An insight into the nuances of Indian Pharmaceutical Industry

1. INDIAN PHARMACEUTICAL
INDUSTRY

2. PHARMA INDUSTRY
$6 Bn
$18 Bn
$45 Bn
2005 2012 2020E
Pharma Revenues (US$ bn)
The Indian pharmaceuticals market is expected to grow at
a CAGR of 12.1 per cent to reach US$ 45 billion in 2020
72%
19%
9%
Revenue share of Indian pharmaceutical sub-
segments
Generic Drugs
OTC Medicines
Patented Drugs
With 72 per cent of market share (in terms of revenues), generic
drugs form the largest segment of the Indian pharmaceutical sector
$2.4 Bn
$3.2 Bn
$4.2 Bn
$5.1 Bn
$5.2 Bn
$6.7 Bn
$8.5 Bn
$10.1 Bn
0 2 4 6 8 10 12
FY6
FY7
FY8
FY9
FY10
FY11
FY12
FY13
Pharma Exports (CAGR 26.1%)
In terms of value, pharmaceutical products exports have increased
at a CAGR of 26.1 per cent to US$ 10.1 billion during FY06–13
17.8%
12.3%
11.4%
8.9%7.6%
7.4%
34.6%
Indian pharmaceutical market segments by value
Anti-infectives
Cardiac
Gastro Intestinal
Vitamins/Minerals/Nu
trients
Respiratory
Pain/Analgesics
Others
Anti-infective drugs command the largest share (17.8 per cent) in the Indian
pharma market
33.33%
31.25%
21.43%
1.96%
28.85%
26.87%
18.82%

3. API IS THE LARGEST SEGMENT OF THE INDIAN PHARMACEUTICAL
INDUSTRYPharmaceuticalIndustry
Active Pharmaceutical
Ingredients (APIs)
Contract Research and
Manufacturing Services
(CRAMs)
Formulations
Biosimilars
• India is expected to be the third largest global generic API merchant market by
2016, with a 7.2 per cent market share
• Drug companies from India filed 49 per cent of the overall Drug Master Filings
(DMF) filed in the US in 2012
• Fragmented market with more than 1,000 players
• CRAMS industry is estimated to have reached USD8.0 billion in 2015, up from
USD4.0 - 4.5 billion in 2012
• Largest exporter of formulations in terms of volume with 14 percent market share
and 12th in terms of export value
• Domestic market size is currently valued at USD11.2 billion
• Double-digit growth expected over the next five years
• Biosimilar’s sector is expected to touch USD1.4 billion by 2016 from USD482
million in 2011
• The government plans to allocate USD70 million for local players to develop
biosimilars

4. MAJOR PLAYERS
Sun Pharma
641.1
Cipla
649.6
Glaxo
596.2Ranbaxy
542.2
Zudus Cadila
524.4
Abbott HC
498.2
Mankind
472.1
Lupin
398.1
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50%
RevenueGrowth
Market Share
Note: The bubbles denote MAT March 2013 sales in USD million
Market share is in terms of revenue
MAT - Moving Annual Total
Source: All Indian Origin Chemists & Distributors, Equity Master, BMI,
Aranca Research

5. CRITICAL SUCCESS FACTORS
• Focused expertise and resources, “trends” toward a higher
probability of success.
• Industry metrics for predicting the probabilities associated with each
stage of drug development are useful but may not be reliable.
• Life cycle management is essential.
• Licensing and acquisition talent needs to be “best in class”.
• The ability to generate meaningful free cash flow is the ultimate
predictor of sustainability.

6. KEY DRIVERS
• Growing orientation towards Research and Development (R&D) – The introduction of product
patent in India has brought some fundamental changes in strategies of Indian pharmaceutical
companies, with focus shifting more towards R&D.
• Leveraging CRAMs opportunities – India is emerging as the global hub for contract research and
manufacturing services (CRAMs) due to its low cost advantage and world class quality standards
• Growing exports - Exports have been the major growth enabler of the Indian pharmaceutical
industry in recent years. India exports pharmaceutical products, APIs and intermediates to more
than 200 countries across the world
• Expanding presence in regulated market – Over the years, India has shown better regulatory
awareness and superior technical skills, which has enabled Indian companies to penetrate the
high-value markets like the US and EU. Exports of pharmaceutical products (finished products as
classified under heading 30 of ITC-HS code) to the US grew by an impressive 33% to Rs 23 bn
and by a whopping 62% to Rs 35 bn to the EU during FY04-FY06. Regulated markets, though
difficult to penetrate due to stringent regulations, are known to give better value and margin to
exporters
• Rise in new product launches – New products launched since 2005 accounted for around 12% of
the overall market growth. These launches have been done by both domestic and international
players and some of them are first time launch of new chemical entity (NCE)

7. SECTOR DRIVEN BY CONFLUENCE OF DEMAND, CAPABILITIES AND
POLICY
Growth
Drivers
Demand
Side
Drivers
Policy
Supports
Supply
Side
Drivers
• Accessibility of drugs to greatly
improve
• Increasing penetration of health
insurance
• Growing number of stress-related
diseases due to change in lifestyle
• Better diagnostic facility
• Reduction in approval time
for new facilities
• Focus on specialized
pharma education
• Improved accessibility to
locations
• Cost Advantage
• India a major manufacturing
hub for generics
• 546 sites registered at USFDA

8. KEY ISSUES AND CHALLENGES
• Price Controls – Price controlled drugs are essential medicines, such as antibiotics and painkillers,
and drugs used for the treatment of diseases such as cancer and asthma. Such medicines contain
bulk drugs, or raw materials, whose prices are controlled by the NPPA - manufacturers cannot
hike prices on their own. 10% of drugs fall in this category
• Infrastructure – . Poor energy and transport infrastructure has traditionally posed a problem for
companies. Some areas lack basic hotel facilities, preventing reach and penetration
• Labour – There is an increasing concern in the domestic industry regarding a shortage of skilled
labour in critical areas. This causes a demand-supply imbalance, and has led to an increased rate
of wage inflation.
• Regulatory Control – Indian drug companies have attracted the highest number of enforcements
from the American drug regulator in 2013, a year that has seen the US Food and Drug
Administration (FDA) turning stricter to ensure compliance levels and quality of medicines. As
many as 19 drug manufacturing factories across India were barred from supplying medicines to
the US, the world’s largest drug market
• Intellectual Property Concerns