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.

1. Indian Pharmaceutical Sector
A presentation by
Deepak Kumar
Dipankar Biswas
Kasif Iqbal
Partho Sarathi Roy
Shireen Khan

2. 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 top
Calcutta Chemicals,
Standard global five
Pharmaceuticals, production countries
Indian
Cipla etc. by volume
Pharmac
GSK, Parke Davis, eutical
Wyeth, Ciba etc. Sector

3. Time for Big Boys
1 2 3
Hindustan
Antibiotics IDPL (1961) Ranbaxy
(1954) (1961)
Evolution of Major Drugs
1920 1930 1940 1948

4. Game Changing Move
Landmark
IDMA was formed Patent act was
in 1961 passed in 1970
India could
Aim was to oppose manufacture any
monopoly international drug

5. Division of Drugs
Chronic Therapy Acute Therapy
Segment Segment
Indian
Pharmaceutical
Industry
Bulk drugs or
Formulations
API Cardiovascular Anti infective
Neurological Gastro intestinal
Anti-diabetes Respiratory
Oncology Pain management

6. 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

7. Top Players
Ranbaxy
Sun Pharmaceuticals
Dr. Reddy’s Labortories Ltd.
Cipla
Lupin

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. 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 capabilities
Report by: IAMAI, IMRB & Cyber Media Research

19. 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%

20. Promotions
 Gifting
 Detailing
 Drug Samples
 Sponsoring
 Continuing Medical Education (CME)

21. Pull & Push Marketing System
Super Core Model (Pull System) Core Model (Push System)

22. Operation & Distribution of Pharmaceutical
Industry

23. Supply Chain Model
Manufacturer Repackager
Retailer
Wholesaler
Manufacturer
Retailer
Repackager
Wholesaler
Wholesaler
Manufacturer Retailer
Other Sources of Drugs
(foreign, private mfrs)

24. Challenges in Pharma Supply Chain
Supply Inventory
chain cost effectiveness
Logistic
Planning
effectiveness
Supply
Time to
chain Responsiveness
market
challenges

25. Margins at Different Level
Levels Margins
Clearing and forwarding agents 1–10% on the total turnover + other expenses
Stockist or distributors 8% on scheduled drugs
10% on nonscheduled drugs
Retailers 16% on scheduled drugs
20% on nonscheduled drugs

26. Balance Sheet Overview
Companies
Market Cap Sales Turnover Net Profit Assets
Name
Rs. in Crores
Ranbaxy Labs 21,551.69 7,690.12 -3,052.05 6,258.36
Sun Pharma 78,776.72 4,015.56 1,927.98 8,148.91
Cipla 34,758.47 6,977.50 1,123.96 7,562.48
Dr Reddys
32,607.28 6,739.70 912.36 8,251.20
Labs
Lupin 26,750.90 5,384.83 804.37 4,727.06

27. 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

28. Total Pharmaceutical Market
Share(India)
1.7 10.9
Anti-Infective
4.4 11 16.4 Gastrointestinal
5.3 Cardiac
Respiratory
5.3 Vit./Minerals/Nutrients
Pain/Analgesics
Dermatologists
Gynaecology
5.4 9.6 Neuro psychiatry
antidiabetics
9.5 10.3 Opthologicals
10.2 Others
Company Logo

29. Cost Structure
Ranbaxy Sun Pharma
1400
3000
1200
2500
1000
2000
Rs. in Crores
800
Rs. 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

30. Cost Structure
Dr. Reddy's Cipla
3500
2500
3000
2000
2500
Rs. in Crores
1500
Rs. 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

31. Cost Structure
Lupin
2500
2000
Rs. in Crores
1500
1000
500
0
Raw Materials Power & Fuel Employee cost Other Selling & Admin Miscellaneous
cost Manufacturing exp exp
cost
2010 1596.77 141.68 376.55 115.15 562.13 54.72
2011 1921.18 196.83 491.23 99.35 653.62 134.69
2012 2377.44 257.13 579.67 119.15 804.2 153.75

32. Cost Structure YOY
Cost structure
S.NO 2010-11 2011-12
7000
Sun
6000 9.48% 31.5%
Pharma
5000
Figure in crores
4000 Ranbaxy 44.13%
3000
Lupin 22.8% 22.7%
2000
1000
Cipla 17.1% 4%
0
Sun Pharma Ranbaxy Lupin Cipla Dr. Reddy's
Dr.
2010 1624.48 4536.77 2847 4408.85 3424.4 18.2% 21.8%
2011 1778.51 6538.9 3496.9 5163.77 4048 Reddy’s
2012 2338.67 4291.34 5368.54 4929.4

33. Acquisitions by MNCs
No Year Acquirer Target Company
Company Country
1 Jun’08 Daiichi Sankyo Co Ltd Japan Ranbaxy Laboratories
2 Aug’08 Fresenius Kabi AG Germany Dabur Pharma
3 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)

34. Trends in Diseases
Tuberculosis
Especially in urban centres like Mumbai, Delhi,
Hyderabad, Kolkata etc.
Dengue Fever- 97 % increase in number of cases and
34 % increase in number of deaths
Swine flu- Worst affected areas are MP, UP,
Rajasthan
Encephalitis- 50% decrease in the last 2 years, lack of
funds could play spoilsports
Lifestyle diseases- Heart diseases, Cancer, Obesity,
Diabetes etc. is set to rise

35. 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
2017
WHO report, 2011

36. 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