This ppt gives an overview of the Indian Pharmaceutical sector. We have concentrated on 5 aspects of the sector and analysed it. The covered heads are history, business model, Marketing, Competitor analysis, Financials and Trends.
Report by IAMAI(internet and mobile association of india & IMRB, growth of 16% compared to last year. MOBILE – 6 million -11.2 million
Phamaceutical sector in india
Indian Pharmaceutical Sector A presentation by Deepak Kumar Dipankar Biswas Kasif Iqbal Partho Sarathi Roy Shireen Khan
Inception & Snapshot Bengal $21.73 Chemicals and 1.4 million Pharmaceuticals billion employment (1892) industry per year Alembic Chemical works (1907) Bengal Immunity (1919) Ranks 10 % of among topCalcutta Chemicals, Standard global five Pharmaceuticals, production countries Indian Cipla etc. by volume PharmacGSK, Parke Davis, eutical Wyeth, Ciba etc. Sector
Time for Big Boys 1 2 3HindustanAntibiotics IDPL (1961) Ranbaxy (1954) (1961) Evolution of Major Drugs1920 1930 1940 1948
Game Changing Move LandmarkIDMA was formed Patent act wasin 1961 passed in 1970 India couldAim was to oppose manufacture anymonopoly international drug
Division of Drugs Chronic Therapy Acute Therapy Segment Segment Indian Pharmaceutical IndustryBulk drugs or Formulations API Cardiovascular Anti infective Neurological Gastro intestinal Anti-diabetes Respiratory Oncology Pain management
Location of major pharmaceutical companies in India 4000 3500 3000 No. of Companies 2500 2000 1500 1000 500 0 Others Tamil Nadu Maharashtra Gujrat West Bengal Andhra Pradesh Formulations Bulk Drugs
Top Players Ranbaxy Sun PharmaceuticalsDr. Reddy’s Labortories Ltd. Cipla Lupin
Strength Vast market growth potential Low cost production Low R&D costs Innovative manpower Cheap/skilled English-speaking labor force Increasing western work methods and mindset Long-established trade patterns with Western Europe and the US Strong local manufacturing sector Governmental focus and investment in the R&D area Increasing FDI in the industry
Weakness Low pharma consumption levels per capita Biased drug pricing and bad compensation policy Underdeveloped healthcare infrastructure Vast regional disparities in healthcare coverage Many pharma MNCs already supplying the market at lower prices
Opportunities Large and growing population Rising demand for generic drugs globally Increased demand for APIs – active pharmaceutical ingredients Increasing R&D activity by domestic firms
Threats Failure to properly enforce WTO compliant patent legislation for drugs. Government imposing further price controls on essential medicine India’s patent laws threatened by litigation Weak copy right policies threatening the legal entities in the industry
Porter’s Five Force Model Power of supplier Very low bargaining power Threat of Substitutes Barriers to Entry Industry Competition No substitute for the Very low barrier to medicine entry Highly competitive Biotechnology is a threat to synthetic pharma product Power of Buyers Consumer has no choice but to buy what doctor says
Industry Competition Most competitive industries in the country with as many as 10,000 different players. Top player in the country has only 6% market share and top five have 18%. High growth prospects. Very low entry barriers. Fixed cost requirement is low and need for working capital is high.
Bargaining Power of Buyers End user of the product is different from the influencer (read Doctor). Consumer has no choice but to buy what doctor says. Buyers are scattered and they as such does not wield much power in the pricing of the products.
Bargaining Power of Suppliers Pharma industry depends upon several organic chemicals. Very competitive and fragmented industry. Chemicals are largely a commodity. Suppliers have very low bargaining power. Pharma industry can switch from their suppliers without incurring a very high cost.
Barriers to Entry Most easily accessible industries for an entrepreneur in India. Capital requirement for the industry is very low, creating a regional distribution network is easy. Point of sales is restricted in this industry in India. Creating brand awareness and franchisee amongst doctors is the key for long-term survival. Quality regulations by the government may put some hindrance for establishing new manufacturing operations. Impending new patent regime will raise the barriers to entry.
Threat of Substitutes One of the great advantages of the pharma industry. Demand for pharma products continues and the industry thrives. Key reasons for high competitiveness in the industry is that as an on going concern. Key reasons for high competitiveness in the industry is that as an on going concern.
Revolution in Marketing International Trade Barriers have disappeared Indian Industry is competing globally Evolution of Internet, giving access to whole lot of information, 137 million internet connection in india Evolution of smart phones (sales growth by 87%) Recognition of India’s intellectual capabilitiesReport by: IAMAI, IMRB & Cyber Media Research
Global Pharma Market Market Growth Market size Market Growth Forecast Region Yr 2008 ( USD CAGR (2003 - Billion) 2008) CAGR (2011 - 2015) North America 311.8 5.70% -1% to 2% Europe 247.5 6.40% 3% to 6% Japan 76.6 2.70% 1% to 4% China 21 20% 23% India 7.7 14.60% 12.20%Global Sales 773.2 6.60% 3% to 6%
Promotions Gifting Detailing Drug Samples Sponsoring Continuing Medical Education (CME)
Pull & Push Marketing SystemSuper Core Model (Pull System) Core Model (Push System)
Operation & Distribution of Pharmaceutical Industry
Challenges in Pharma Supply Chain Supply Inventory chain cost effectiveness Logistic Planning effectiveness SupplyTime to chain Responsivenessmarket challenges
Margins at Different LevelLevels MarginsClearing and forwarding agents 1–10% on the total turnover + other expensesStockist or distributors 8% on scheduled drugs 10% on nonscheduled drugsRetailers 16% on scheduled drugs 20% on nonscheduled drugs
DuPont Analysis Cipla pharmaceutical ROE and ROI has highest returns on equity and Investment by 23.10 and 0.21 followed by Dr. Reddy’s Laboratories ROE is 17.00 and ROI is 0.18. The third position secured by Ranbaxy Laboratories ROE is 16.16 and ROI by 0.13. This shows Cipla is concentrating on its financial performance by reducing its expenses and cost. Company Logo
Total Pharmaceutical Market Share(India) 1.7 10.9 Anti-Infective 4.4 11 16.4 Gastrointestinal5.3 Cardiac Respiratory5.3 Vit./Minerals/Nutrients Pain/Analgesics Dermatologists Gynaecology5.4 9.6 Neuro psychiatry antidiabetics 9.5 10.3 Opthologicals 10.2 Others Company Logo
Cost Structure Ranbaxy Sun Pharma 1400 3000 1200 2500 1000 2000 Rs. in Crores 800Rs. in Crores 1500 600 1000 400 200 500 0 Raw Power Emplo Other Selling Miscel 0 Materi & Fuel yee Manuf & laneou Raw Power Emplo Other Selling Miscell als cost cost acturin Admin s exp Materi & Fuel yee Manuf & aneou g cost exp als cost cost acturin Admin s exp 2010 878.46 47.38 174.71 52.9 439.11 31.92 g cost exp 2011 928.85 39.4 214.06 62.81 505.7 27.69 2010 2181.2 132.75 608.28 96.68 1332.7 185.14 2012 1257.7 68.76 316.56 34.86 0 660.7 2011 2523.0 194.98 845.24 112.69 1579.3 1283.5
Cost Structure Dr. Reddys Cipla 3500 2500 3000 2000 2500 Rs. in Crores 1500Rs. in Crores 2000 1500 1000 1000 500 500 0 0 Raw Power Emplo Other Selling Miscell Raw Power Employ Other Selling Miscell Materi & Fuel yee Manuf & aneous Materia & Fuel ee cost Manufa & aneous als cost cost acturin Admin exp ls cost cturing Admin exp g cost exp cost exp 2010 1599.4 104.1 516.4 117.3 1036.6 50.6 2010 2687.54 92.15 318.87 259.67 867.98 182.64 2011 1749.5 144.6 702.7 129.5 1256.7 65 2011 3085.9 164.42 464.2 270.08 999.68 179.49 2012 2122.9 177.5 831.2 163.1 1554.4 80.3 2012 2903.95 188.18 644.79 259.56 1217.79 154.27
Acquisitions by MNCsNo Year Acquirer Target Company Company Country1 Jun’08 Daiichi Sankyo Co Ltd Japan Ranbaxy Laboratories2 Aug’08 Fresenius Kabi AG Germany Dabur Pharma3 Jun’09 Pfizer (Animal Health U.S. Vetnex Animal Health Ltd Business) (earlier ICICI Venture acquired from Ranbaxy)4 Jun’09 Vetoquinol SA France Wockhardt (Animal Care Subsidiary)5 Jul’09 Abbott Laboratories U.S. Wockhardt (Nutrition Business)6 Jul’09 Sanofi Aventis France through Shantha Biotech (Hiked stake Merieux Alliance from 60% to 80%)7 May’10 Abbott Laboratories USA Piramal Healthcare(Sale of Business)
Trends in DiseasesTuberculosisEspecially in urban centres like Mumbai, Delhi, Hyderabad, Kolkata etc.Dengue Fever- 97 % increase in number of cases and 34 % increase in number of deathsSwine flu- Worst affected areas are MP, UP, RajasthanEncephalitis- 50% decrease in the last 2 years, lack of funds could play spoilsportsLifestyle diseases- Heart diseases, Cancer, Obesity, Diabetes etc. is set to rise
Clinical Trial Boom Huge amount of outsourcing from Europe and USA Highly trained man power Advanced IT infrastructure Large amount of patients to experiment Expected to employ 50,000 medical professionals by 2017WHO report, 2011
Recommendations Stringent patent laws must be imposed. Many patents are rejected by USPTO and EPO. Pharmaceuticals mergers and acquisition should be scanned closely by the Competition commission of India Price regulation should be balanced in such a way that it does not affect the Pharmaceutical business Assisting SME’s in overcoming entry barriers posed by GMP compliance requirement Absence of provision on regulation of biosimilars Transparency and accountability in the drug regulatory regime