tecnova global · 2018-09-13 · this report is solely for the use of customer personnel. no part...

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We Deliver the

India Advantage

Tecnova Global

Indian Pharmaceutical Industry Overview


Executive Summary

• Pharmaceutical sector growing @ 14.5% CAGR, to reach USD 60bn

• Healthcare industry growing @ 17%, to reach USD 300bn 2020 Growth Forecast

• 10% market share by volume of drugs produced internationally

Global Footprint

• 20% of global generics exports accounted for by India Leading Exporter

• USD 25bn market size by 2016 Growth in Generics

• More than USD 12bn foreign investments received in last decade and a half

Top 5 Investment Sector


Contents

Industry Overview

• Page 4

Industry Analysis

• Page 11

Industry Drivers

• Page 17

Future Outlook

• 2

Credentials • Page 35



We Deliver the

India Advantage

Industry Overview

India is expected to become one of the top 5 markets globally


Why India?

Improving Demographics

• Increased affordability of drugs owing to

growing middle class and decreasing poverty

levels

• Growing health insurance penetration

• With increasing penetration of chemists,

especially in rural India, OTC drugs will be

readily available

• Drugs produced in more ~65 therapeutic classes

• 60,000+ generic brands 500+ APIs

manufactured

• ~100 manufacturing plants have received US

FDA approval (largest outside US)

Low Production Cost

Capabilities Across Spectrum Supportive Government Policies

• 60% lower than that of the US and 50% of

European production costs

• To support the Make in India initiative, the

government has announced Phar a Visio 2020‟ to make India the global leader in end-to-

end drug manufacturing


Structure Of Indian Pharmaceutical Sector

Pharmaceutical Industry

Active Pharmaceutical

Ingredients (API)

Branded Generic

Contract Research and Manufacturing Services (CRAMS)

Formulations

Chronic Therapy

Cardiovascular

Neurological

Anti – Diabetes

Oncology

Acute Therapy

Anti – Infective

Gastrointestinal

Respiratory

Analgesics

Vitamins/ Neutraceuticals

Biosimilars


Industry Segments

• Expected to be 3rd largest global generic API market by 2016 with 7.2% market share

• India accounts for 2nd highest Abbreviated New Drug Applications (ANDAs)

• Over 3000 or 35.7% of Drug Master Files (DMF) filed with US – highest outside of US

APIs

• With more than 1,000 players, market is fragmented

• Currently industry size of CRAMS is estimated to be USD 8bn CRAMS

• About 77% pharmaceutical manufacturers in India produce Formulations

• USD 11.2bn current domestic market size

• Largest exporter of Formulations by volume, with 14% market share

Formulations

• USD 1.5bn market size of Biosimilars by 2016 end

• Government plans to allocate USD 70mn for developing Biosimilars Biosimilars


6

12

60

0

10

20

30

40

50

60

70

2005 2013 2020F

Indian Pharmaceutical Sector Revenues (USD billion)

• India is forecasted to be one of the top three pharmaceutical markets by 2020 on

account of incremental growth and top five market globally by size

Pharmaceutical Sector Revenues


Industry Trends

• Pharmaceutical major Lupin Ltd acquired Brazil based Medquímica for an undisclosed amount, and has announced 2 acquisitions in US and Germany

• Marksans Pharma has acquired Time – Cap Laboratories Inc, New York

Overseas Expansion

• Currently 7 – 10% of revenue is spent on R&D by Indian Pharma companies

• With growing competition, expenditure on R&D is on the rise as companies are looking to increase their drug pipelines in order to bring new drugs to the market

R&D

• Increased collaboration between MNCs and Indian pharmaceutical companies to develop generic versions of drugs

• LAZOR alliance formed by leading pharmaceutical companies to improve efficiency and reduce operating costs as well as share best practices

Joint Ventures


Date announced Indian company Foreign company Value

(USD million)

Type

December, 2014 Panacea Biotec Ltd Apotex Inc NA JV

November, 2014 Curatio Healthcare Sequoia Capital 15.8 Acquisition

December, 2013 Torrent Pharmaceutical Elder Pharmaceuticals Ltd 322 Acquisition

March, 2013 Unichem Laboratories Mylan 30 Acquisition

December, 2012 Shantha Biotech Sanofi Aventis 783 Acquisition

December, 2012 Claris Life sciences Otsuka Pharmaceutical 250 JV

September, 2012 Agila Specialties Mylan, A Canonsburg 1,850 Acquisition

September, 2011 Natco Pharma Litha NA JV

September, 2010 Piramal Abbot 3,720 Acquisition

May, 2010 Glenmark Sanofi 615 JV

December, 2009 Orchid Chemicals Hospira 400 Acquisition

Inbound M&A/ JV in Indian Pharma

• 44 deals worth USD 4bn in Healthcare sector for 2013, up 44% in terms of deal

value from 2012



We Deliver the

India Advantage

Industry Analysis

Generics dominates the Indian Pharma market


Revenue Segmentation

• Generics form the largest segment

of the Indian pharmaceutical sector

with 72% share of revenue

• India is the largest provider of

generic medicines globally

accounting for 20% of global exports

(volume)

• Over the Counter (OTC) medicines

constitutes 19% of the market

(revenue)

• The remaining 9% is attributed to

patented drugs (revenue)

72%

19%

9%

Revenue by Sub Segment 2013

Generics

OTC

Patented


16%

13%

11%

9% 8%

7%

7%

29%

Market Share by Value (2014)

Anti-Infectives

Cardiovascular

(CVS)

Gastrointestinal

Respiratory

Vitamins &

Minerals

Analgesic/ Pain

Anti-diabetic

Top 3 Segments: Anti – Infective,

Cardiovascular and Gastrointestinal Drugs

• Anti-infective drugs has historically

been the largest segment, 16%

market share in 2014

• Cardiovascular segment is expected

to keep rising on account of cardiac

cases and lifestyle disease, (13% )

• With increased R&D spend on

Gastroenterology, this segment is

expected to grow at a tremendous

rate, currently at 11% share

• 50% of the market is covered by top

four segments


6,9 8,1

10 11,3

12,6

15,1

18,1

21,8

26,1

0,8 0,9 1,1 1,3 1,5 1,8 2,2 2,7 3,3

0

5

10

15

20

25

30

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

F

20

16

F

Generic drug sales Patented drug sales

Patented Vs Generic Drugs Sales (USD billion)

Patented Drugs Maintain Market Share

• Patented drugs are expected to

hold a 10 – 11% market share,

notwithstanding the continuous

growth in the generics segment

• 90% of the prescription drug

market is catered to by generics

• Generic drug market will

continue growing on account of

the continuing Patent Cliff that

started in 2012


2 2,2

2,7 3

3,3

3,9

4,7

5,5

6,6

0

1

2

3

4

5

6

7

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

F

20

16

F

OTC Drug Market (USD billion)

OTC Drugs To Drive Rural Penetration

• OTC segment growing @ 16%

CAGR

• OTC drugs are expected to

witness tremendous growth

owing to demand generated from

increased rural penetration

• New classification of select drugs

and cosmetics will further

increase the share of OTC

segment


0%

5%

10%

15%

20%

25%

2,5% 3,5% 4,5% 5,5%

Cipla

Sun

Pharma

GSK

Ranbaxy

Zydus

Cadila

Lupin

Competitive Market – Top Four Firms

Account For Over 20% Market Share

Market Share

Major Players

Re

ven

ue

Gro

wth

• 40% market share (revenue) is

held by the top 10 companies

(Mar’14 LTM)

• Cipla is the market leader with

5% market share

• Sun Pharma posted 20% revenue

growth, the highest amongst

major players in this period

1. Bubble size denotes overall revenues

2. Ranbaxy has recently been acquired by Sun Pharma



We Deliver the

India Advantage

Industry Drivers

Indian Pharma industry is driven by exports


2

3

4

5 5

7

9

10

0,4 0,6 0,7 0,9 1,1 1,2 1,7 1,8

0

2

4

6

8

10

12

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Exports Imports

Exports Vs Imports (USD billion)

Exports Driving High Growth

• Pharmaceutical exports have

grown @ CAGR of 68% in last

decade

• India exports to over 200

countries in the world with US

being the key market

• Currently Japan is being

targeted as the next big export

opportunity by Indian

Pharmaceutical manufacturers


Exports By Region

• 34% of total pharmaceutical

exports were accounted for by

the Americas

• Indian exports of Anti-Retroviral

Therapy (ART) and anti-Malarial

drugs to Africa has been growing

at double digit rates

• An overall export target of USD

25bn has been set for 2016

34%

26%

20%

20%

Exports By Region (2013)

Americas

Europe

Asia

Others


Growth Drivers

• Growing per capita income driving demand for better healthcare

• Influx of private players with new products in the health insurance space and increased state coverage

• Increase in lifestyle related diseases

• Increased penetration of disease testing and diagnostic centres

• Global hub for generic drugs manufacturing

• Cost efficient

• 546 USFDA approved and registered sites

• Increasing penetration of pharmacies

• Indigenously developed drugs are exempted from DPCO (Drug Price Control Order)

• New facility approval time has been drastically reduced

• Emphasis on specialty Pharma education

• Disbursement of funds to families classified as BPL

Demand

Side

Drivers

Supply

Side

Drivers

Government

Support


Demand Drivers

Accessibility

• Over USD 200bn to be spent on medical

infrastructure

• Pharma and health insurance companies are

investing in penetrating rural and newly urbanized

areas

• Market share of hospitals to increase to 25% in 2020

from 13% in 2010

• 73 million households to be added to the middle

class by 2025 on account of rising incomes

• 650 million people expected to be covered by health

insurance by 2020

Acceptability

Affordability Epidemiological Factors

• Greater awareness of available medication options

• Prevalence of self medication to boost OTC market

• Acceptance of biologics and preventive medicine to

rise

• India is a medical tourism hub with growing YoY

patient inflow

• Patient pool expected to increase over 20% in the

next 10 years, mainly due to rise in population

• New diseases and lifestyle changes to boost demand

• Increasing prevalence of lifestyle diseases


India’s Share Of Wallet

• Share of healthcare expenditure in households has consistently increased from

4% in 1995 and is expected to be 13% in 2025

56

41 34

24

5

6

5

5

14

12

12

10

4

8

9

11

11

16

19

20

1 2

3

6

3 5

6

9

4 7 9 13

1995 2005 2015 (F) 2025 (F)

Healthcare

Education and Recreation

Communication

Transportation

Personal Products and

Services

Household Projects

Housing and Utilities

Apparel

Food, Beverages and Tobacco

Discretionary

Items

Necessities

Share of Average Household Consumption (%)


50 55

64 70

78 88

100

116 134

18%

21% 22%

23% 24% 24% 25%

26% 27%

0%

5%

10%

15%

20%

25%

30%

0

20

40

60

80

100

120

140

160

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

F

20

16

F

% Pharma Sales of Total Healthcare Spend

Healthcare Expenditure Pharma Sales

Growing Pharmaceutical Spend

• Increasingly affluent and

consumer oriented middle

class population of over 350

million

• Today at least 50 million

Indians can afford to buy

branded medicines which is

equal to about 80% of the UK


8 9

11

13 14

16

19

23

27

0

5

10

15

20

25

30

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

F

20

16

F

Per Capita Sales of Pharmaceuticals (USD)

Growing Per Capita Pharmaceutical Sales

• Per capita sales of

pharmaceuticals is expanding

@ 16% CAGR

• Need gaps being created in the

market owing to growing per

capita sales of pharmaceuticals


Supply Side Drivers

• Between 2013 and 2017, patent drugs worth USD 78bn will go off – patent

• This presents a great opportunity to the Indian Pharma sector, as it is expected to fill the market with generic versions of these drugs

Patent Expiry

• MNCs are expected to launch patented drugs in India owing to product patents

• Increased prevalence of lifestyle diseases will boost the sale of drugs in this segment

Launch of Patented

Drugs

• Pharma companies have increased spending to tap rural markets and develop better medical infrastructure

• USD 200bn earmarked to be spent on improving healthcare infrastructure by the government

Medical Infrastructure

• OTC drugs market is expected to be USD 6bn+ by 2016 from USD 3.0bn in 2011

• Increased penetration of chemists, especially in rural regions, would increase the availability of OTC drugs in the country

OTC Drugs


Government Support

• The government has invested USD 1.1bn in the PPP fund to support R&D in India, with the fund being focused mainly on vaccines, drugs and pharmaceuticals

• Increased incentives to domestic firms to conduct R&D

Public Private Partnership

(PPP)

• 1970 Patents Act amended to make it TRIPS compliant and introduction of product patents in India in 2005 gave a boost to the discovery of new drugs

• India has reiterated its commitment to IP protection following the introduction of product patents

• Increased likelihood of technology transfer from developed nations

Patents

• Approval times have been drastically reduced and the process itself simplified by the CDSCO to enable Indian Pharmaceutical companies compete globally

Quicker Approvals


Growth Oriented Policy Measures

• Steps taken to reduce approval time for new facilities

• Export license NOCs issued in 2 weeks – 85% reduction in TAT

Improved Turnaround

• Tax breaks provided to pharmaceutical sector, weighted tax deduction @ 150% on R&D expenditure

• 100% FDI (Foreign Direct Investment) allowed through the automatic route

• Full exemption from customs and excise duty for HIV/AIDS drugs and diagnostic kits supplied under National AIDS Control Program funded by the Global Fund to fight AIDS, TB and Malaria (GFATM)

Taxation, Duties & FDI

• USD 640mn government funded venture fund on the anvil to boost drug discovery and strengthen pharmaceutical infrastructure

Industry Infrastructure

• The government intends to provide support by way of infrastructure and R&D in the public and private domain, to make India one of the leading destinations for end – to – end drug discovery and innovation; with a target of 10 – 20% global drug discovery to originate in India by 2020

Pharma Vision 2020

• MOUs with USFDA, WHO, Health Canada, etc. to boost growth in the Indian Pharma sector by benefiting from their expertise

Global Partnerships


51 54

65 72

77

88

101

116

133

14 16 20 23 26

31 37

44

53

0

20

40

60

80

100

120

140

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

F

20

16

F

Healthcare expenditure Expenditure by Government

Share of Government Expenditure (USD billion)

Government Spend On The Rise

• Share of government

expenditure of total healthcare

grew from 27.5% to 36.6%

during same period

• Government healthcare spend

grew from USD 14bn in 2008 to

USD 37bn in 2014 and is

expected to grow @ 18% CAGR

to USD 53bn by 2016


37 38

45 49

51

57

64

72

80

14 16

20 23

26

31

37

44

53

0

10

20

30

40

50

60

70

80

90

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

F

20

16

F

Private Public

Public Vs Private Expenditure on Healthcare (USD billion)

Rising Share Of Private Sector Spend

• Private sector expenditure is

expected to grow @ 12% CAGR

• Private se tor’s healthcare

spend grew from USD 37bn in

2008 to USD 64bn in 2014 and

is expected to reach USD 80bn

by 2016


35

130 20

25

55

120

80

240

110

140

0

100

200

300

400

500

600

700

2010 2020F

Private Insurance

Government

Employee

Insurance

Employee State

Insurance Corp

Rashtriya

Swasthya Bima

Yojana

State Insurance

Population Covered by Health Insurance (millions)

Health Insurance Penetration Growth

• Currently penetration of health

insurance is 20%, in India and is

forecasted to be ~40% by 2018

• By 2015, spending through

health insurance would reach

8.4% of the total health

spending, up from 6.4% in

2009

• Private insurance coverage

would increase nearly 15%

annually till 2020


Factors Driving Health Insurance Growth

Rising healthcare costs have increased

need for health insurance

380 million people are expected to be

covered by government sponsored

programs like RSBY and ESIC

All major private companies are

providing insurance cover to their

employees and their families

Increased awareness of health

insurance among people of India



We Deliver the

India Advantage

Future Outlook

India will keep expanding its global manufacturing footprint


100

85

40

0

10

20

30

40

50

60

70

80

90

100

US Europe India

Relative Cost of Production

Cost Efficient Global Manufacturing Hub

• 40% lower cost of setting up a

manufacturing unit and 50%

lower labor costs as compared to

Western countries

• 546 US FDA approved company

sites, highest outside US and

2,633 FDA approved drug

products

• One of the largest pools of skilled

workforce including managerial

and technical skills


Opportunity Areas

• India is a leading country for clinical trials market

• India continues to attract huge investments in the area on account of a genetically diverse population and significant availability of skilled doctors

Clinical Trials Market

• Demand for high – end drugs is expected to reach USD 8bn by 2015 end, owing to improving income levels and urbanization

• This could potentially drive demand for production of high – end drugs in India

High – End Drugs

• Demand for generic medicines in rural markets has seen tremendous growth, 70% of I dia’s population resides in rural areas

• Pharma companies are looking to make inroads into this nascent segment by investing in distribution networks as current levels of penetration are very low

Penetration in Rural Market

• Current market size is approximately USD 8bn, with significant investment opportunities

• With more than a 1,000 players, the market is fragmented and consolidation is expected to happen over the next few years

CRAMS



We Deliver the

India Advantage

Credentials

Te nova’s a kground and experien e


CA, CFA, CPA, CS

Strategy and

Management

Consultants

Engineers and

Statisticians

Others

Empanelled Government

Bodies

Financial Institutions

Regulatory Bodies

Distributors

Industry Associations

• Over three decades of experience

• Solely focused on India entry

consulting

• Successfully executed projects for

1,000+ clients

• 60% of our clients are Fortune

1000 companies

• 100+ consulting associates

• Highly qualified team members

from premier institutions like

IIMs, IITs, ISB among others

About Us


• Target shortlisting

+ willingness check

• Due diligence

• Valuation

• Indian entity incorporation

• M&A/ set up greenfield facility

• Obtain regulatory approvals

• Product registration

• Land acquisition

• Recruitment of key executives

• Price negotiations

• Deal structuring

• Deal closure

• Post merger integration

• Market sizing and

dynamics

• Regulatory analysis

• Price build up

• End user industry analysis

• Competition assessment

• Feasibility analysis

• Distribution structure

M&A & JVs

India Market

Assessment

Entry Strategy and

Business Plan

Implementation

Services

Service Offering


Success Stories


1. India Focus

2. Relevant Experience 3. Full Service

Boutique

Consultants

4. Risk Management 5. Incubation

Service

1 We operate and specialize

only in India entry consulting

2 30+ years of managing 1000+

clients

3 Entire ecosystem of consulting

services under one roof

4 Handholding to help you navigate the

Indian market to avoid pitfalls that are

typical to India with minimal risk

5 A ility to a t as your Virtual Part er through our Incubation Service to enter

India with minimal

investment

How Tecnova Adds Value



TECNOVA is a Strategy Consulting firm based in India specializing in providing workable strategy solutions and implementation assistance to

foreign companies for leveraging the “India advantage”. With over 1 million man-hours of consulting work, we work with senior management

teams of MNC’s to develop modular & flexible strategies to explore the Indian market and minimize the knowledge gap for doing business in

India. For new entrants to the Indian market, we provide strategic advice and implementation assistance to reduce entry risk and compress

gestation time for break even and profitability. For already existing Indian operations of foreign companies, we provide advisory and transaction services to increase profitability and improve performance. For more information about us, visit www.tecnovaglobal.com

We Deliver the

India Advantage

TECNOVA INDIA PVT. LTD.

335, Udyog Vihar, Phase IV,

Gurgaon,

Haryana,

INDIA 122 015

Ph: +91-124-435-6300

Fax: +91-124-430-8207

http://www.tecnovaglobal.com/

tecnova global · 2018-09-13 · this report is solely for the use of customer personnel. no part...

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