Bio-pharma

Power Pack

1
•Market Size :3

•Segments :8

•Competitive Scenario : 11

•Review of Industry Growth and Outlook : 20

2
 Market Size

3
• In 2015-16, the biopharmaceutical industry's revenue is estimated to have
grown 12%, compared with 9% in 2014-15.
• The improvement in performance was powered by high growth in sales of
pentavalent vaccines (primarily in Panacea Biotech and Shantha Biotech) and
insulin (products such as Mixtard).
• Realising the opportunity offered by biopharmaceuticals, companies have
increased their focus on biosimilars (generic versions of innovator
biopharmaceuticals) and new pentavalent vaccines.
• Industry revenue rose to almost Rs 123 billion over 2010-11 to 2015-16 at a 13%
CAGR.
• The industry grew at a robust 18% CAGR between 2010-11 and 2012-13.
However, growth slowed down dramatically after this period.
4
• According to secondary sources, the slowdown in 2013-14 was the result of
trade channel disruptions caused by a Drug Pricing Control Policy (DPCO) in
May 2013 and currency depreciation in semi-regulated markets, which partially
impacted domestic and export demand.
• In 2014-15, domestic sales and exports grew in single digits, because of supply
issues and macroeconomic challenges in a few markets.
• For example, Biocon's revenue is estimated to have grown in single digits due
to supply constraints on products, such as insulin, and geopolitical challenges
in the Middle East and North Africa.
• Serum Institute of India's revenue is estimated to have grown in single digits,
because of portfolio rejig in the domestic market and the inability to gain
marketing approvals on time
5
• Its performance is estimated to have averaged out on a high base in the export
market.
• However, aggregate revenue growth for companies, such as Bharat Serum and
Vaccines, is estimated in excess of 30%, aided by new vaccine launches.

6
Biopharmaceutical market growth trend

7
 Segments

8
Classification of drugs

9
• Biopharmaceuticals are substances produced by manipulating living
organisms via techniques such as genomics (mapping of genes), proteomics
(study of structure of proteins), mutation analysis (change in the DNA
sequence of a cell) and systems biology (study of complex interactions in a
biological system) intended for human/animal treatment.
• Globally, these techniques are referred to as biotechnology, which in other
words is a process technology or a drug discovery research tool.
• Biopharmaceuticals are drugs developed by applying biotechnology on living
organisms / biologics for treatment of diseases.

10
 Competitive scenario

11
 Indian biopharmaceutical industry continue to witness steady
growth
• Indian bio-pharma industry is in the growth stage.
• The aggregate revenue of the industry has been growing at a CAGR of 18-
20% over the past 5 years, which is coupled with a profitability of 14-16%.
• This growth is primarily driven by the export of Indian biopharmaceutical
products along with an increasing demand for the same in the domestic
market.

12
 Indian biopharmaceutical industry continue to witness steady
growth
• Notwithstanding the stringent regulations, the industry is continuously
evolving, with companies increasing their foothold in the supply of
recombinant vaccines, along with limited number of therapeutic bio-similar
proteins in the domestic as well as semi-regulated markets.
• The industry consists of 50-100 players, with the top seven companies
accounting for more than 60% of revenues.
• Most players such as Serum Institute of India, Panacea Biotech, Bharat
Serum and Vaccines etc operate primarily in the relatively simpler area of
vaccines.

13
 Indian biopharmaceutical industry continue to witness steady
growth
• Vaccines include preventive ones (meant for polio, tetanus, diphtheria etc.)
and therapeutic ones to treat chronic diseases.
• This segment requires relatively lower capital investments in research &
development and has moderate amounts of technical complexities in
manufacturing.

14
 Semi-regulated markets provide ideal platform to expand
vaccines market....
• Majority of Indian biopharmaceutical players directly export preventive
vaccines (for immunization programs) to semi-regulated markets via
tenders raised by international health organisations (such as WHO,
UNICEF, GAVI etc).
• To qualify for such contracts, Indian players have to maintain current GMP
(good manufacturing practices) compliant manufacturing facilities and be
capable of providing vaccines on a large scale at low prices.
• Over the last 2-3 decades, Indian players have developed capacity to meet
such requirements, while at the same time, built strong relationship with
such organisations aiding in consistent order flows. For e.g.:
15
 Semi-regulated markets provide ideal platform to expand
vaccines market....
• IPCA supplies artemisinin based combination therapy (ACTs), useful for
combating malaria, to donor organisations like UNICEF, WHO,
IDA,Mission Pharma, etc.
• In February 2015, Panacea Biotech signed a $13.49 million contract with the
Pan American Health Organisation for the supply of 5.99 million dosages of
pentavalent vaccine (Easy5-TT) -for 2015 and 2016.
• In 2013, the company announced it had bagged a supply order from
UNICEF for its pentavalent vaccine from 2014 to 2016
• In 2015, Shantha Biotechnics ltd delivered 22 million doses of its
pentavalent vaccine, Shan5, under UNICEF's global vaccination
programme.
16
 ....yet competition remains low in complex categories

• In the present scenario, the segment is steadily witnessing a shift towards

more complex recombinant vaccines such as pentavalent and other
recombinants.
• However, competition remains low on account of smaller number of players
having such a complex vaccine portfolio.
• The industry has a co-existence of traditional players such as Dr Reddy's,
Cadila Healthcare and Wockhardt, as well as standalone biopharmaceutical
players, such as Biocon and Reliance Life Sciences, who focus on therapeutic
biotechnology drugs.

17
 ....yet competition remains low in complex categories

• However, these players are still evolving and are yet to market their
indigenously developed recombinant drugs in regulated markets.
• Currently, they sell products (therapeutic vaccines and drugs) mainly in the
domestic and semi-regulated markets of Africa and Latin America.

18
 Biosimilars remain sparsely populated due to low risk appetite
of companies
• There is low competition observed in the industry as far as biosimilars are
concerned.
• To develop a biosimilar, Indian players have to conduct animal studies, clinical
trials etc prior to an approval.
• On an average, the time required for developing biosimilars is 6-7 years with
low success rate thereby, keeping potential new entrants at bay.
• However, off late, competition is increasing with several Indian
pharmaceutical manufacturers expanding their product portfolio in the
domestic and semi-regulated therapeutic biosimilar markets.
• Yet, the extent of competition remains lower than that witnessed in traditional
generics, largely due to technical barriers and the gestation period.
19
 Review of Industry
Growth and Outlook

20
• New products, especially therapeutics, and complex vaccines will be the
growth engine for Indian biopharmaceutical players over the next few years.
• Companies are expected to focus on drugs for ailments, such as hepatitis,
rheumatoid arthritis, anaemia, fertility disorders, cancer and diabetes.

21
Biopharmaceutical growth outlook

22
Product pipeline of Indian pharma companies

23
Product pipeline of Indian pharma companies
• Recombinant vaccines, such as pentavalent and rotavirus vaccines, and
monoclonal anti-bodies, such as Adalimumab (rheumatoid arthritis) and
Rituximab (oncology), will drive domestic demand.
• The domestic market is likely to see better growth prospects from 2016-17,
on the back of an improvement in product registrations and launches by
companies since 2015-16.
• Further, continued sales of pentavalent vaccines by companies, such as
Shantha Biotech, are likely to support growth momentum going ahead as
well, with domestic demand likely to chart a steady 12-14% CAGR, reaching
Rs 120-130 billion by 2020-21.

24
Product pipeline of Indian pharma companies
• A caveat, however, remains on the performance of large companies, such as
Biocon and Serum.
• Failure to get timely product approvals/launches or a slow ramp-up in sales
of new products could impact domestic growth.
• On the other hand, exports are likely to grow at a relatively faster pace, as
players build their product portfolios to target export opportunities.
• Players such as Biocon are filing for more product approvals, such as for
insulin (Glargine), in semiregulated markets. An improvement in exports of
these products to aid growth recovery in 2016-17 and beyond.

25
Indian companies widen their product portfolios
• Large and medium-sized pharmaceutical companies have been building
strong portfolios with low-cost therapeutic drugs (biosimilars); the most
recent was launched in 2014-15 and 2015-16.
• These products will compete with their patented variants. A few launches by
large pharmaceuticals players are: Reditux by Dr. Reddy's and Zotide by
Cipla.
• Concord Biotech has a lucrative portfolio of drugs in the
immunosuppressants category, coupled with the company's focus on
expanding its product basket.

26
Indian companies widen their product portfolios
• In fact, the company has been earning margins in the range of 40-45% over
the past three years.
• Growing competition in the core pharmaceuticals segment and the need to
diversify for expansion have attracted large pharmaceutical companies, such
as Cadila Healthcare, Wockhardt, Glenmark, Dr Reddy's, Lupin and Cipla,
to this segment.
• For these companies, the choice of a product portfolio in the
biopharmaceutical segment will determine the margin they can earn.
• Therapeutics and other biosimilars to help large formulation companies
penetrate the domestic market better.

27
Players firming up presence in semi-regulated markets
• Cost advantage is expected to drive demand for Indian biosimilars in key
export markets in Asia (Vietnam, Nepal, Bhutan and Sri Lanka), Latin
America and Africa.
• The lack of stringent regulations and faster marketing approvals have
helped Indian players to directly retail biosimilars.
• Major products sold by Indian players in semi-regulated markets include
insulin, epogen, granulocyte colony stimulating factor (G-CSF),
streptokinase, interferon and rituximab.

28
Regulated markets offer next growth opportunity
• Patents on biopharmaceuticals, which recorded sales of $51-54 billion in
2015-16, are set to expire over 2017 to 2021 in the US and Europe.
• Further, even among the drugs where patents have already expired, the
penetration of biosimilars is very low due to regulatory challenges and
difficult procedural requirements of all-phase clinical trials (in core
pharmaceuticals, all-phase clinical trials are not required for generic
launches).
• These expiries will present a lucrative opportunity for Indian players to
launch biosimilar versions in regulated markets.

29
Regulated markets offer next growth opportunity
• Compared with a generic chemical molecule, such biopharmaceutical drugs can
contribute higher revenue realisation due to better effectiveness and generally
higher probability of success.
• For example, based on secondary information, a typical small molecule, such as
Metformin (to treat diabetes), may be priced at $0.6 per tablet in the US.
• While at the same time, a biological molecule such as insulin (Glargine-to treat
diabetes) could be priced at $13 to $ 27 per millilitre of dose (prices are based on
the cash purchase medicine segment).
• Players such as Biocon are already stepping up to file for biosimilars in the US.
• In fact, its partnership with Mylan has moved closer to filing marketing

30
approval dossiers for four biosimilars in the US and Europe in 2016-17.
Regulated markets offer next growth opportunity
• However, regulatory approvals will be a key monitorable, especially in the
US, the largest biopharmaceutical market.
• While regulations are already in place in Europe for marketing certain
categories of biosimilars, the US Food and Drug Administration (FDA) has
granted its first biosimilar approval in 2015 and had only two approvals as
of September, 2016.
• However, regulations have become more standardised in the US to facilitate
filings for biosimilars.

31
Global value of biopharmaceutical drugs going off-patent

32
Global value of biopharmaceutical drugs going off-patent
• Indian players have strong capabilities to re-engineer patented products and
supply them globally at a lower cost, even in regulated markets.
• However, as building a product portfolio for regulated markets will also
require clinical studies with extensive approvals,
• Revenue growth from these regions to remain limited in the medium term.
• To resolve the regulatory fix, Indian players have opted for tie-ups as well
as in-house R&D to develop biosimilars. Some examples:

33
Global value of biopharmaceutical drugs going off-patent
• Intas Pharmaceuticals launched its first biosimilar, Accofil, in Europe in
February 2015 through its subsidiary, Accord Healthcare, followed by Reditux
by Dr. Reddy's and Zotide by Cipla Cipla and Serum Institute of India entered
into a vaccine distribution agreement to cater to the European market.
• Lupin entered into a joint venture with Yoshindo Inc to target the Japanese
biosimilar market.
• Biocon and Dr. Reddy's have tied up with Mylan and Merck Serono,
respectively, to jointly develop and sell biosimilars in Europe and the US.
• Further, Biocon plans to file for regulatory marketing approvals for four of its
biosimilars in regulated markets in 2016-17.

34