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    Analysis of Pharmaceutical Industry: by Vlss Consultancies

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    The pharmaceutical industry in India is one of the largest and most advanced among developing countries. It has grown from importing bulk drugs to breaking new ground in medical research. The industry is worth $6 billion and growing at 13% annually. It accounts for 1% of the global market by value but 8% by volume. The industry is fragmented with 24,000 players, though the top 250 control 70% of the market. The government regulates drug prices and approvals. Mergers and acquisitions have increased industry consolidation and access to international markets. The future of the industry is bright given India's competitive advantages in low costs and skilled human capital.

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    Analysis of Pharmaceutical Industry: by Vlss Consultancies

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    The pharmaceutical industry in India is one of the largest and most advanced among developing countries. It has grown from importing bulk drugs to breaking new ground in medical research. The industry is worth $6 billion and growing at 13% annually. It accounts for 1% of the global market by value but 8% by volume. The industry is fragmented with 24,000 players, though the top 250 control 70% of the market. The government regulates drug prices and approvals. Mergers and acquisitions have increased industry consolidation and access to international markets. The future of the industry is bright given India's competitive advantages in low costs and skilled human capital.

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    22096446 Industry Analysis Pharma Sector[1]

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    The pharmaceutical industry in India is one of the largest and most advanced among developing countries. It has grown from importing bulk drugs to breaking new ground in medical research. The industry is worth $6 billion and growing at 13% annually. It accounts for 1% of the global market by value but 8% by volume. The industry is fragmented with 24,000 players, though the top 250 control 70% of the market. The government regulates drug prices and approvals. Mergers and acquisitions have increased industry consolidation and access to international markets. The future of the industry is bright given India's competitive advantages in low costs and skilled human capital.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    83 views25 pages

    Analysis of Pharmaceutical Industry: by Vlss Consultancies

    Uploaded by

    sagardextor
    The pharmaceutical industry in India is one of the largest and most advanced among developing countries. It has grown from importing bulk drugs to breaking new ground in medical research. The industry is worth $6 billion and growing at 13% annually. It accounts for 1% of the global market by value but 8% by volume. The industry is fragmented with 24,000 players, though the top 250 control 70% of the market. The government regulates drug prices and approvals. Mergers and acquisitions have increased industry consolidation and access to international markets. The future of the industry is bright given India's competitive advantages in low costs and skilled human capital.

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    of 25

    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 ANALYSIS
    SWOT ANALYSIS
    MICHAEL PORTER 5 FORCES MODEL

    • (B)QUANTITATIVE ANALYSIS
    RATIO ANALYSIS
    Opportunities :-
    Strengths :- 1. Significant export potential.
    1.Cost Competitiveness 2. Marketing alliances for MNC products in domestic
    2 Developed Industry with Strong market and international market.
    Manufacturing Base 3.Contract manufacturing arrangements with MNCs
    3.Well Established R&D infrastructure 4. Potential for developing India as a centre for
    4. Access to pool of highly trained scientists, international clinical trials.

    Weaknesses:- Threats :-
    1. Low investments in innovative R&D. 1.Product patent regime poses serious challenge to
    2. Lack of resources to compete with MNCs domestic industry unless it invests in research and
    for New Drug Discovery & Research development
    3. Lack of strong linkages between industry 2. R&D efforts of Indian pharmaceutical companies
    and academia. hampered by lack of enabling regulatory requirement.
    4. Low medical and healthcare expenditure 3.Drug Price Control Order puts unrealistic ceilings
    in the country on product prices and profitability
    4. Export effort hampered by procedural hurdles in
    India as well as non-tariff barriers imposed abroad.
    Power of Suppliers
    Volume benefits occur
    Inputs standard, available locally
    Numerous suppliers-switching cost low
    Suppliers can go for forward integration
    Raw material cost constitute more than 50% of
    the total expenses

    Barriers to Entry
    Very low barriers to entry Industry Competition Threats of Substitutes
    Government policies supportive Highly competitive. No substitutes for the medicines
    For entry price regulation exists Top five players have mere
    Biotechnology is a threat to
    Economies of scale exist 18% market share
    Lower fixed cost and high working capital synthetic pharma products
    Proprietory technology and
    Product will exist after 2005

    Power of Buyers
    End consumers do not have bargaining power
    Brand identity exists but is in the hands
    Of Influencer (Doctors)
    Price Sensitivity is less
    Highly fragmented market, so buyer
    Concentration v/s industry is low
    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
    YRC Aggregat Cipla Dr Reddy's Piramal Sun Ranbaxy
    e Pharma. 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 0.69 0.1 0 0.28 0.18 0.92
    Ratio
    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 5.82 47.45 40.76 5.61 208.94 9.29
    Ratio
    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 Value Target Country

    Feb-06Betapharm Dr.Reddy’s Labs Front end line in 570Germany


    Germany
    May-04Espama Gmbh Wockhardt Front end line in 11Germany
    Germany
    Nov-05Ranbaxy Daichii Sankyo Low cost 33.5Japan
    manufacturing
    and supply
    chain
    management

    Nov-05Roche’s API Dr.Reddy’s Labs Increasing presence 58.97Mexico


    Facility in Contract Mfg

    Oct-05Avecia Nicholas Piramal Increasing presence 17.1UK,Canada


    in Contract Mfg
    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

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