&urse a ma#ority of drug costs topatients.

4.14 ther issues

frican countries li"e Benya and %an)ania! which accounts for 1/C of total e7ports! haverecently passed anti counterfeit legislations which could hamper e7ports of Indian generics.In addition to this! issues such as tariffs! ta7es and non tariff &arriers such as reduction incustoms duty! e7cise duty e7emptions! and &an on the import of &ul" drugs also impacts thepharmaceutical industry.

5. Porter's Five Forces Model Analsis

orterDs Aive Aorces odel helps one to analy)e the harmaceutical industry to determinewhat can &e done to get an advantage over the firmDs e7isting competitors and also todetermine how attractive a particular industry would &e for new entrants.

orterDs Aive Aorces are= 1+ %hreats of entry posed &y new or potential competitorsP 2+egree of rivalry among e7isting firmsP argaining power of &uyersP 4+ >argaining powerof suppliers and /+ 6loseness of su&stitute products.

>elow is an anlysis of the harmaceutical Industry using the a&ove named forces=

1. !"reats o# entr $osed % ne& or $otential co$etitor ()*+,


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@igh entry &arriers due to costs associated with research L development of new

drugs *i.e. years of investment in ,L for a drug that mayQmay not wor"+

overnment regulation *i.e. A+

%he threat of entry posed &y new or potential competitor is a N( competitive force

due to the a&ove entry &arriers L regulatory constraints.2. -eree o# rivalr aon e/istin #irs (,

@igh rivalry among main companies in the industry. Aor e7ample the current rivalry in

the erectile dysfunction space where :un harma L r ,eddys Na& claim thatNevitra wor"s faster or Eli Nilly L I6: claim that 6ialis wor"s longer than fi)ers9iagra

%he degree of rivalry among e7isting firms is a @I@ competitive force

3. arainin $o&er o# %ers (M-M,

@ospitals L other health care organi)ations &uy in &ul" 'uantities and e7ert pressure

on pharmaceutical companies to "eep prices in chec"

,egular patients have lost &argaining power due to price increases in generic drugs

%he &argaining power of &uyers is a EI competitive force.

4. arainin $o&er o# s$$liers ()*+,

:ales for the pharmaceutical industry concentrate in a handful of large players and

that has decreased the &argaining power of suppliers.

%he &argaining power of suppliers is a N( competitive force

5. loseness o# s%stitte $rodcts (,

emand for generic versus &rand name drugs has increased &ecause of the costs

eneric drug companies do not have the high costs associated with the research L

development of new drugs and that allows them to sell at cheaper prices

%he closeness of su&stitute products is a @I@ competitive force

verall and &ased on the a&ove analysis of orters Aive Aorces! we can conclude that thepharmaceutical industry is not attractive for new entrants.

6. +*! Analsis o# ndian P"aracetical ndstr

:trength

S (ell-esta&lished industry with strong manufacturing &ase

S (ell developed networ" of Na&oratories and , L infrastructure for new drug

discovery and development


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S 6ost competitiveness due to lower la&our cost and production cost

S ccess to pool of highly trained and s"illed scientists! &oth in India and a&road

S (ell-&uilt mar"eting L distri&ution networ" in domestic and international mar"et

S India is second largest country in terms of population in world with rich &iodiversity

S E7pertise in reverse engineering and development of new 6hemical process madeIndian pharmaceutical industry as one of the strongest generic industry

(ea"nesses

S Nac" of resources to compete with 56s for 5ew rug iscovery ,esearch and tocommerciali)e molecules on a worldwide &asis

S Nac" of strong lin"ages &etween industries and academia

S Nac" of culture of innovation in the industry

S Now investment in innovative ,esearch L evelopment

S Now per capita medical e7penditure and healthcare spend in country

S Inade'uate regulatory standards

S roduction of spurious L low 'uality drugs tarnishes the image of industry

pportunities

S :ignificant e7port potential to the developing as well as developed countries

S Nicensing deals and colla&orations with 56s for 5ew 6hemical Entities and 5ewrug elivery :ystems

S roviding mar"eting operations to sell 56 products in domestic mar"et

S India can &e niche player in glo&al pharmaceutical , L &y developing world class

infrastructure

S 6ontract manufacturing arrangements with 56s


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S otential for developing India as a centre for International 6linical %rials

S Increasing aging world population

S Increasing incomes and &uying power of people especially in rural areas has openedthe great opportunity for Indian pharma companies. round 0C of the totalpopulation of India is residing in rural areas.

S rowing awareness for health and increasing spending on health

%hreats

S roduct patent regime poses serious challenges to domestic industries unless itinvests in , L .

S , L efforts of Indian pharmaceutical companies hampered &y lac" of regulatoryre'uirement. Aor instance! restrictions on animal testing out-dated patent office.

S 6 puts unrealistic ceilings on product prices and profita&ility and preventspharmaceutical companies from generating investi&le surplus.

S E7ports effort hampered &y procedural hurdles in India as well as non-tariff &arriersimposed a&road

7. Relator Frae&ork

,egulations are imposed &y regulator y &odies to ensure that drugs meet safety and 'ualitystandards. It is e7tremely vital in the industry that high standards are maintained! consideringthat many lives are at sta"e. ,egulatory &odies also that the pharmaceutical companiesdonDt charge unreasona&le prices from consumers.

%he stringency of regulatory procedures varies across countries. n the &asis of esta&lishedregulations and patent laws! the glo&al pharmaceutical industry can &e &roadly classified intoregulated and semi-regulated mar"ets.

,egulated mar"ets include :! E and apan that have esta&lished systems of patent lawsand sophisticated regulatory systems for controlling drug 'uality. 6ountries li"e 6hina! Indi a


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and :outh frica! which have less stringent systems of patent laws and less sophisticatedregulatory systems for drug 'uality control! are regarded as :emi ,egulated ar"ets.

.1 :emi-regulated mar"ets

%here is no single harmoni)ed protocol for drug approval across countries. 6ountries havetheir own regulatory authorities and drug approval mechanisms.

.2 ,egulatory uthorities in Bey 6ountries

6ountry ,egulatory uthority &&reviation

: : Aood L rugs dministration :A

B B edicines and @ealthcare roducts

,egulatory gencies

@,

:outh frica edicines 6ontrol 6ouncil of :outh frica 66

India Aood L rug dministration A

>ra)il 5ational @ealth :urveillance gency 59I:

Europe %he European edicines gency EE

5.3 /eulatory environment in India

/eulatory bodies


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Source: CRISIL

he 6rus and 7osmetics %ct! 180 ,6rus %ct- and 6rus and 7osmetic /ules! 18,6ru rules- reulate the import! manufacture! distribution and sale of drus inIndia. nder the provisions of these %cts! the 7entre appoints the 6rus echnical%dvisory $oard ,6%$- to advise the central overnment and the state overnments ontechnical matters.

he responsibility to enforce the 6rus %ct is entrusted (ith both the centralovernment and the different state overnments. nder the 6rus and 7osmetics %ct!state authorities are responsible for reulatin the manufacturin! sale and distributionof drus! (hereas the central authorities are responsible for approvin ne( drus andclinical trial s! layin do(n the standards for drus controllin the 9uality of importeddrus and coordinatin the activities of state dru control orani+ations.

he 6rus 7ontroller General of India ,67GI- is the central body that co*ordinates theactivities of state dru control orani+ations! formulates policies and ensures uniformimplementation of the 6rus %ct throuhout India. It is also responsible for the approvalof licenses of specified cateories of drus such as blood and blood products! I ;luids!accine and Sera.

Indian pharmaceuticals industry is mainly reulated on patents! price and 9uality

5. Investiational


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sponsors formally propose that the S ;6% approve a ne( pharmaceutical for sale andmarketin in the S.he oal of the he dru is safe! effective in its proposed use,s- and its benefits out(eih the risks

> he proposed labelin of the dru ,packae insert- is appropriate.

> he methods used in manufacturin the dru and the controls used to maintain9uality are ade9uate to preserve t he dru = s identity ! strenth! 9uality! and purity


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8. o$an Analsis

8.1 Aro%indo P"araceticals

AR*-* PARMA!A)

$2 13 $3 13 $2 14 $3 14perating Income 1


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*increasing share of formulations+ and geographic mi7 *higher proportion of sales fromdeveloped mar"ets+. In AM11! formulations accounted for /4C of companys turnover *upfrom


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8.2 A-)A ealt"care

A-)A A)!AR

$2 13 $3 13 $2 14 $3 14

perating Income 00.13 24.2$ 8


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well-thought ac'uisitions! steady product introductions and therapy e7pansion! andmaintaining service levels have &een "ey factors that have helped the company &ecomestrong player in the generic space. ver the years! the company has also entered intocertain strategic 9s and alliances having clear focus on leveraging either its manufacturingcapa&ilities or partnering to gain technical e7pertise in certain productQtherapy segments.

(ith a contri&ution of ayer for co-mar"eting products in India and morerecently ac'uired >iochem to strengthen its acute segment portfolio. In the :! 6adilasinitial foray and ramp-up was largely driven &y highly commoditi)ed oral solids which thecompany is now augmenting with limited competition segments such as transdermals!in#ecta&les etc. %he recent ac'uisition of 5esher harma has helped the company gainpresence in the controlled release su&stance portfolio. mong other mar"ets! 6adila hascreated considera&le presence in the >ra)ilian mar"et and is also increasing its focus on theapanese generics segment. dditionally! the company has also esta&lished certain

9sQalliances with leading players with a specific strategic intent either leveraging on thecapa&ilities in certain therapy areas or mar"ets=

%he revenue of 6adila has &een growing steadily! the 'uarter ending ecem&er 201< saw agrowth of 2


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8.3 P)A )!-

)atest Reslts (Rs r,

Period;nded -ec;13 -ec;12

:ales2!2/


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,ating ate :ecurity %ype mount *6r.+ ,ating

02-12-201< Nong %erm e&ts 2.


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>% $$1. 4/3.0 /02.13

dditionally! on-time-in-full delivery levels improved two to threefold through dedicated effortin the supply chain processes. %he impact of these initiatives has already &een recogni)ed&y several "ey partners worldwide.

nother critical focus of this programme is to improve cost effectiveness across productswhile upholding the highest standards of regulatory! 'uality and safety re'uirements.aagrutis efforts have reduced yield loss! shortened lead times and de&ottlenec"ed


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constrained capacities across manufacturing facilities &y implementing several improvementideas.

%he 6ompany has recently also launched ?rocurement Effectiveness Effort to &uild &est inclass procurement practices and further reali)e cost savings.


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8.4 ranles ndia )td

)atest Reslts (Rs r,

Period;nded -ec;13 -ec;12

:ales 2$2.12 1


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2-12-201< e&t rogamme 12.$4 >>>

2-12-201< e&t rogamme 12/. 13-11-201< Nong %erm e&ts 1.8 >>>V

13-11-201< Nong %erm e&ts $.$ >>>V

13-11-201< :hort %erm e&t 1>

08-11-201< e&t rogamme 2/.>

08-11-201< e&t rogamme $.$ >>>

11-03-201< Nong %erm e&ts 1.>>

11-03-201< Nong %erm e&ts / >>>

11-03-201< Nong %erm e&ts $.$ >>>

11-03-201< :hort %erm e&t 2/.>

0/-03-201< Nong %erm e&ts 2/3.13 >>>V

0/-03-201< :hort %erm e&t 1


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>I%QIC 11.3/C $./4C 14.30C 1.23C

%QIC 4.


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Airst! instead of using its additional Is for captive consumption! the 6ompany sold moreIs in AM1< which has a lower profit margin than Aormulations. :econd! the 6ompanysAormulation E7pansion was delayed in AM1< and faced scale-up issues after its completion.%he 6ompany had additional e7penses including increased manpower at the facility withouta concurrent increase in production.

nterestInterest lia&ility increased 4.0C from W1.0 6r. in AM12 to W1. 6r. in AM1< conse'uent to anincrease in the 6ompanys de&t portfolio. (hile there was an increase! the interest cover gotstrengthened from 4.87 to 4.37 over the same period! reflecting the 6ompanys a&ility torepay its interest lia&ilities.

et $ro#it

%he 6ompany earned a net profit of ,s.


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9. "anin ndstr !rends

Indian pharma players sharpen focus on regulated mar"ets

%o understand the strategies! dynamics and performance of domestic pharmaceuticalcompanies *formulations and &ul" drugs players+ listed on stoc" e7changes! they have &eensegregated into large! medium and small! on the &asis of their turnover *as of 20010-11+. sper this measure! companies with a turnover of more than ,s 2/ &illion can &e termed large-si)ed players! those with a turnover &etween ,s < &illion and ,s 2/ &illion would &e medium-si)ed players! while small-si)ed players would &e those with a turnover of less than ,s uoyed &y the a&ove trends! Indian formulation e7ports recorded a 21.< per cent 6,&etween 200/-0$ and 2010-11. n a y-o-y &asis! e7ports grew &y 2$ per cent in 2010-11!after a 2.2 per cent growth the previous year. ,ecovery was led &y e7ports toregulated mar"ets! which grew &y


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21*23 per cent and 1*1 per cent! respectively.

6omestic formulations sales are e)pected to ro( by 1*1 per cent y*o*y! touchin C1billion in 2012*13. Gro(th (ill be driven by sales of drus caterin to chronic and lifestyleailments.

%. he concessional per cent basic customs duty has been e)tended to si) life*savindrusDvaccines and to bulk drus used to manufacture the said drus. 'o(ever! the impactof this on the industry (ill be neutral since these drus account for a small proportion in theIndian pharmaceutical market.

$. E)cise duty on formulations has been increased to ? per cent from per cent! (hile thee)cise duty on bulk drus has been hiked to 12 per cent from 10 per cent. hese increasesare not e)pected to sinificantly impact Indian pharmaceutical players as they (ill pass onthe duty increases to consumers. ;ormulations manufacturers (ill not be impacted by hihere)cise duty of bulk drus.

7. he five*year e)tension of the 200 per cent (eihted deduction for in*house /A6e)penditure (ill only marinally benefit Indian pharmaceutical players as /A6 e)penditureon an averae forms less than per cent of their net sales.

10. *tlook o# ndian P"aracetical ndstr

@verall ro(th outlook for the Indian drus and pharmaceutical industry appears positive.&harma manufacturers are likely to benefit from rise in demand for eneric products. Someof the factors that (ould drive ro(th in the domestic pharma industry are:

1- lo( cost operations

2- research*based processes

3- improvements in %&I

- availability of skilled manpo(er.

he domestic formulations and bulk drus markets are currently facin price pressure as

benefits of cheaper drus have been shifted to end*users and trade channels. 'ence!

consolidation! partnership and alliances are e)pected to ather momentum in the nearfuture. @ff patentin of branded drus (ould increase demand for eneric drus. his

provides immense opportunities to the Indian pharmaceutical companies especially iven

their prior e)perience in eneric dru development. Some other factors such as hih

penetration in the lobal markets and increase of share in %bbreviated


39/39

2- Increasin (eihted ta) deduction on e)penditure in in*house /A6 activities to 2004

3- Settin up a venture capital fund to support dru discovery and strenthenpharmaceutical infrastructure.

Bibliography

6,E. *201

industry risk analysis report - indian pharmaceuticals industry

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