Pharma Industry Trends 4 MNCs vs Indian Cos

7/28/2019 Pharma Industry Trends 4 MNCs vs Indian Cos

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B. Pharm + MBA

(Pharma. Tech.)

Lecture No. 4

March, 2012


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Size and Scope of the Indian Pharma Market

Ranked 3rd largest by Production Volume

Ranked 14th By Domestic Consumption Value

24,000 licensed pharmaceutical companies

2,400 registered pharmaceutical producers

Approx 425 out of 465 bulk drugs used, aremanufactured in India

Sale of all types of medicines in the country isexpected to reach around US$19.22 billion by 2012.


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Pharma

Rankings 2011as per IMS (Rank 1 to 25)

January December 2011

RANK

MANUFACTURERS Values In M.S. Growth

12M. Crores % +/-%

12M.%

TOTAL MARKET 53,802.84 100 14.9

1 CIPLA 2,722.60 5.06 11.7

2 GLAXOSMITHKLINE 2,125.35 3.95 9.1

3 ABBOTT HEALTHCAR 2,053.03 3.82 12.7

4 SUN PHARMA 2,030.83 3.77 22.8

5 MANKIND 1,815.27 3.37 22.7

19.97

6 ALKEM 1,588.19 2.95 17.7

7 ABBOTT 1,491.28 2.77 29.0

8 LUPIN LIMITED 1,448.62 2.69 13.79 MACLEODS PHARMA 1,349.95 2.51 42.6

10 INTAS 1,294.56 2.41 28.0

33.31

11 ZYDUS CADILA 1,280.25 2.38 11.9

12 RANBAXY 1,163.77 2.16 18.6

13 SANOFI 1,123.17 2.09 15.3

14 DR REDDYS LABS 1,091.26 2.03 8.1

15 TORRENT PHARMA 1,078.50 2.00 15.6

43.97

16 ARISTO PHARMA 1,006.39 1.87 7.017 U S V 978.76 1.82 24.2

18 ALEMBIC 942.52 1.75 11.7

19 MICRO LABS 917.72 1.71 15.4

20 PFIZER 880.23 1.64 14.5

52.75

21 GLENMARK PHARMA 874.53 1.63 22.1

22 WOCKHARDT 871.75 1.62 22.2

23 NOVARTIS 815.39 1.52 14.6

24 FDC 784.07 1.46 1.1

25 IPCA LABS 707.84 1.32 4.7

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Pharma

Rankings 2011as per IMS (Rank 26 to 50)

January December 2011

RANK

MANUFACTURERS Values In M.S. Growth

12M. Crores % +/-%

12M.%26 EMCURE 661.61 1.23 11.6

27 ELDER PHARMA 589.11 1.09 17.8

28 GERMAN REMEDIES 559.45 1.04 9.0

29 UNICHEM 484.78 0.90 6.2

30 WYETH LIMITED 473.30 0.88 24.6

31 ZUVENTUS PHARMA 465.44 0.87 29.4

32 CADILA PHARMA 462.85 0.86 13.3

33 MERCK LIMITED 460.77 0.86 10.5

34 FRANCO INDIAN 454.33 0.84 8.435 STANCARE 416.58 0.77 6.7

69.63

36 HIMALAYA DRUG 398.16 0.74 8.4

37 RANBAXY GLOBAL CHC 391.06 0.73 33.7

38 ASTRA ZENECA 341.56 0.63 23.9

39 INDOCO 336.74 0.63 1.3

40 SOLVAY PHARMA 310.21 0.58 28.1

72.94

41 REXCEL 309.67 0.58 10.2

42 BLUE CROSS 306.86 0.57 17.043 UNIQUE PHARM 265.74 0.49 16.2

44 MEDLEY PHARMA 257.63 0.48 12.5

45 UNISEARCH 252.68 0.47 2.4

75.52

46 RAPTAKOS BRETT 250.85 0.47 15.0

47 WIN MEDICARE 248.73 0.46 12.8

48 BIOCHEM 247.96 0.46 7.0

49 WALLACE 232.90 0.43 10.5

50 JANSSEN 223.27 0.41 16.3

77.75


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Total Pharma 53,803 100.00 +15

Rank CompanyValue

(Rs cr.) M.S. %Growth

+/-%1 Abbott 3,855 7.16 +20

2 Cipla 2,723 5.06 +12

3 Ranbaxy 2,524 4.69 +16

4 GSK 2,166 4.02 +9

5 Sun Pharma 2,100 3.90 +226 Zydus Cadila 1,970 3.66 +13

7 Mankind 1,815 3.37 +23

8 Alkem 1,795 3.34 +16

9 Pfizer 1,719 3.20 +16

10 Lupin 1,449 2.69 +14

11 Mcleods 1,350 2.51 +43

12 Intas 1,306 2.43 +2813 Sanofi 1,283 2.38 +16

14 Aristo 1,199 2.23 +7

15 Emcure 1,127 2.09 +18

16 Dr Reddys 1,091 2.03 +8

17 Torrent 1,079 2.00 +16

18 Wockhardt 1,075 2.00 +16

19 USV 979 1.82 +24

20 Micro Labs 949 1.76 +15

Rank Company

1 Abbott

2 Cipla

3 Sun Pharma

4 Zydus Cadila

5 GSK

January 2012 rankings


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Phase IEarly Years

Market sharedominationby foreigncompanies

Absence ofIndiancompanies

1970

PhaseIIGovernmentControl

IndianPatent Act 1970

Drug pricescapped

Local

companiesbegin tomake animpact

1980

Phase IIIDevelopmentPhase

Processdevelopment

Productioninfrastructure

creation Export

initiatives

1990

Pharma Industry Evolution


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Phase IVGrowth Phase

Rapidexpansionof domesticmarket

Internationalmarketdevelopment

ResearchOrientation

2000

Phase VInnovation andResearch

New IP law

DiscoveryResearch

Convergence

2010

Pharma Industry Evolution


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The evolution of the Indian Pharma Industry

The government started to encourage the growth of drugmanufacturing by Indian companies in the early 1960s, and with thePatents Act in 1970.

However, economic liberalization in 90s by the former PrimeMinister P.V. Narasimha Rao and the then Finance Minister, Dr.

Manmohan Singh enabled the industry to become what it is today.This patent act removed product patents from food and drugs, andthough it kept process patents, these were shortened to a period offive to seven years.

The lack of patent protection made the Indian market undesirableto the multinational companies that had dominated the market,and while they streamed out

Indian companies carved a niche in both the Indian and world

markets with their expertise in reverse-engineering new processesfor manufacturing drugs at low costs.


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The India Advantage for MNCs

Generics making up 99.8% of the prescription market.Growth about 14 to 15%

Growth driven by the growing number of patientsgaining access to affordable medicines

Regulatory process being upgraded New policy being discussed to let market driven prices

prevail

Low resources and investments for innovation in R&D

India advantage being extended to Global players forcost containment in R&D and production.

India having potential to become Global hub for Pharmamarket worldwide

Highest no. of USFDA approved facilities outside the US


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The Rapidly Changing Market Place

Thanks to the 1970 Patent Act, multinationals representonly 35% of the market, down from 70% thirty years ago.January 1, 2005 enactment of an amendment to Indiaspatent law that reinstated product patents for the first time

since 1972.

The legislation took effect on the deadline set by the WTOsTrade-Related Aspects of Intellectual Property Rights(TRIPS) agreement, which mandated patent protection onboth products and processes for a period of 20 years.

Under this new law, India will be forced to recognize notonly new patents but also any patents filed after January 1,

1995.


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Indian companies achieved their status in the domestic marketby breaking these product patents.

In the domestic market, this new patent legislation has resultedin fairly clear segmentation. The multinationals narrowed theirfocus onto high-end patients who make up only 12% of themarket, taking advantage of their newly bestowed patentprotection.

Meanwhile, Indian firms have chosen to take their existing

product portfolios and target semi-urban and rural populationseg. Mankind, Alkem, Aristo, Nicholas Piramal.

Now MNCs like Sanofi, Novartis, Aventis, GSK and Pfizer are alsoexploring semi-urban rural markets.

The Rapidly Changing Market Placecontd.


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Higher the Value Curve Better Pricing Advantage

Low

High

Intermediate& Bulk

Substances

Commodity

Generics

Conventional

Dosage Forms

Value- Added and

Branded Generics

OTC & New Drug

Delivery Systems

New Chemical

Entity & Drug

Discovery

Technological/MarketingComplexity

Bottom Line


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Growing Importance of the Emerging Markets

According to IMS, almost 80 per cent of current sales formost global companies comes from regulated markets.

This is forecasted to grow at a compounded annual rate

of only three to six per cent.

In comparison, emerging markets (EMs) are likely togrow at a 12-15 per cent rate.

EMs contributed almost half of global growth in the pastfew years (despite a 20 per cent market share) and thiscontribution is projected to increase to 70 per cent in thenext five years.


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In 2008, one inbound deal took place, where Ranbaxy was boughtover by Daiichi Sankyo for $4 billion.

In 2009, about five inbound deals took place. Sanofi-Aventis bought Shantha for $625 million, Hospira Inc acquired Orchid for $400 million Mylan acquired Matrix for $133 million Pfizer Animal Health's bought Ventex AFCL from ICICI Venture

for $75 million and Ventoquinol's acquired Wockhardt's animal health business for

$31 million

In 2010, apart from $3.7-billion Abbott-Piramal deal, the only singledeal in pure pharma space was that of US-based Avantor's buyoutof RFCL from ICICI Venture for $112 million.

In 2011, Reckitt Benckiser acquired Paras Pharma for US$ 726 mio.


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If you cant buy them off, join themWith the rising significance of India as one of the largest genericdrug markets and escalating valuations which makes thepharmaceutical space here a tough acquisition target, globalpharma majors remain active for entering partnerships, jointventures and alliances with their Indian counterparts.

During this year, two global pharma majors entered JVs with topIndian players to sell generic drugs in India as well as otheremerging markets.

In January, Bayer AG entered into a 50:50 joint venture, BayerZydus Pharma, to distribute pharmaceuticals in India with CadilaHealthcare Ltd.

Similarly, US-based Merck joined hands with Sun Pharma,eyeing emerging markets.


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If you cant buy them off, join them2

In October 2010, Pfizer, the world's largest

drug maker, entered into a marketingalliance with biotech major Biocon Ltd to,initially, market globally four of the latters

insulin biosimilar products.

The $350-million deal allows each other to

market insulin in separate markets.


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In 2010, Anglo-Swedish drug maker AstraZeneca signed its

first branded generics supply deal, with TorrentPharmaceuticals.

In 2009, a similar deal was signed by British drug makerGlaxoSmithKline with Dr Reddy's Laboratories.


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signed a deal with for anti-diabeticdrugs.

Lupin

will market and distribute the entire range of

Huminsulin brand of Eli Lilly in the country andin Nepal.

has signed a deal with to

market Galvus (Vildagleptin) in the metros.

USV will manage marketing activities in tier II and IIItowns in the next phase.



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Growing Importance of India for MNCs The Indian market is growing at a healthy rate and attracts all the major

MNCs to strengthen their presence here.

Also, India has a 1/5th share of global population which helps in expandingthe pharma markets quite well.

The valuation remains high and they prefer the alliance route than

the acquisition one for the time being. Another key feature of EMs is that consumers primarily pay for most

medications from private means, unlike in regulated markets where alarge portion is borne by state/insurance players.

Coupled with relatively lower incomes, consumers are thus more price-sensitive than in other markets, the study says.

Also, the manufacturing cost in India is 35-40 per cent cheaper than that ofUS or European markets.

Through the alliances, apart from India, all the other emerging marketslike Australia, Africa, Middle East and Latin America can be tapped.


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Global Companies: Local Approach

Pharma MNCs are currently launching branded generics in the Indianmarket via product localisation, a strategy that involves local branding,sourcing and pricing. This strategy helps them launch products atcompetitive prices, thereby addressing affordability issues.

With localisation, the pharma MNCs operating in India have been able toimprove their growth rates and this strategy is expected to yield futuregrowth.

The scaling up of field force by pharma MNCs in India to increasegeographic penetration and the launch of new products in the Indianmarket has led to an increase in personnel costs for them.

This, along with the increase in promotional and marketing expenditureon new launches, has brought pressures on operating margins, althoughthey are still largely within the range of comfort.

The margins are expected to improve once the incremental investmentsin marketing and sales translate into higher sales and profits.


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Global Companies: Local Approach

The pharma MNCs are launching products fromtheir global portfolios at a fraction of the globalprices in the Indian market e.g.

Diovan (Novartis),Januvia (Merck Sharp & Dohme),Galvus (Novartis) and

Crestor (Astra Zeneca).

These are being sold in India at a discount of upto 80% to the global prices.


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Favourable demographics and changing disease

patterns characterise increasing demandIndia has witnessed rapid epidemiological transition as a consequence ofeconomic and social change.

Historically, acute disease segments have dominated the market, with theanti-infective sub-segment contributing a major share.

However, with growing urbanisation, the disease profile of the Indianpopulation has become increasingly skewed toward lifestyle-relatedailments such as obesity, heart disease, stroke, cancer, diabetes andrespiratory diseases.

The number of people suffering from chronic diseases such as cancer,diabetes, neuropsychiatric conditions and cardiovascular disease is set todouble in India by 2020.

Thus, change in patient demographics will fuel demand for quality and

affordable products in the domestic market.


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Expanding health care infrastructure and changing

demographics to supplement growth

The Indian healthcare sector is forecasted to reach $280 billion by 2020,

contributing expected GDP expenditure ofeight per cent by 2012,compared with 4.2 per cent in 2009, according to a report by an industrybody.

Over the past two decades, Indias thriving economy has driven the needfor urbanisation, thereby creating an expanding middle class withincreased disposable income to spend on healthcare.

Other key growth drivers for this sector include a growing population, theopening of new hospitals, growing lifestyle related health issues, lessexpensive treatment costs, the growth of medical tourism, improvinghealth insurance penetration and government initiatives.

The overall growth of the Indian healthcare sector is likely to create asizeable demand for quality and affordable medicines, thereby providing

significant growth opportunities for both domestic and pharma MNCs.


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Rural-centric initiatives to enhance market access:Robust consumption in the rural economy is expected to be a keygrowth driver. Rural India accounts for more than 70 per cent of allIndian households and close to 40 per cent of the total consumptionpie.

A large number of companies are organising their efforts to derive amajor portion of their overall sales from this untapped market.

Additionally, pharma MNCs are looking to implement new andeffective business models in India and improve the health of patients.

Delivering patient health outcomes implies getting involved in thecycle of care, rather than just delivering drugs to a health care system.


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A few rural initiatives include:Sanofi-Aventis Saath 7:

In 2009, Sanofi-Aventis launched the Saath 7 programmein India, in which certified counsellors help diabetic

patients understand their diseases and providepersonalised consultation through home visits.

Mercks Sparsh:

In 2009, Mercks Indian subsidiary, MSD Pharmaceuticals,launched Sparsh, a multilingual helpline for diabetics onits drugs Januvia and Janumet to provide diet, exercise,

and adherence advice.


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J&Js Mobile Health for Mothers:

In September 2010, Johnson & Johnson (J&J) launched a mobilehealth initiative for expectant mothers in India. Mobile Health forMothers provides free text messages on prenatal care, appointment

reminders and calls from health coaches.

Pfizer-ITC:

In July 2011, Pfizer collaborated with FMCG major ITC to enhance its

product sales in the rural markets. According to the agreement,Pfizer will sell its over-the-counter products through ITC channels inrural areas.

Such noble initiatives can be expected to help pharma MNCs further

augment their brand awareness in the domestic market and help tapthe segments growth potential.

More examples of rural initiatives:


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Domestic companies need to transform their business

model to play a larger role in global pharma marketThe Indian pharma industry has been able to claim a share in theglobal market by leveraging its strengths and enhancing its regulatoryand technical maturity.

Formulations manufactured in India constitute 20 per cent of the

global generics market by value, and the overall share of Indianmanufactured formulations is as high as 46 per cent in the genericssegment in the emerging markets.

However, with the onset of the patent regime, the traditional reverse

engineering capabilities of Indian pharma companies are no longerhelpful, as they would not be able to replicate the patented productand launch it in the domestic market.

In future, India would be required to leverage its strengths in supplyof low cost medicines across the world and invest in newer areas todrive growth.


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New Opportunitiesfor Domestic Companies

Opportunities exist ranging from the low-value addedsegment, comprising of

NDDS ($134 billion opportunity by 2013),

Super generics ($135 billion worth of product expiringbetween 2010 and 2015) and Biosimilars ($115 billion worth of biologics expiring by

2015), to the High value New Chemical Entity (NCE)/New

Biopharmaceutical Entity segment.

Thus, domestic companies can look forward to pursueall these opportunities and build capabilities to conduct

drug discovery and in house development.


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Documents

Pharma Industry Trends 4 MNCs vs Indian Cos