Indian Pharmaceuticals Market

Indian Pharmaceuticals Market (IPM)

Third largest in the world
Size – FY09 – US$ 21 bn (Domestic – 12 bn, Exports – 9 bn)
Growing at a CAGR of 14 % over last 5 years
PwC report estimates size at US$ 50 bn by 2020
Astonishing demand for drugs
Country with most heart patients
40 million+ people with diabetes
5.1 million HIV/AIDS patients
14 million tuberculosis patients
 Industry Classification

Pharma

Formulations
Formulations

Bulk Drugs (API) Contract Research Generics

Generics

Patented
Patented
Generics generics Branded generics
Generics generics Branded generics
 Industry Analysis – Porters 5 Forces Model
BARRIERS TO ENTRY
Moderate to High
• High no. Of legal procedures and
licences
• High capital requirement for mfg,
supply chain & R&D
• Low success ratio in R&D
• Patent issues
• Barriers are moderate in case of
generics as R&D expenses are low
• Exports require high regulatory
clearances
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SUPPLIER POWER
Low to Moderate
• High no of suppliers
• At times, use of single supplier as sole source for
particular material
• Delay in supplying materials hampers their ability to
deliver products
THREAT OF SUBSTITUTES AND
COMPETITION COMPLEMENTS
Very High – Generics , Very Low - R&D Intensive Moderate to High
• For R&D intensive drugs threat
• High competition across companies for generics
is moderate
• Very less differentiation points in generics
• For generics and off patent
• Price discounting and margin pressures in
drugs threat is very high
generics
• Alternative medicines like
• For patented drugs it acts almost as monopoly
auyrveda, Unani posing threat
BUYER POWER
Moderate to High
• For generics and OTC drugs its high
• Need to keep buyer’s satisfied otherwise will risk to
lose to competitors
• For some of the patented and Life saving drugs
buyer power will be moderate
4
4
 Generics Overview
• Marketing off patent drugs
• Major players – Sun Pharma, Ranbxy, Dr Reddy’s, Cadilla, Cipla
• India to become 10th largest market by 2015 with market size
of US$ 20 bn
Increasing Genericisation Value of Drugs going off patent
US$bn US$bn
~ US$90bn

~ US$50bn
 Generics Continued
• Key growth drivers
– Significant patents expires through 2011
– Government priority to rationalize healthcare
costs
– Cost Competitiveness
• Key Challenges
– Foreign currency fluctuations
– Incresaing costs and cost of capital
 Bulk Drugs (APIs)
• Major players : Ranbaxy, Cipla, Dr Reddy’s,
Lupin, IPCA Labs

Indian API Exports Increasing share in DMF Lisitings

(US$bn)
 APIs Continued
• Key growth drivers
– Increasing share in DMF listings
– Contract manufacturing opportunities
– 2nd highest US FDA approved facilities
– Cost competitiveness
• Key Challenges
– Maintain the pace of new drugs in pipeline
– IP Competence
– Faster turnaround time
– Research facilities
 Industry Analysis – Porters 5 Forces Model
BARRIERS TO ENTRY
Moderate to High
• High no. Of legal procedures and
licences
• High capital requirement for mfg,
supply chain & R&D
• Low success ratio in R&D
• Patent issues
• Barriers are moderate in case of
generics as R&D expenses are low
• Exports require high regulatory
clearances
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Larsen & Toubro Infotech Ltd.
SUPPLIER POWER
Low to Moderate
• High no of suppliers
• At times, use of single supplier as sole source for
particular material
• Delay in supplying materials hampers their ability to
deliver products
THREAT OF SUBSTITUTES AND
COMPETITION COMPLEMENTS
Very High – Generics , Very Low - R&D Intensive Moderate to High
• For R&D intensive drugs threat
• High competition across companies for generics
is moderate
• Very less differentiation points in generics
• For generics and off patent
• Price discounting and margin pressures in
drugs threat is very high
generics
• Alternative medicines like
• For patented drugs it acts almost as monopoly
auyrveda, Unani posing threat
BUYER POWER
Moderate to High
• For generics and OTC drugs its high
• Need to keep buyer’s satisfied otherwise will risk to
lose to competitors
• For some of the patented and Life saving drugs
buyer power will be moderate
9
9
 STRATEGIC GROUPS IN THE INDIAN PHARMA INDUSTRY

Domestic
Formulation

Global DR. REDDY’S LAB

Branding
NOVO
NORDISK RANBAXY

Glaxo
Generics Smithkline

TORRENT SANOFI-AVENTIS
Torrent
Local
Branding CIPLACIPLA International
Formulation

Applied R & D Basic R & D

Dr. Reddy’s Laboratories Ltd
 The Company
Origin
Estd. Feb ‘84
Founder: Dr. Anji ReddyDr.
Reddy’s under Dr. Anji Reddy
Pioneer and Trendsetter in Indian
Pharmaceutical industry
– Turned around Indian Bulk Drug
industry
– Indian Bulk Drug industry
Indian Bulk Drug Industry
– Mid-80s: Import-dependent
– Mid-90s: Self-reliant
– 2000 on wards: Export-oriented
First Indian Pharmaceutical Company to take up Drug Discovery research
industry
Global Presence
• Focus on US, Germany, India and
Russia
• Wholly-owned subsidiaries in the USA,
UK, Russia, Brazil, New Zealand,
Turkey and Mexico
• Joint Ventures in China, South Africa
and Australia
• Representative Offices in 16 countries
• 3rd party Distribution setups in 23
countries
 Revenue distribution
Percentage contribution to revenue (FY 10)

India
17%
North America North America
35% Russia & CIS
Others EU
11% Others
India

EU Russia & CIS

26% 11%
Purpose: Providing affordable & innovative
medicines for healthier lives

Strategy: Leaverage industry-leading science &

technology, product offering and
customer service with execution excellence
Shareholding Pattern
Competitor Analysis
 Ranbaxy
Incorporated in 1961

Ranked among the top 10 generics companies in the world

Ground operations in 49 countries and manufacturing operations in 11

nations

Exports contribute to around 80 per cent of the total revenues

The company’s net profit in first quarter of 2008 was US$ 39 million.

Aspires to become a research based pharmaceutical company with

revenues of US$ 5 billion by 2012

Envisions being in top five global generics players by 2012

TC presence: Anti-infectives, CVS, diabetes, dermatological, neuro-

psychiatry, Pain management, GI and Nutritional
 CIPLA
Set up in 1935

World’s largest manufacturer of cost effective anti-retroviral drugs

Cipla’s products are bought by over 170 countries across all the continents

Partnerships with nine companies for over 125 products

Recorded a turnover of US$ 800 million in 2009

Exports account for over 50 per cent of the overall sales

Over 100 Drug Master File (DMF) registrations in the US and over 85 in
Europe

Presence across most of the therapeutic category

 GSK
Two manufacturing units in India, located at Nasik and Thane

2000-strong fieldworkers and a countrywide network of over 4000

stockists

Net sales of the pharmaceuticals business segment was US$ 326 million,
which constitutes 92 per cent of the company’s total sales

It exported bulk drugs and formulations worth US$ 7.1 million

Two R&D centers which are approved by the Department of Scientific and
Industrial Research, Government of India

TC presence: Anti-infectives, CVS, diabetes, dermatological, pain

management, CNS, GI, nutritional, gynaecological, respiratory, sera and
immunoglobulin, hormones
 Peer Comparision
Sales Turnover (FY10) PAT Margin(FY10)
6000 5624 30.0%
27.1%
5000 4782 25.0%
4553

4000 20.0% 18.6% 19.2%

Sales(Rs Crore)

3000 15.0%

%age
11.9%
1892
2000 10.0%

1000 5.0%

0 0.0%
Dr Reddys Cipla Ranbaxy GSK Dr Reddys Cipla Ranbaxy GSK

Market Capitalisation( 30 sep 2010) D/E Ratio( FY10)

30000 28033 28319 0.9
0.8
25283 0.8
25000
0.7
20000 19176 0.6
Market Cap

D/E Ratio

0.5
15000
0.4
10000 0.3
0.2
5000 0.1 0.1
0.1
0
0 0
Dr Reddys Cipla Ranbaxy GSK Dr Reddys Cipla Ranbaxy GSK
 SWOT Analysis
Strengths Weaknesses
Partnerships with key Over-reliance on partnerships
players in the market keeps Lack of resources similar to US
its cost base down and Europe based competitors
Research Driven & Global to develop a drug to marketing

Opportunities
Threats
Take a drug all the way to market
Needs to gain FDA approval for all
Take a molecule from its pipeline all
sources and products
the way to the market place cost-
Products have to pass strict FDA
effectively market
trials before going to market, which
Increase domestic footprint in
can be costly and time consuming
generics
Management Discussion Analysis
FY 11 Guidance : RoCE of 18 – 22%. FY13 Goal : Revenues $3 bn & RoCE of
25%

Strong & sustained cash flows expected from product opportunities

suchas Omeprazole Mg OTC, Fondaparinux & Fexofenadine
pseudoephedrine

Attractive Emerging Markets presence with stronghold in two key ‘BRIC’

Markets – India & Russia

Strategic alliance with GSK for Emerging Markets

 Key priorities

Deepening market presence

Differentiated product portfolio

Supply chain excellence

DRL Businesses
Business Model

Active
Pharmaceuti Global
cal Generics
Ingredients

Proprietary
Products
APIs
Active Pharmaceutical Ingredients
Acquisitions in Mexico and UK

Services
 Process research
 Product development
 Pilot scale manufacture
 Product regulatory support

Large Client base

Active Pharmaceutical Ingredients
Adds strategic value to the Finished Dose business

75% of global Generics requirement sourced internally

High degree of Vertical Integration and Cost advantage

Servicing more than 800 customers spread over 100 countries

and Six continents
 Active Pharmaceutical Ingredients
450 CAGR of
22%
400

350

300

250
408 413 430
404
200

150
216
100 161
50

0
FY 05 FY 06 FY 07 FY 08 FY 09 FY 10

Revenue ($ Mn)
Global Generics
 Global Generics
Deepening market presence

Widening scope of portfolio offering

Achieving supply chain excellence

Addressing the need for infrastructure / capacity increase

Focus on emerging markets

Global Generics- North America
Portfolio of 50+ products with 3/4th of the portfolio vertically
integrated

Sumatriptan contributed 36% of total North America revenue

FDA approved manufacturing facilities in India and

Shreveport, USA

Supply chain excellence

Global Generics- North America

350 Growth
of 53%
300

250

200

301
150 272

199
100

109
50
37
0
FY 06 FY 07 FY 08 FY 09 FY 10
 Global Generics - Germany
Acquisition of Betapharm in 2006

The emerging trend – Increasing tender activities by State

Health Insurers

Long term plan

 Focus on increasing market share, increased scale and growth

 Launch of new products and higher shelf space

 Global Generics - Germany
Germany - Revenue (Euro Mn)

160
140
120
100
Revenue (Euro Mn)
80 144 151
138
60 109
40
20
0
FY 07 FY 08 FY 09 FY 10
 Global Generics - Russia
Portfolio of 22 brands

OTC segment contributes 11% of total sales

High growth potential with attractive margins

80% of products vertically integrated

Market Rank
 Pharma – 16th

 Genrics – 7th
 Global Generics - Russia
Russia - Revenue in USD Mn
160 Growth
of 20.8%
140

120

100
Revenue in USD Mn
80 152
125
60
101
40 79
60
48
20

0
FY 05 FY 06 FY 07 FY 08 FY 09 FY 10
 Global Generics - Russia
Improve Coverage
 Improve market share in Moscow & St Petersburg

 Expand hospital coverage

Portfolio
 Focus on cardiovascular & oncology

 Expansion in OTC segment

Supply chain excellence

 Improve availability
Proprietary Products
 Proprietary Products

Biologics, Differentiated Formulations and New Chemical

Entities

1st Indian Company to fully develop a Biosimilar in-house

Rituximab launch proved to be a large success in India

Expect to launch 2 products in FY10 and thereafter 1 product

every year

Capacity Expansion ongoing for large scale mammalian cell

culture plant
India Business
 India Business
7 brands among Top 300 brands

Omez achieves sales of Rs 100 crs per annum

Emerging leadership presence in niche areas

 Dental, oncology & dermatology

Rural markets provide a huge opportunity

India Business
 profitability
40

35

30

25
Profitability

20 OPM (%)
NPM (%)

15

10

0
2006 2007 2008 2009 2010
Financial Year
Emerging Markets in next decade
Strategic Issues &
Recommendations
 Strategic Issues
Betapharm (Germany) needs to turn profitable

Increasing market share in Northern and Eastern parts of

India

Too much dependence on US and EU markets

Need to find new markets

Rural markets in India provides huge opportunity which

needs to be tapped

Increased regulations and change in government policies

can prove detrimental as in case of Germany
 Recommended strategies
Recommended strategies for Indian markets
 Focus on Chronic therapy market since the growth in chronic therapy is
approximately 20%

 Identify merger and acquisition opportunities with robust product

pipeline

 Increase presence in the rural markets – Huge opportunity

Recommended Strategies for Overseas market

 Focus on markets other than the US

 Emerging markets like Africa provide a huge opportunities

 Tie up with other players to reach these emerging markets

 Market Strategy
Emerging Markets Regulated Markets
Aggressive alliancing efforts outside Regulatory clarity is emerging though
core Dr. Reddy’s territories to leverage market dynamics will take some time
sole generic position to mature

Variable approval pathways and Emerging markets strategy will create

patent situation means that potential “clinically proven” full width portfolio
of pipeline will begin to be evident of biosimilar products
from FY12

Vertically integrated, India-based Retain strategic flexibility to alliance

development and manufacturing for detailing-driven market dynamics;
create a high margin portfolio for Dr. prepare for substitution-driven price
Reddy’s competition
 References
• Marketing Intelligence report – IMS ORG

• Annual report 2009-10 Dr. Reddy’s

• http://www.drreddys.com

• Dr Reddy’s Investor presentations

• http://www.ibef.org/economy/ruralmarket.aspx

• Indian pharmaceutical report-Yes Bank

THANK YOU !!