An overview of CIPLA and pharmaceutical industry in India along with porters 5 forces analysis

1. Combined By:
Ashwin (14048)
Sjcba,Bangalore

3. Company Profile• CIPLA Limited is an India-based global
pharmaceutical company, Whose goal is ensuring
No patient shall be denied access to high quality,
Affordable medicine and support.

4. Mission Statement
• Cipla’s mission is to be a leading global
healthcare company which uses
technology and innovation to meet
everyday needs of all patients.

5. Industry analysis-
Pharmaceuticals• Third largest in terms of volume and thirteen largest in terms of value.
• Branded generics constitute 70-80% of market
• Highly fragmented
• Estimated to grow at 20% CAGR over next five years.
• FDI up to 100 per cent under the automatic route for manufacturing of medical devices
subject to specified conditions.
• The country's pharmaceutical industry expanded at a compound annual growth rate (CAGR)
of 9.4 per cent in 2013 to reach US$ 12 billion and is expected to expand at a CAGR of 23.9
per cent to US$ 55 billion by 2020
• The Government of India plans to set up a US$ 640 million venture capital fund to boost drug
discovery and strengthen pharma infrastructure..

6. Industry analysis

7. Industry analysis

8. 8

9. Competitoranalysis
Name Last Price Market Cap.
(Rs. cr.)
Sales
Turnover
Net Profit Total Asset
Sun Pharma 841.75 202,566.81 8,017.20 -1,472.76 9,816.89
Lupin 1,698.15 76,404.86 9,752.47 2,397.35 9,067.83
Dr Reddys Labs 4,223.85 72,041.11 10,010.94 1,679.35 13,758.80
Cipla 719.20 57,759.30 10,131.78 1,181.09 12,470.76
Aurobindo Pharm 761.45 44,465.98 8,095.10 1,516.34 8,256.07
Cadila Health 1,913.55 39,179.65 5,284.43 1,271.12 5,788.60
Ranbaxy Labs 859.80 36,598.55 6,864.94 -879.00 7,088.06
GlaxoSmithKline 3,612.40 30,598.12 3,287.58 471.65 1,854.30
Glenmark 1,059.85 29,904.32 5,085.60 1,007.53 3,259.35
Divis Labs 2,141.30 28,422.39 3,084.01 847.06 3,588.09
Torrent Pharma 1,493.60 25,275.11 3,476.00 623.00 4,990.81
Wockhardt 1,652.35 18,257.54 1,886.55 331.82 1,417.00
Piramal Enter 914.40 15,779.17 2,401.41 372.74 15,250.15
competition Source : moneycontrol.com

10. Opportunities and Threats
• Global demand for generic
rising
• Increased penetration in
non-metro markets
• Significant investment
from MNCs
• New partnerships to
develop Bio similar
business
 Wage Inflation
 Competition from
emerging economies
 Preliminary investment
for drug discovery is
very high
 Long gestational period

11. Competitive Advantage
• Low cost
• Reverse engineering of new processes for the mass production
− High quality drugs
− At low cost due to the absence of product patent.
• New pharmaceutical products to the market - costs $1.2billion
• Cipla simply reverse engineered the process
− low cost business model.
• Relative cheap labor and high skilled manpower in India
• Produce drugs much cheaper than those produced by the patent
owners

12. Organic growth
• Engaged In Acquiring New Capabilities
• Cipla Pioneered Bulk Drug Manufacturing In India And Has Emerged As A Major Player In The
Domestic Market
• The Process Patent Regime,
• Leveraging On Its Significant Process Skills And
• Reverse Engineering Capabilities
• Building On Its Reverse Engineering Capabilities
• It Developed New Generic Products For Other Developing Economies
• It Became One Of The Largest Exporters Of Drugs From India,
• Foreign Sales Reaching Up To 50% Of Total Sales

13. • Business scope - expanding to other countries
• Cipla has forayed into developed markets
− such as the US and Europe using specifically developed generic drugs
− marketing them through tie-ups with generic MNC majors
− such as Andrx (Cipla 2009)
• In 2005 Cipla's R&D was primarily aimed at developing new processes generic drugs
− Remained At About 4% Of Sales.
− Drugs Are Sold In Over 100 Countries
− It Had Not Made Any Overseas Acquisitions until 2013
• Negligible exports a few decades ago are now in excess of 50% of turnover (Cipla 2010).

14. Current scenario
• Patents expiring
• Until the mid-1990s when India signed the WTO agreement, many leading Indian pharmaceutical companies relied on
the domestic market alone.
• Since 2002, over
-$80 billion worth of block busters have lost their patents.
-Another $74 billion worth is expected to be exposed to generic competition as a result of loss of patent
between 2009 and 2012.
• As a result,
-Indian generics are taking advantage of the global generics market
-expanding to developed countries.
• Cipla is well positioned as it has a
-competitive edge of low cost manufacturing

15. More R&Dspending
• Cipla is rising up the value chain.
• Pure reverse engineering firm focused on the domestic market, moving towards basic
research driven, export oriented global presence, and enlarging its market reach.
• Invested Rs. 250 crores in a new R & D facility in Mumbai .
• The total expenditure on R & D as a percentage of total revenue increased to about
5.4%in 2014.
• Cipla's R & D now includes
-development of new drug formulations
-patenting of newer processes and products of the domestic and international
markets
-development of new products specifically for exports.

16. Strength and Weakness
Strength
1. Cipla has developed good positive image by providing support to cancer patients by issuing
drugs at low cost
2. Imminent commencement of the Fixed-Dose combination for treatment of uncomplicated
falciparum malaria to tackle the 200+ million cases of malaria globally
3. Initiation of ‘No Touch Breast Scan’ a step forward in the screening technology in India.
4. A foremost player in anti-infective and anti-asthmatic formulations.
5. Has a strong employee force of over 16,000
Weakness
1. Strong competition from international and domestic giants means limited market share
2. Cipla had faced problems during negative campaign by AHF

17. Value creation
• Take full control of cold-chain management
• Full supply chain visibility
• Own-controlled air freight service guaranteeing sufficient capacity and flexibility
• Controlled product temperature ruling out temperature excursions and damages
• Reduced logistics costs
• Reduced total lead time and a shorter order-to-cash cycle
• Big data- Using data to supplement decisions by adopting big data strategy

18. Strategies in action
• Invested big on talent for future growth:
-There was a significant increase in its employee cost, up 56% over a year during the March
quarter and 49% for the year ended March 2014.
• Hired senior executives in key functions of finance and international business & strategy from competitors
such as Lupin and Dr Reddy’s Laboratories.
• Acquired the entire stake in Medpro South Africa and increased its stake in Quality Chemical Industries of
Uganda. A significant part of the increased personnel is due to these acquisitions.
• Subhanu Saxena, its global chief executive officer since February 2013, also joined from Novartis, where
he had led the global product strategy and commercialization functions at Novartis.

19. • The company had identified three strategic priorities to sustain its growth.
-building the right organizational and governance models
-developing a robust portfolio and pipeline
-executing the growth strategies.
• Each of these has elements of talent enhancement.
• Consolidated financial results show the company incurred employee benefit
expense of Rs 428 crore during the quarter ended March, up from Rs 275 crore
in the same period a year before.
• For the full year ended March, employee cost was Rs 1,543 crore, against Rs
1,036 core the previous year.

20. Future