22096446 industry analysis pharma sector[1]

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ANALYSIS OF

PHARMACEUTICAL INDUSTRY

BY VLSS CONSULTANCIES


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INTRODUCTION

Pharmaceutical Industry in India is one of the largest

and most advanced among the developing countries

The Indian pharmaceutical industry has come a long

way from waiting for imports of bulk drugs from

global players to breaking new grounds in medical

research worldwide.


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GROWTH OF THE INDUSTRY

Worth of the industry $ 6 billion

CAGR 13%

Accounts for - 1% of the world's pharma industry

in value terms and 8% in volume terms. M&As: Over 25 with 15 cross border transaction

worth $600-700 million.

Revenues generated - US$ 7.6 bn and have

grown at an average rate of 10% over last fiveyears


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STRUCTURE OF INDUSTRY

Fragmented with 24000 players 300 organized

Leading 250 70% of the market

Market leaders hold 7%

Manufactures : Bulk drugs APIs

Formulations (75:25)

Adopts high technology & produces high value

products


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FRAMEWORK OF ANALYSIS:

(A)QUALITATIVE ANALYSIS

SWOT ANALYSIS

MICHAEL PORTER 5 FORCES MODEL

(B)QUANTITATIVE ANALYSISRATIO ANALYSIS


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Strengths :-1.Cost Competitiveness2 Developed Industry with StrongManufacturing Base

3.Well Established R&D infrastructure4. Access to pool of highly trained scientists,

Opportunities :-1. Significant export potential.2. Marketing alliances for MNC products in domesticmarket and international market.3.Contract manufacturing arrangements with MNCs

4. Potential for developing India as a centre forinternational clinical trials.

eaknesses:-1. Low investments in innovative R&D.2. Lack of resources to compete with MNCsfor New Drug Discovery & Research3. Lack of strong linkages between industryand academia.

4. Low medical and healthcare expenditurein the country

Threats :-1.Product patent regime poses serious challenge todomestic industry unless it invests in research anddevelopment2. R&D efforts of Indian pharmaceutical companieshampered by lack of enabling regulatory requirement.3.Drug Price Control Order puts unrealistic ceilingson product prices and profitability4. Export effort hampered by procedural hurdles inIndia as well as non-tariff barriers imposed abroad.


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Barriers to EntryVery low barriers to entry

Government policies supportiveFor entry price regulation exists

Economies of scale exist

Proprietory technology and

Product will exist after 2005

Power of SuppliersVolume benefits occur

Inputs standard, available locallyNumerous suppliers-switching cost lowSuppliers can go for forward integration

Raw material cost constitute more than 50% ofthe total expenses

Industry Competition

Highly competitive.Top five players have mere

18% market share

Lower fixed cost and high working capital

Power of BuyersEnd consumers do not have bargaining power

Brand identity exists but is in the hands

Of Influencer (Doctors)

Price Sensitivity is less

Highly fragmented market, so buyer

Concentration v/s industry is low

Threats of SubstitutesNo substitutes for the medicines

Biotechnology is a threat to

synthetic pharma products


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RATIO ANALYSIS

We have analyzed the top five companies in the Indianpharmaceutical industry for the purpose of doing the quantitativeanalysis.

Our rationale behind selecting the top five companies has been

the SALES AND PROFIT. The companies being:

Cipla

Ranbaxy

Sun Pharma

Piramal Healthcare

Dr. Reddys Laboratories


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YRC Aggregate

Cipla Dr Reddy's Piramal SunPharma.

RanbaxyLabs.

200803 200803 200803 200803 200712

Key Ratios

DE Ratio 0.98 0.1 0.09 0.43 0.18 1.37

Long Term DERatio

0.69 0.1 0 0.28 0.18 0.92

Current Ratio 1.58 2.66 2.37 1.54 3.04 0.98

Turnover Ratios :

Fixed Assets 1.78 2.05 2.27 1.74 3.62 2.04

Inventory 5.02 3.9 6.11 8.34 8.88 4.64

Debtors 4.53 3.38 3.53 7.5 3.96 4.72

Interest CoverRatio

5.82 47.45 40.76 5.61 208.94 9.29


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Sales: Segment -wise


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EXPORTS

BULK DRUGS

FORMULATION


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DOMESTIC EXPORTS(Source: DGCIS)

YEAR EXPORT (Rs. in Crores)

1998-1999 6256.06

1999-2000 7230.16

2000-2001 8757.47

2001-2002 9751.2

2002-2003 12826.1

2003-2004 15213.242004-2005 17857.8

2005-2006 22578.98

2006-2007 24942


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Indias Bulk Drug Export

Source: (CRISINFAC)

Bulk Drugs Export- grew 28%CAGR (2001-02 and 2007-08)

Reached $4.2 billion


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Indias Formulation Export

(SOURCE: CRISINFAC)


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REGULATORY BODIES & PATENT THEKEY FACET OF PHARMACEUTICAL

INDUSTRY IN INDIA


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US FDA

Implemented for drug safety system.

India has the highest number of US FDAapproved plants outside the US at 75 plus.

Of the overall Drug Master Filings to USFDA, Indian players has jumped fromaround 14% (2000) to 46% (2008).

India has recorded 1671 DMF filings,whereas China shows a tally of 520 only.


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Increasing share of Indian companies inDMF filings (US FDA)

(SOURCE: CRISINFAC)


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GOVERNMENT POLICY


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POLICY MEASURES:

Lifesaving drugs, Clinical trials, Anti AIDS drugs

Exempted from excise duty

Permitting FDI for manufacture of drugs on certain

conditional basis

Extension of deduction of R&D expenses from 150% to

200%


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MERGERS AND ACQUISITIONS

IN THE INDIAN

PHARMACEUTICALINDUSTRY


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Announce date Target Acquirer Reason Deal Value Target Country

Feb-06Betapharm Dr.Reddys Labs Front end line inGermany

570Germany

May-04Espama Gmbh Wockhardt Front end line inGermany

11Germany

Nov-05Ranbaxy Daichii Sankyo Low costmanufacturingand supplychain

management

33.5Japan

Nov-05Roches APIFacility

Dr.Reddys Labs Increasing presencein Contract Mfg

58.97Mexico

Oct-05Avecia Nicholas Piramal Increasing presencein Contract Mfg

17.1UK,Canada


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CONCLUSION

Pharma industry being a growth industry Unaffected by the business cycle As per the present growth rate, the Indian Pharma

Industry is expected to be a US$ 20 billion industry by

the year 2015 India has competitive strength in research services availability of low cost skilled doctors and scientists large patient population with diverse disease

characteristics adherence to international quality standards VLSS agencies recommends investment in this industry

to be a wise decision.


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THANK YOU

22096446 industry analysis pharma sector[1]

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