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Strategic Analysis of the Indian Pharmaceutical Contract Manufacturing MarketFinal ppt

The document presents a strategic analysis of the Indian pharmaceutical contract manufacturing market, highlighting opportunities for market share gain and trends such as increasing outsourcing of core functions and late life-cycle outsourcing. India is favored due to low manufacturing costs and a significant number of U.S. FDA-approved facilities, positioning it as a leading hub for active pharmaceutical ingredients (APIs) and formulation services. The analysis also emphasizes the competition with China and the emergence of new trends, including alliances between multinational corporations and Indian companies.

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Strategic Analysis of the Indian Pharmaceutical Contract Manufacturing Market Presenting Opportunities for Market Share Gain Aiswariya Chidambaram Senior Research Analyst - Healthcare
Areas of Contract Manufacturing Indian Contract Manufacturing Market Value Chain
25% 15% 20% 55% 15% 15% 0% 10% 20% 30% 40% 50% 60% Discovery API development Dodage development APImanufacturing Dosage manufacturing Packaging Extent of Outsourcing in Each Area of the Value Chain ExtentofOutsourcing Outsourced Core Functions Outsourcing Trends  Increase in outsourcing of core functions  Late life-cycle outsourcing – API manufacturing represents the highest share  Drug discovery, development activities and dosage manufacturing – potential future areas  Increase in outsourcing of core functions  Late life-cycle outsourcing – API manufacturing represents the highest share  Drug discovery, development activities and dosage manufacturing – potential future areas
Traditional Formulation Cluster Traditional Formulation Cluster Emerging Bulk Drugs Cluster Emerging Bulk Drugs Cluster Emerging Formulation Cluster Emerging Formulation Cluster Traditional Bulk Drugs Cluster Traditional Bulk Drugs Cluster GOA MAHARASHTRA – Mumbai, Pune ANDHRA PRADESH - Hyderabad GOA MAHARASHTRA – Mumbai, Pune ANDHRA PRADESH - Hyderabad ANDHRA PRADESH - Visakhapatnam ANDHRA PRADESH - Visakhapatnam HIMACHAL PRADESH – Baddi UTTARAKHAND - Pantnagar, Haridwar HIMACHAL PRADESH – Baddi UTTARAKHAND - Pantnagar, Haridwar GUJARAT – Ahmedabad, Ankleshwar, Vapi, Vadodara MAHARASHTRA – Mumbai, Tarapur, Aurangabad, Pune ANDHRA PRADESH – Hyderabad, Medak TAMILNADU – Chennai PONDICHERRY KARNATAKA – Mysore and Bangalore GOA - Panaji GUJARAT – Ahmedabad, Ankleshwar, Vapi, Vadodara MAHARASHTRA – Mumbai, Tarapur, Aurangabad, Pune ANDHRA PRADESH – Hyderabad, Medak TAMILNADU – Chennai PONDICHERRY KARNATAKA – Mysore and Bangalore GOA - Panaji Contract Manufacturing Market—Key Indian Hubs
Contract Manufacturing Market—Benefit Analysis
50 25 25 3 10 5 15 7 United States India Raw Materials Manpower Depreciation Other Site Exp Percentage points comparison with U.S. Manufacturing Cost Arbitrage, India, 2010 The United States China India – Non- USFDA India – USFDA approved Europe Percentage points comparison with U.S. Cost Comparison, India, 2010 100 95 70 66 22 7 4 United States Germany Italy United Kingdom Poland India China Percentage points comparison with U.S. Labor Cost Arbitrage, India, 2010  Low-cost manufacturing hubs  Cost of manufacturing 60 percent lesser than the United States  Labor is the main source of cost arbitrage  Low-cost manufacturing hubs  Cost of manufacturing 60 percent lesser than the United States  Labor is the main source of cost arbitrage Contract Manufacturing Market—Cost Arbitrage
5 8 10 25 27 55 119 Hungary Israel Taiwan Spain China Italy India Number of U.S. FDA-approved Facilities, Global, 2010 Contract Manufacturing Market—U.S. FDA-approved Facilities  India not only offers cost competitiveness, but also ensures product quality  More than 119 U.S FDA approved facilities in 2010 – ranks second after the U.S  GMP compliant and cater to international standards  India not only offers cost competitiveness, but also ensures product quality  More than 119 U.S FDA approved facilities in 2010 – ranks second after the U.S  GMP compliant and cater to international standards
DMF Filing Trend by DMF Type, Global, 2008-2010 DMF Filing with U.S. FDA, India, 2000 - 2010 0 100 200 300 400 500 600 700 800 2008 2009 2010(As on March10,2010) 786 710 129 236 155 8578 114 11 16 20 4 No.ofDMFsfiled Type II Type III Type IV Type V Year 271 294 321 455 380 365 736 760 799 1131 1021 1024 37 39 40 40 37 36 10 15 20 25 30 35 40 45 0 200 400 600 800 1000 1200 2005 2006 2007 2008 2009 2010 %ofDMFsfromIndia No.ofDMFsfiled DMF Filed, India DMF Filed, Overall % of DMF from Ind ia • India continues to lead in the number of DMF filings with the U.S. FDA. • Way ahead of China as well as other Western countries • Major companies include Dr. Reddy’s Laboratories, Aurobindo Pharma, Sun Pharmaceuticals, Lupin, Matrix Pharmaceuticals and Orchid Pharmaceuticals. Contract Manufacturing Market—DMF Filing
ChinaIndia Europe The United States Bulk and Sourcing Hub • Good cost of RM/ early stage intermediates • Late lifecycle APIs Scale Manufacturing Hub (API and formulations) • More than 100 U.S. FDA- approvedplants • High-quality managerial Quality assurance• Strong API and formulations capability Early Stage and Launch Hub • R&D expertise and investments • Technology capability • Facilities to support launch • Relationships and track record Source: Frost & Sullivan analysis Existing Business Model, Global, 2010 Contract Manufacturing Market—Existing Business Model •
Pre-clinical API Pre-clinical Formulation Phase-I API Phase-II a API Phase-II b API Phase III API Registration Launch Commercial Manufacturing Clinical Trials Formulations Formulations Development PRE-CLINICAL DEVELOPMENT CLINICAL DEVELOPMENT COMMERCIALIZATION FULL-SCALE SUPPLIESEARLY PHASE CUSTOM SYNTHESIS AND FORMULATIONS DEVELOPMENT DEVELOPMENT PARTNERDEVELOPMENT PARTNER LAUNCH PARTNERLAUNCH PARTNER LIFECYCLE AND TRANSITION MANAGEMENT PARTNER LIFECYCLE AND TRANSITION MANAGEMENT PARTNER Prior 20002000-20052005-20102010-20152015 Onwards APIs/ Bulk Drugs Prior 20052005-20102010-20152015-20202020 OnwardsFormulations Existing Business Model, Global, 2010 Contract Manufacturing Market—Emerging Business Model
Capacity Reputation/ Credibility Technical expertise Quality Low Low High Low High 2 105 6 8 2 104 6 8 2 104 6 8 Low High 2 104 6 8 High Personal relationship Communication Timely delivery/ Speed Approved facilities/ Regulatory support Low Low High Low High 2 104 6 8 2 104 6 8 2 104 6 8 Low High 2 104 6 8 High Cost Location Low High 2 104 6 8 Low High 2 104 6 8 Note: Above are the key competitive factors in the selection of a CMO by Pharmaceutical/Biotech companies for contract manufacturing services. The factors are rated on a scale of 1 to 10 with 1 = Low importance and 10 = High importance based on the end-user’s input. Note: Above are the key competitive factors in the selection of a CMO by Pharmaceutical/Biotech companies for contract manufacturing services. The factors are rated on a scale of 1 to 10 with 1 = Low importance and 10 = High importance based on the end-user’s input. Source: Frost & Sullivan analysis. Key Competitive Factors in the selection of a CMO
Analytical: Sample Types Divi’s Laboratory Ltd. Piramal Healthcare Ltd. Jubiliant Organosys Ltd. Aurobindo Pharma Ltd. Dr. Reddy’s Laboratory Ltd. Raw Materials API Testing Dosage Form Cleaning Validation Intermediates Company Service Information Comparison
API Types Divi’s Laboratory Ltd. Piramal Healthcare Ltd. Jubiliant Organosys Ltd. Aurobindo Pharma Ltd. Dr. Reddy’s Laboratory Ltd. Small Molecules Controlled Substances Custom Organic Synthesis API - Intermediates Cytotoxics Process Development Company Service Information Comparison (continued)
Formulations List Divi’s Laboratory Ltd. Piramal Healthcare Ltd. Jubiliant Organosys Ltd. Aurobindo Pharma Ltd. Dr. Reddy’s Laboratory Ltd. Injectable Oral Topical Buccal/ Sub- lingual Ophthalmic Antibodies Formulation Company Service Information Comparison (continued)
Patent Expiry of Blockbuster Drugs WorldwidePatent Expiry of Blockbuster Drugs Worldwide Interest of Big Pharma Leading to Increased Industry ConsolidationInterest of Big Pharma Leading to Increased Industry Consolidation Expansion of Manufacturing CapacitiesExpansion of Manufacturing Capacities New Product Launches/Novel Drug Delivery MechanismsNew Product Launches/Novel Drug Delivery Mechanisms Increasing Adherence towards an Integrated Business ModelIncreasing Adherence towards an Integrated Business Model Biologics ManufacturingBiologics Manufacturing Contract Manufacturing Market – Emerging Trends
Enormous Cost- saving Benefits Manufacturing costs reduced by 40 – 60 % Patent Cliff Drugs worth $150 billion going off patent globally Increasing Regulatory Support Novel technology, new pharmaceutical hubs, SEZ policy Industry Consolidation Strategic alliances between Big Pharma and domestic participants Limited Technical Know-how Lack of expertise in sterile products, technology platforms IPR Protection Breach of proprietary information Drivers Restraints Contract Manufacturing Market—Pushing and Pulling Forces
United States Size: $55.78 B Growth (2011 – 2016): 8.5% Europe Size:$36.44 B Growth: 8.2% Japan Size:$8.00 B Growth: 9.2% India Size:$10.00 B Growth: 18.5% China Size:$26.45 B Growth: 19.4% Global Generic Pharmaceuticals Market – Patent Cliff
• Currently Indian generics represent 15% of the generics in the U.S. • With drugs worth $67.50 billion losing patent protection in the United States, it is expected that Indian companies will capture at least 30.0 per cent of the replacement generic equivalents Indian Generics Market – A Snapshot 48%52% Domestic Sales and Export of Generics, India, 2010  India – primarily a branded generics market with more than 95% generic penetration  Constitutes 20 – 22% volume share globally  Leading exporter of generics to the tune of $11 billion  Highly fragmented market – more than 20,000 registered units  Big Pharma vying to gain market shares in domestic market  Price driven; cost pressures fuelling consolidation
IndiaIndia China Source: Frost & Sullivan analysis Focus on: - Late stage intermediates - Complex synthetic APIs (Custom Synthesis) - Dosage  Greater number of U.S FDA plants and DMF filings  Large English speaking population  TRIPS compliant product patent regime Focus on: - Early stage intermediates - Large volume API manufacturing - Expertise in fermentation  Currently lagging behind, expected to rapidly catch up  Language barriers  Better logistics & infrastructure China – A Potential Competitor
In the last two years, the drive among multinationals to outsource manufacturing to Indian companies has gained momentum. Although contract manufacturing companies should have been best positioned for these contracts, the multinationals are preferring the Indian generic companies as outsourcing partners. The key reasons for this are: •Generic facilities are capable of manufacturing products across various therapeutics segments, unlike the pure play contract manufacturers that develop cost efficiencies through one or two technologies at a time. •Generic facilities are already running and manufacturing products for less regulated or emerging markets. •Generic companies are already in compliance with regulations in regulated and semi regulated markets, something that is lacking in pure contract manufacturers. •Frost & Sullivan, therefore, foresees that pure play contract manufacturers will continue to face hurdles related to scale up and will not be able to effectively compete against the generic companies for strategic tie-ups, as Big Pharma has being showing interest in strategic tie-ups with Indian generic companies (which have their own brands in emerging markets) Strategic Tie-ups between MNCs and Indian Companies
Source: Assocham, Frost & Sullivan analysis Contract Research and Manufacturing Services Deals
Source: Assocham, Frost & Sullivan analysis Contract Research and Manufacturing Services Deals (continued)
Source: Assocham, Frost & Sullivan analysis Contract Research and Manufacturing Services Deals (continued)
Strategic Deals between MNCs and Indian Companies
Strategic Deals between MNCs and Indian Companies (continued)
80% 20% APIs and Intermediates Formulations 64% 36% APIs and Intermediates Formulations Percent Revenue Split, India, 2010Percent Volume Split, India, 2010 • Outsourcing of APIs for generic drugs is expected to remain high in the future. • Contract Manufacturing of APIs and intermediates for NCE has started gaining momentum. • Contract manufacturing of NCE formulations is expected to begin during the forecast period. Indian Contract Manufacturing Market Overview (continued)
 Active pharmaceutical ingredients (APIs) or bulk drugs are defined as the active part of a drug, which is responsible for its medicinal property.  Asia Pacific, particularly India, is a favored market for API outsourcing, due to low cost benefits, complex synthetic abilities, and GMP compliance.  Every company currently involved in the contract manufacturing segment, also has some presence in the API segment due to the amount of manufacturing outsourced to this segment.  In terms of volume, 80-85 percent of the entire outsourcing in contract manufacturing takes place in the areas of APIs and intermediates.  Contract manufacturing for API, which is outsourced to India, is mainly for generic formulations.  However, as the Indian contract manufacturing segment market matures, contract manufacturing for New Chemical Entities (NCEs) will be outsourced to India.  Indian contract manufacturing organizations are already being used by many MNCs as suppliers of advanced intermediates.  China is a major competitor in the Asian market. However, is still a supplier of low-cost off-patent molecules and low-end intermediates.  However, the threat from the Chinese suppliers for these products and higher-end ones is only bound to increase as the Indian contract manufacturing segment market matures.  The trend is shifting toward outsourcing the manufacturing of advanced APIs, such as biotech-based APIs, biopharmaceuticals and advanced bulk drugs required for the production of dosage forms of new chemical entities in high-end therapy areas, such as oncology. Source: Frost & Sullivan analysis APIs and Intermediates—Overview
• Early market growth stage • Limited shelf-life and storage issues • Require high investments and specialised technical know-how • Increasing focus on biologics • Expected to witness fastest growth (29.5%, 2011 – 2017) • More than 70% of Indian CMOs have expertise • Patient compliance and prevalence of self-prescription. • Low manufacturing costs and lower degree of technical change • Expected to remain the key segment (25.4%, 2011 – 2017) • Low-value business • Majority pediatric and baby-boomer end- users • High transportation and wastage costs • Likely to present relatively lesser growth prospects (12.5%, 2011 – 2017) Formulations —Overview
- range of services control the market -Number of CMO’s - high -Suppliers can forward integrate -Volume benefits are available - Moving up the value chain Becoming more specialized and niche Power of Suppliers -End users have bargaining power -Buyer concentration vs. industry is high - Buyers in need due to generic penetration and pressure on margins Power of Buyers -Low entry barriers in case of toll - Government policies are supportive - Economies of scale & scope exits - IPR strengthening - Technology and regulatory strength Threat of New Entrants -Easy access to cheap technology - Virtual pharma model - Wider product range and Threat of Substitutes - Consolidation likely to increase Low Impact Medium Impact Industry Rivalry Traditional Emerging - Top participants, control the - High toll manufacturing CMOs - Suppliers can forward integrate - Volume benefits are available - - Power of Suppliers - End users have bargaining power - Buyer concentration versus industry is high - Power of Buyers - Low entry barriers Supportive Government policies- Economies of scale and scope - Threat of New Entrants - Easy access to low – cost technology and skilled labor - - Threat of Substitutes - Low Impact Medium Impact Industry Rivalry Traditional Emerging - market concentration market services Contract Manufacturing Market: Porter’s Five Forces Model for Non-sterile Formulation, India, 2010 Non-sterile Formulation—Porter’s Five Forces Model
Contract Manufacturing Market: Porter’s Five Forces Model for Sterile Formulation, India, 2010 Power of Suppliers - Number of suppliers is high - Raw material cost is low - Difficulty to forward integrate - High competition exists Threat of New Entrants - High entry barriers - Stringent and time-consuming regulatory processes - Rising attractiveness in terms of market size and profitability Threat of Substitutes - Access to technology - High capital investment - Complex manufacturing process - Availability of limited capacity Power of Buyers - Less bargaining power - Average buyer concentration vs. industry - Buyers in need due to new sterile product approvals - Expanding role of generic pharmaceuticals Industry Rivalry - Very few reliable companies - Low competition - Outsourcing trend is accelerating - Competition is on the basis of technology, quality and capacity - Low Impact Medium Impact Traditional Emerging Sterile Formulation—Porter’s Five Forces Model
Source: Frost & Sullivan analysis Emerging Opportunity Areas
 Innovation  Funding  Expertise  Regulatory compliance “Any sufficiently advanced technology is indistinguishable from magic” – Arthur C. Clarke Technology – The Powerful Tool  Larger companies - complex technologies such as combination drugs and controlled releases.  Foray into therapeutic segments, which have difficult manufacturing processes and less competition.  Focus on cost, quality of manufacturing and complex chemistry skills.  Commoditized generic market - focus on complex technologies and can command premium pricing. Indian Companies Focussed on Complex Technologies
Therapeutics Development of RNA-i based therapeutics Development of anti-sense based therapeutics Recombinant protein therapeutics Monoclonal antibodies Government Regulatory bodies like EMEA to drive new product and technology introduction Increase in approval rates of new biopharmaceuticals and biosimilars. Globalization Consolidations, mergers, acquisitions Opening and expansion of Asian markets Global capital markets  CMOs moving up the value chain – consolidating horizontal spread, expanding vertical spread  “A-one-stop-shop” offered by CMOs, promoting a complete portfolio of products and comprehensive range of services.  Shift from a purely transactional relationship to a risk-sharing model aligned with customer priorities  Large CMOs moving into niche areas of manufacturing.  Development of virtual pharma  Transition from “small molecule blockbuster” model to biopharmaceutical model “ The best way to predict the future is to create it” – Peter Drucker What Can be Expected in the Future? Customer-centric range of services Staying ahead of industry curve by building brand preference Strengthened relationship for longevity
Reacting to Change Anticipating Change Leading the Change • Develop drugs for key indications. • Customize according to customer needs and preferences. • Comply with new government policies. • Analyze prospects for market globalization. • Research customer needs, preferences and expectations. • Monitor new technological developments to predict future. • Foresee capacity requirements. • Pioneer new and better technologies. • Introduce innovative products, that open new market opportunities and spur creation of whole new industries. • Seek to set industry standards. • React and respond as needed. • Defend and protect company’s position in the market. • Plan ahead for future changes. • Invest in R&D. • Instill competitive capabilities. • Improve product line. • Strengthen distribution. • Seize the offensive. • Be the agent of industry change. • Influence rules of the game. • Force rivals to follow. Strategic Posture Actions Strategy “ Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy Source: Frost and Sullivan Facing the Change – Strategic Recommendations
• Outsourcing of non-core activities such as manufacturing of intermediates and APIs to low-cost destinations such as India is gaining momentum for pharma MNCs as they focus on their core R&D and brand building business. • Indian companies have strengthened their presence in the market and developing technical expertise in niche segment (sterile drugs, cytotoxics, lyophilization, etc.) that offer higher margins and higher entry barriers. Acquisition of foreign facilities would accelerate growth and foster better relationships with innovator companies, though generating adequate return from such investments can be difficult. • In the long run, companies, which provide integrated drug development, research, clinical trial and manufacturing outsourcing services, will prove to be one stop shops catering to all the needs of the innovator companies resulting in long-term partnerships and better customer franchise. • The domestic market offers significant opportunities for CRAMS providers, as increasingly larger domestic companies are outsourcing manufacturing and packaging services to these participants in order to focus on marketing and sales, and new drug development. Their ability to offer value-added services such as drug delivery systems, combination drugs further leverages their value proposition. • Overall, the outlook for Indian CRAMS appears to be healthy, supported by increasing outsourcing of manufacturing and high-end research activities. Conclusion
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Strategic Analysis of the Indian Pharmaceutical Contract Manufacturing MarketFinal ppt

  • 1.
    Strategic Analysis ofthe Indian Pharmaceutical Contract Manufacturing Market Presenting Opportunities for Market Share Gain Aiswariya Chidambaram Senior Research Analyst - Healthcare
  • 2.
    Areas of ContractManufacturing Indian Contract Manufacturing Market Value Chain
  • 3.
    25% 15% 20% 55% 15% 15% 0% 10% 20% 30% 40% 50% 60% Discovery API development Dodage development APImanufacturingDosage manufacturing Packaging Extent of Outsourcing in Each Area of the Value Chain ExtentofOutsourcing Outsourced Core Functions Outsourcing Trends  Increase in outsourcing of core functions  Late life-cycle outsourcing – API manufacturing represents the highest share  Drug discovery, development activities and dosage manufacturing – potential future areas  Increase in outsourcing of core functions  Late life-cycle outsourcing – API manufacturing represents the highest share  Drug discovery, development activities and dosage manufacturing – potential future areas
  • 4.
    Traditional Formulation Cluster Traditional Formulation Cluster Emerging Bulk Drugs Cluster Emerging Bulk Drugs Cluster Emerging Formulation Cluster Emerging Formulation Cluster Traditional BulkDrugs Cluster Traditional Bulk Drugs Cluster GOA MAHARASHTRA – Mumbai, Pune ANDHRA PRADESH - Hyderabad GOA MAHARASHTRA – Mumbai, Pune ANDHRA PRADESH - Hyderabad ANDHRA PRADESH - Visakhapatnam ANDHRA PRADESH - Visakhapatnam HIMACHAL PRADESH – Baddi UTTARAKHAND - Pantnagar, Haridwar HIMACHAL PRADESH – Baddi UTTARAKHAND - Pantnagar, Haridwar GUJARAT – Ahmedabad, Ankleshwar, Vapi, Vadodara MAHARASHTRA – Mumbai, Tarapur, Aurangabad, Pune ANDHRA PRADESH – Hyderabad, Medak TAMILNADU – Chennai PONDICHERRY KARNATAKA – Mysore and Bangalore GOA - Panaji GUJARAT – Ahmedabad, Ankleshwar, Vapi, Vadodara MAHARASHTRA – Mumbai, Tarapur, Aurangabad, Pune ANDHRA PRADESH – Hyderabad, Medak TAMILNADU – Chennai PONDICHERRY KARNATAKA – Mysore and Bangalore GOA - Panaji Contract Manufacturing Market—Key Indian Hubs
  • 5.
  • 6.
    50 25 25 3 10 5 15 7 United States India Raw MaterialsManpower Depreciation Other Site Exp Percentage points comparison with U.S. Manufacturing Cost Arbitrage, India, 2010 The United States China India – Non- USFDA India – USFDA approved Europe Percentage points comparison with U.S. Cost Comparison, India, 2010 100 95 70 66 22 7 4 United States Germany Italy United Kingdom Poland India China Percentage points comparison with U.S. Labor Cost Arbitrage, India, 2010  Low-cost manufacturing hubs  Cost of manufacturing 60 percent lesser than the United States  Labor is the main source of cost arbitrage  Low-cost manufacturing hubs  Cost of manufacturing 60 percent lesser than the United States  Labor is the main source of cost arbitrage Contract Manufacturing Market—Cost Arbitrage
  • 7.
    5 8 10 25 27 55 119 Hungary Israel Taiwan Spain China Italy India Number of U.S.FDA-approved Facilities, Global, 2010 Contract Manufacturing Market—U.S. FDA-approved Facilities  India not only offers cost competitiveness, but also ensures product quality  More than 119 U.S FDA approved facilities in 2010 – ranks second after the U.S  GMP compliant and cater to international standards  India not only offers cost competitiveness, but also ensures product quality  More than 119 U.S FDA approved facilities in 2010 – ranks second after the U.S  GMP compliant and cater to international standards
  • 8.
    DMF Filing Trendby DMF Type, Global, 2008-2010 DMF Filing with U.S. FDA, India, 2000 - 2010 0 100 200 300 400 500 600 700 800 2008 2009 2010(As on March10,2010) 786 710 129 236 155 8578 114 11 16 20 4 No.ofDMFsfiled Type II Type III Type IV Type V Year 271 294 321 455 380 365 736 760 799 1131 1021 1024 37 39 40 40 37 36 10 15 20 25 30 35 40 45 0 200 400 600 800 1000 1200 2005 2006 2007 2008 2009 2010 %ofDMFsfromIndia No.ofDMFsfiled DMF Filed, India DMF Filed, Overall % of DMF from Ind ia • India continues to lead in the number of DMF filings with the U.S. FDA. • Way ahead of China as well as other Western countries • Major companies include Dr. Reddy’s Laboratories, Aurobindo Pharma, Sun Pharmaceuticals, Lupin, Matrix Pharmaceuticals and Orchid Pharmaceuticals. Contract Manufacturing Market—DMF Filing
  • 9.
    ChinaIndia Europe The United States Bulkand Sourcing Hub • Good cost of RM/ early stage intermediates • Late lifecycle APIs Scale Manufacturing Hub (API and formulations) • More than 100 U.S. FDA- approvedplants • High-quality managerial Quality assurance• Strong API and formulations capability Early Stage and Launch Hub • R&D expertise and investments • Technology capability • Facilities to support launch • Relationships and track record Source: Frost & Sullivan analysis Existing Business Model, Global, 2010 Contract Manufacturing Market—Existing Business Model •
  • 10.
    Pre-clinical API Pre-clinical Formulation Phase-I API Phase-II a API Phase-IIb API Phase III API Registration Launch Commercial Manufacturing Clinical Trials Formulations Formulations Development PRE-CLINICAL DEVELOPMENT CLINICAL DEVELOPMENT COMMERCIALIZATION FULL-SCALE SUPPLIESEARLY PHASE CUSTOM SYNTHESIS AND FORMULATIONS DEVELOPMENT DEVELOPMENT PARTNERDEVELOPMENT PARTNER LAUNCH PARTNERLAUNCH PARTNER LIFECYCLE AND TRANSITION MANAGEMENT PARTNER LIFECYCLE AND TRANSITION MANAGEMENT PARTNER Prior 20002000-20052005-20102010-20152015 Onwards APIs/ Bulk Drugs Prior 20052005-20102010-20152015-20202020 OnwardsFormulations Existing Business Model, Global, 2010 Contract Manufacturing Market—Emerging Business Model
  • 11.
    Capacity Reputation/ Credibility Technical expertise Quality Low Low High Low High 2105 6 8 2 104 6 8 2 104 6 8 Low High 2 104 6 8 High Personal relationship Communication Timely delivery/ Speed Approved facilities/ Regulatory support Low Low High Low High 2 104 6 8 2 104 6 8 2 104 6 8 Low High 2 104 6 8 High Cost Location Low High 2 104 6 8 Low High 2 104 6 8 Note: Above are the key competitive factors in the selection of a CMO by Pharmaceutical/Biotech companies for contract manufacturing services. The factors are rated on a scale of 1 to 10 with 1 = Low importance and 10 = High importance based on the end-user’s input. Note: Above are the key competitive factors in the selection of a CMO by Pharmaceutical/Biotech companies for contract manufacturing services. The factors are rated on a scale of 1 to 10 with 1 = Low importance and 10 = High importance based on the end-user’s input. Source: Frost & Sullivan analysis. Key Competitive Factors in the selection of a CMO
  • 12.
    Analytical: Sample Types Divi’s Laboratory Ltd. Piramal Healthcare Ltd. Jubiliant Organosys Ltd. Aurobindo Pharma Ltd. Dr.Reddy’s Laboratory Ltd. Raw Materials API Testing Dosage Form Cleaning Validation Intermediates Company Service Information Comparison
  • 13.
    API Types Divi’s Laboratory Ltd. Piramal HealthcareLtd. Jubiliant Organosys Ltd. Aurobindo Pharma Ltd. Dr. Reddy’s Laboratory Ltd. Small Molecules Controlled Substances Custom Organic Synthesis API - Intermediates Cytotoxics Process Development Company Service Information Comparison (continued)
  • 14.
  • 15.
    Patent Expiry ofBlockbuster Drugs WorldwidePatent Expiry of Blockbuster Drugs Worldwide Interest of Big Pharma Leading to Increased Industry ConsolidationInterest of Big Pharma Leading to Increased Industry Consolidation Expansion of Manufacturing CapacitiesExpansion of Manufacturing Capacities New Product Launches/Novel Drug Delivery MechanismsNew Product Launches/Novel Drug Delivery Mechanisms Increasing Adherence towards an Integrated Business ModelIncreasing Adherence towards an Integrated Business Model Biologics ManufacturingBiologics Manufacturing Contract Manufacturing Market – Emerging Trends
  • 16.
    Enormous Cost- saving Benefits Manufacturing costs reduced by 40– 60 % Patent Cliff Drugs worth $150 billion going off patent globally Increasing Regulatory Support Novel technology, new pharmaceutical hubs, SEZ policy Industry Consolidation Strategic alliances between Big Pharma and domestic participants Limited Technical Know-how Lack of expertise in sterile products, technology platforms IPR Protection Breach of proprietary information Drivers Restraints Contract Manufacturing Market—Pushing and Pulling Forces
  • 17.
    United States Size: $55.78B Growth (2011 – 2016): 8.5% Europe Size:$36.44 B Growth: 8.2% Japan Size:$8.00 B Growth: 9.2% India Size:$10.00 B Growth: 18.5% China Size:$26.45 B Growth: 19.4% Global Generic Pharmaceuticals Market – Patent Cliff
  • 18.
    • Currently Indiangenerics represent 15% of the generics in the U.S. • With drugs worth $67.50 billion losing patent protection in the United States, it is expected that Indian companies will capture at least 30.0 per cent of the replacement generic equivalents Indian Generics Market – A Snapshot 48%52% Domestic Sales and Export of Generics, India, 2010  India – primarily a branded generics market with more than 95% generic penetration  Constitutes 20 – 22% volume share globally  Leading exporter of generics to the tune of $11 billion  Highly fragmented market – more than 20,000 registered units  Big Pharma vying to gain market shares in domestic market  Price driven; cost pressures fuelling consolidation
  • 19.
    IndiaIndia China Source: Frost& Sullivan analysis Focus on: - Late stage intermediates - Complex synthetic APIs (Custom Synthesis) - Dosage  Greater number of U.S FDA plants and DMF filings  Large English speaking population  TRIPS compliant product patent regime Focus on: - Early stage intermediates - Large volume API manufacturing - Expertise in fermentation  Currently lagging behind, expected to rapidly catch up  Language barriers  Better logistics & infrastructure China – A Potential Competitor
  • 20.
    In the lasttwo years, the drive among multinationals to outsource manufacturing to Indian companies has gained momentum. Although contract manufacturing companies should have been best positioned for these contracts, the multinationals are preferring the Indian generic companies as outsourcing partners. The key reasons for this are: •Generic facilities are capable of manufacturing products across various therapeutics segments, unlike the pure play contract manufacturers that develop cost efficiencies through one or two technologies at a time. •Generic facilities are already running and manufacturing products for less regulated or emerging markets. •Generic companies are already in compliance with regulations in regulated and semi regulated markets, something that is lacking in pure contract manufacturers. •Frost & Sullivan, therefore, foresees that pure play contract manufacturers will continue to face hurdles related to scale up and will not be able to effectively compete against the generic companies for strategic tie-ups, as Big Pharma has being showing interest in strategic tie-ups with Indian generic companies (which have their own brands in emerging markets) Strategic Tie-ups between MNCs and Indian Companies
  • 21.
    Source: Assocham, Frost& Sullivan analysis Contract Research and Manufacturing Services Deals
  • 22.
    Source: Assocham, Frost& Sullivan analysis Contract Research and Manufacturing Services Deals (continued)
  • 23.
    Source: Assocham, Frost& Sullivan analysis Contract Research and Manufacturing Services Deals (continued)
  • 24.
    Strategic Deals betweenMNCs and Indian Companies
  • 25.
    Strategic Deals betweenMNCs and Indian Companies (continued)
  • 26.
    80% 20% APIs and IntermediatesFormulations 64% 36% APIs and Intermediates Formulations Percent Revenue Split, India, 2010Percent Volume Split, India, 2010 • Outsourcing of APIs for generic drugs is expected to remain high in the future. • Contract Manufacturing of APIs and intermediates for NCE has started gaining momentum. • Contract manufacturing of NCE formulations is expected to begin during the forecast period. Indian Contract Manufacturing Market Overview (continued)
  • 27.
     Active pharmaceuticalingredients (APIs) or bulk drugs are defined as the active part of a drug, which is responsible for its medicinal property.  Asia Pacific, particularly India, is a favored market for API outsourcing, due to low cost benefits, complex synthetic abilities, and GMP compliance.  Every company currently involved in the contract manufacturing segment, also has some presence in the API segment due to the amount of manufacturing outsourced to this segment.  In terms of volume, 80-85 percent of the entire outsourcing in contract manufacturing takes place in the areas of APIs and intermediates.  Contract manufacturing for API, which is outsourced to India, is mainly for generic formulations.  However, as the Indian contract manufacturing segment market matures, contract manufacturing for New Chemical Entities (NCEs) will be outsourced to India.  Indian contract manufacturing organizations are already being used by many MNCs as suppliers of advanced intermediates.  China is a major competitor in the Asian market. However, is still a supplier of low-cost off-patent molecules and low-end intermediates.  However, the threat from the Chinese suppliers for these products and higher-end ones is only bound to increase as the Indian contract manufacturing segment market matures.  The trend is shifting toward outsourcing the manufacturing of advanced APIs, such as biotech-based APIs, biopharmaceuticals and advanced bulk drugs required for the production of dosage forms of new chemical entities in high-end therapy areas, such as oncology. Source: Frost & Sullivan analysis APIs and Intermediates—Overview
  • 28.
    • Early marketgrowth stage • Limited shelf-life and storage issues • Require high investments and specialised technical know-how • Increasing focus on biologics • Expected to witness fastest growth (29.5%, 2011 – 2017) • More than 70% of Indian CMOs have expertise • Patient compliance and prevalence of self-prescription. • Low manufacturing costs and lower degree of technical change • Expected to remain the key segment (25.4%, 2011 – 2017) • Low-value business • Majority pediatric and baby-boomer end- users • High transportation and wastage costs • Likely to present relatively lesser growth prospects (12.5%, 2011 – 2017) Formulations —Overview
  • 29.
    - range of servicescontrol the market -Number of CMO’s - high -Suppliers can forward integrate -Volume benefits are available - Moving up the value chain Becoming more specialized and niche Power of Suppliers -End users have bargaining power -Buyer concentration vs. industry is high - Buyers in need due to generic penetration and pressure on margins Power of Buyers -Low entry barriers in case of toll - Government policies are supportive - Economies of scale & scope exits - IPR strengthening - Technology and regulatory strength Threat of New Entrants -Easy access to cheap technology - Virtual pharma model - Wider product range and Threat of Substitutes - Consolidation likely to increase Low Impact Medium Impact Industry Rivalry Traditional Emerging - Top participants, control the - High toll manufacturing CMOs - Suppliers can forward integrate - Volume benefits are available - - Power of Suppliers - End users have bargaining power - Buyer concentration versus industry is high - Power of Buyers - Low entry barriers Supportive Government policies- Economies of scale and scope - Threat of New Entrants - Easy access to low – cost technology and skilled labor - - Threat of Substitutes - Low Impact Medium Impact Industry Rivalry Traditional Emerging - market concentration market services Contract Manufacturing Market: Porter’s Five Forces Model for Non-sterile Formulation, India, 2010 Non-sterile Formulation—Porter’s Five Forces Model
  • 30.
    Contract Manufacturing Market:Porter’s Five Forces Model for Sterile Formulation, India, 2010 Power of Suppliers - Number of suppliers is high - Raw material cost is low - Difficulty to forward integrate - High competition exists Threat of New Entrants - High entry barriers - Stringent and time-consuming regulatory processes - Rising attractiveness in terms of market size and profitability Threat of Substitutes - Access to technology - High capital investment - Complex manufacturing process - Availability of limited capacity Power of Buyers - Less bargaining power - Average buyer concentration vs. industry - Buyers in need due to new sterile product approvals - Expanding role of generic pharmaceuticals Industry Rivalry - Very few reliable companies - Low competition - Outsourcing trend is accelerating - Competition is on the basis of technology, quality and capacity - Low Impact Medium Impact Traditional Emerging Sterile Formulation—Porter’s Five Forces Model
  • 31.
    Source: Frost &Sullivan analysis Emerging Opportunity Areas
  • 32.
     Innovation  Funding Expertise  Regulatory compliance “Any sufficiently advanced technology is indistinguishable from magic” – Arthur C. Clarke Technology – The Powerful Tool  Larger companies - complex technologies such as combination drugs and controlled releases.  Foray into therapeutic segments, which have difficult manufacturing processes and less competition.  Focus on cost, quality of manufacturing and complex chemistry skills.  Commoditized generic market - focus on complex technologies and can command premium pricing. Indian Companies Focussed on Complex Technologies
  • 33.
    Therapeutics Development of RNA-ibased therapeutics Development of anti-sense based therapeutics Recombinant protein therapeutics Monoclonal antibodies Government Regulatory bodies like EMEA to drive new product and technology introduction Increase in approval rates of new biopharmaceuticals and biosimilars. Globalization Consolidations, mergers, acquisitions Opening and expansion of Asian markets Global capital markets  CMOs moving up the value chain – consolidating horizontal spread, expanding vertical spread  “A-one-stop-shop” offered by CMOs, promoting a complete portfolio of products and comprehensive range of services.  Shift from a purely transactional relationship to a risk-sharing model aligned with customer priorities  Large CMOs moving into niche areas of manufacturing.  Development of virtual pharma  Transition from “small molecule blockbuster” model to biopharmaceutical model “ The best way to predict the future is to create it” – Peter Drucker What Can be Expected in the Future? Customer-centric range of services Staying ahead of industry curve by building brand preference Strengthened relationship for longevity
  • 34.
    Reacting to Change Anticipating Change Leading the Change • Developdrugs for key indications. • Customize according to customer needs and preferences. • Comply with new government policies. • Analyze prospects for market globalization. • Research customer needs, preferences and expectations. • Monitor new technological developments to predict future. • Foresee capacity requirements. • Pioneer new and better technologies. • Introduce innovative products, that open new market opportunities and spur creation of whole new industries. • Seek to set industry standards. • React and respond as needed. • Defend and protect company’s position in the market. • Plan ahead for future changes. • Invest in R&D. • Instill competitive capabilities. • Improve product line. • Strengthen distribution. • Seize the offensive. • Be the agent of industry change. • Influence rules of the game. • Force rivals to follow. Strategic Posture Actions Strategy “ Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy Source: Frost and Sullivan Facing the Change – Strategic Recommendations
  • 35.
    • Outsourcing ofnon-core activities such as manufacturing of intermediates and APIs to low-cost destinations such as India is gaining momentum for pharma MNCs as they focus on their core R&D and brand building business. • Indian companies have strengthened their presence in the market and developing technical expertise in niche segment (sterile drugs, cytotoxics, lyophilization, etc.) that offer higher margins and higher entry barriers. Acquisition of foreign facilities would accelerate growth and foster better relationships with innovator companies, though generating adequate return from such investments can be difficult. • In the long run, companies, which provide integrated drug development, research, clinical trial and manufacturing outsourcing services, will prove to be one stop shops catering to all the needs of the innovator companies resulting in long-term partnerships and better customer franchise. • The domestic market offers significant opportunities for CRAMS providers, as increasingly larger domestic companies are outsourcing manufacturing and packaging services to these participants in order to focus on marketing and sales, and new drug development. Their ability to offer value-added services such as drug delivery systems, combination drugs further leverages their value proposition. • Overall, the outlook for Indian CRAMS appears to be healthy, supported by increasing outsourcing of manufacturing and high-end research activities. Conclusion
  • 36.
    About Frost &Sullivan
  • 37.
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  • 39.
    Tel: 61606666 Fax: 24314264 Email:AiswariyaC@frost.com Contact Information State your need, we would be happy to serve you… www.frost.com Frost & Sullivan (I) Pvt. Ltd. 7th Floor, Karumuttu Centre, 498 Anna Salai, Nandanam Chennai - 600035 AISWARIYA CHIDAMBARAM Senior Research Analyst - Healthcare Your Growth Partner