In 2012, the industry saw a year-on-year growth of almost 16 percent and is presently worth around 10 percent of the global industry in terms of volume and 1. 4 percent with regards to worth. Exports provide a substantial amount of the revenue generated by the Indian companies. While certain companies are focusing on markets that are not fully regulated as well as the generic markets across Europe and the US, others are looking to operate as custom manufacturers for innovators. Bio-pharmaceutical markets have lesser competition and the manufacturing process is rather complex.
This is letting a number of companies focus in that area. The 5 leading companies in this sector spend approximately 5 to 10 percent of their earnings in research and development related activities. However, in global circles this percentage is near 15 to 20 percent. Indian companies have been taking various steps for their R&D operations like associating with innovators. Some other companies have changed their molecule license structure for making their milestone payments. Some organizations are also preferring to make their research and development units into separate entities.
However, with an overall decrease in research companies are now venturing into generics. In such a scenario the innovation-centric companies are purchasing such pharma houses or partnering with them. The supply in the Indian market is high when it comes to the therapeutic medicines and this is typical for a market that is growing. The case is different for lifestyle drugs. The demand is rather high in certain therapy related segments. However, this is expected to change once the literacy and life expectancy levels increase.
Future growth of Indian Pharmaceutical Sector Compared to the similar quarter in 2011-12 the sector is expected to see a revenue growth ranging between 20 and 25 percent. The reduction in the value of the Indian currency is also expected to help the exports. However, the extent of benefit will depend on the level of exposure for each company to hedging. It is expected that Ranbaxy will be making profits of at least 40 percent thanks to the sale of Lipitor’s generic version. Lipitor is the biggest seller among drugs in the world.
It is also supposed to introduce Actos, a diabetes drug valued at 3 billion dollars. Sun Pharma has performed well in both India and the US and this is supposed to help its future performance. The USFDA has lifted the ban on Caraco, its supplementary company, and this will help its revenues from the US. In July and August 2012, the Indian pharmaceutical market has grown by 15 to 16 percent. The segment for acute therapies has grown slowly because of the deferred monsoon. This is also likely to make sure that majority of these companies grow slowly in 2012.
Barclays Equity Research expects that in the quarter starting after September 2012 the Indian pharmaceutical companies will show an all round performance. Companies like Sun Pharma, Dr. Reddy’s Labs, Glenmark, and Lupin are supposed to perform better than the rest. Angel Broking is expecting that the pharma companies listed in the Sensex will have a commendable growth rate of 23 percent in their sales compared on a year-on-year basis. In case of earnings the year-on-year growth has been estimated at 24 percent. The large cap companies are expected to win the race against the others.
ICICI Securities opines that companies that have incurred debts outside India could be in a good position thanks to the present situation involving the Indian National Rupee (INR). It is expected that entities expecting forex losses will see a reversal in their fortunes. One of the likely beneficiaries in this case is Ranbaxy. Pricing issues in Indian Pharma Industry However, there is a fair amount of uncertainty regarding the policy of determining the prices of the drugs. This is expected to be a problem for the industry in the near future.
There are three levels of regulations when it comes to the drug price control order (DPCO). It is imposed on areas like bulk drugs, greater profitability, and the drug formulae. This means that the profits of the companies will depend on the decisions taken by the authorities. The government has recently brought out a National list of essential medicines (NLEM) which has 354 drugs that are likely to be subjected to DPCO. This ruling has faced high opposition from the industry members. Challenges faced by Indian pharmaceutical industry The major barriers to entry in this market may be enumerated as below: * Licensing Patents * Distribution network * Consent for plant from regulatory authorities In India the distributors are presently seen to prefer the generic products in order to increase their profit margins. The buyers in India have a lot of bargaining power because of the divided nature of the industry, which ensures that there is a lot of competition in every segment. India pharmaceutical Industry Financial Performance The multinational companies performed well during 2011-12 and out of the 25 top performers 13 were such entities. However, from an overall perspective, the margins were not so good.
Majority of the companies saw greater expenses for employees and raw materials. The companies, though, continued to increase their presence to the rural areas and add to their MR strength. India Pharmaceutical Industry Scope It is expected that with the present emphasis on product patents, fresh products will soon come into being. The local companies are expected to face stiff competition from their international counterparts who are supposed to be more positive and direct with their product launches. However, price negotiation will also be an important issue for these companies.
It is expected that lifestyle drugs such as the following will be attractive propositions in the future: * Cardiovascular * Anti depressants * Anti diabetes * Anti cancer * Hypertension * Asthma * Congestive heart failures These segments will also see high growth owing to lifestyle alterations expected in the future due to changed patterns and city lifestyles. Contract manufacturing and research or CRAMS is expected to be a major force in the future. Following are India’s major areas of strength in this domain: * English speaking skills Lots of patients with various types of diseases * Capable scientists and doctors at comparatively lesser expense * Observance of global quality regulations With regards to contract manufacturing of drugs it is preferable for both top generic and innovator companies. This is expected to get bigger in the days ahead with more pressure on companies to reduce their expenses. The McKinsey Report states that the market will be worth $55 billion by 2020 but its capacity, till that time period, has been estimated at $70 billion. Government support for Indian Pharma Industry
The Indian government has been fairly supportive of the national pharmaceutical industry since its inception. During 1986 it set up the Department of Biotechnology that was monitored by the Ministry of Science and Technology. From that period, the central governments as well as the states have been offering several special considerations for this industry so that it could grow properly. Some of them may be mentioned as below: * Tax benefits * Exemption from VAT and related fees in several states * Grants for startups focusing on biotech * Fiscal help with subsidies and patents Assistance for companies looking to expand or set up biotech parks in India *
Monetary help for utilities, investment, land and more areas * Permission to test on bigger animals – granted as per Prime Minister’s initiatives for this sector Top Pharmaceutical Companies in India Ranbaxy Laboratories : Ranbaxy Laboratories Limited became a public entity in 1973 after being incorporated during 1961. It is the largest pharmaceutical company in India. In 2011-12 it earned $2. 1 billion around the world and its major market is North America. Following are its top products: * Valacyclovir Ciprofloxacin and its combinations * Simvastatin * Ketorolac Tromethamine * Donepezil * Imipenem+Cilastatin * Atorvastatin and its combinations * Ginseng+Vitamins * Co-amoxyclav and its combinations * Loratadine and its combinations Cipla Cipla was established during 1935 and its headquarters are at Mumbai. It has 20,000 employees and its revenue is $1. 4 billion. It is among the biggest generic companies in the world and has more than 20,000 products, 40 dosage forms, and 65 therapy categories. Its products can be classed into three main categories: * API * Veterinary * Formulations
Dr. Reddy’s Laboratories Dr. Reddy’s started as a laboratory during 1984 as a maker of APIs. At present the company is worth at least $200 million and has more than 2700 employees and 3000 salesmen. Its products may be classified into the following: * Global generics * Differentiated formulations * APIs * Biosimilars * CPS * CPSIA * New chemical entities Lupin Lupin is based in Mumbai and is presently worth $1. 4 billion. The company’s EBITDA is 20 percent and going further up. Since 2005 it has been able increase its market capitalization 11 times and also increased its global presence.
It is also one of the 25 top pharmaceutical companies of the world. Its products and services may be categorized as below: * Branded formulations * Advanced drug delivery systems * Generics * Novel drug discovery and development * APIs * Biotechnology Aurobindo Pharma PV Ramaprasad Reddy, along with some dedicated medical professionals, and K Nityananda Reddy set up Aurobindo Pharma during 1986. At present the organization is one of the top 10 Indian companies when it comes to consolidated revenues. It also exports its products in 125 countries and gets 70% of its revenues from these operations.
Its products may be classed into the following: * Formulations * Peptides * API Sun Pharmaceutical Sun Pharmaceutical is a global specialty pharmaceutical company and operates in 43 markets with significant presence in India and the US. The company commenced operations during 1983. It is the 5th biggest of its kind in India in terms of prescription sales. It specializes in API and Formulation drugs. Cadila Pharmaceuticals Cadila is based at Ahmedabad and is one of the largest privately owned pharma companies. The company operates in at least 90 countries and 45 product segments.