Comprehensive Analysis of

Indian Pharmaceutical
Industry
and
Establishment of Active
Pharmaceutical Ingredients
Unit in Special Economic Zone
 d u st r y -
h a r m a I n
I n d i a n P e c ti v e
c a l P e r sp
H i s t or i
A
 1950-1970
• Highly Profitable Market
• Dominated by MNCs
• Relative absence of domestic Players
 1971-1990
• Process patent introduced
• Indian companies start making an
impact
• Focus on backward integration
• Economies of scale
 1991-2000
• Industry became a net exporter
• Recognition as world class API centre
• Proliferation of domestic players
• Intense fragmentation
 2001-2005
• Innovative research seed investment
• Development partner for R&D services
• New patent regime
 2005+
• Process development competencies
• Economies of scale, low cost high quality
manufacturing
• International exposure
 Critical Factors
• The process patent regime

• Price controls

• Exemptions to Small Scale Industries (SSIs)

 Global Pharma Outlook
Market size & Growth rate
45
40
% M kt. size & growth

35
30
25
rate

20
15
10
5
0 UK
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Ind
US

Ita
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Jap

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Sp

Ch

ex
Br
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Fr

Ca

M
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Countries
Current mkt. Size % Growth rate %
 Trends in Global
Pharma R&D
Drug Development Process

Research & Development & Commercial &

Discovery Clinical Trials Manufacturing

• $~$25B Global Pharma • ~$45B Spend on Dev’t & • 35 New Drugs

Spend … +11% CAGR Clinical Trials … +12%
CAGR
• 450+ Investigational
New Drug Filings • 2,800 Total Clinical Trials
Annually … 350+ Protein-Based
Trials
Approved Annually
• Protein Manufacturing
Capacity Growing
50%/yr
Indian Attractiveness in the Drug
Development Process
 How do we improve research
productivity to build a sustainable
global services business?
 Improve the Service
 Improve the Economics
 Change the Paradigm
 The short & medium term opportunity
 The long term opportunity
 Improve The Service
 Quality of innovation

 Speed of innovation and pace of

delivery

 Integration to make the drug

discovery research & development
process seamless
 Improve The Economics
 Outsourcing
 Partnering
 Inlicensing
 Redesigning internal R&D through
electronic data capture
Trends/Basic Research
Outsourcing
 Projected Global
Pharmaceutical Outsourcing
Market
The Importance of Outsourcing
• US$50B will be spent on research and development by the
biopharmaceutical industry in 2005

• US$16.3B of this research and development will be

undertaken by clinical research
30%

• 42% Pre clinical toxicology & analytical

• 58% clinical research
Indian capability to be the R&D
services hub
Outsourcing Opportunity in
India
Bulk Drugs Contract
Contract & Marketing &
R&D Formulations Sales
Manufacturing

Turnkey International
Projects Clinical
Trials

Plant Outsourcing
Machinery Opportunities - Technical
& India Services
Pharma
Equipment

Primary Herbals
Packaging Neutraceuticals
Bioinformatics
Materials Biostatistics
Software
Development
 Industry Structure
• Fragmented-20,000 players
• No individual have market share > 7%
• 2006- top ten players have 42% of total pie
• Anti-infective segment-25%
 PORTER’S FIVE FORCES
ANALYSIS
• Threat of new entrants
• Bargaining power of buyer
• Bargaining power of supplier
• Treats of substitutes
• Intensity of rivalry
 SWOT OF INDIAN
PHARMACEUTICAL INDUSTRY
STRENGTHS:
• Cost Competitiveness
• Well Developed Industry with Strong Manufacturing Base
• Well Established Network of Laboratories and R&D
infrastructure, strong motivated scientific force
• Self reliant technology for production
• Access to pool of highly trained scientists
• Strong marketing and distribution network
• Low R&D Costs
• Increasingly, India is being regarded as a manufacturing base by
global pharmaceutical companies.
 WEAKNESS
• Low investments in innovative R&D.
• Lack of resources to compete with MNCs for
New Drug Discovery Research and to
commercialize molecules on a worldwide basis.
• Lack of strong linkages between industry and
academia.
• Lack of culture of innovation in the industry
• Low medical expenditure and healthcare spend
in the country
• Inadequate regulatory standards
• Production of spurious and low quality drugs
tarnishes the image of industry at home and
abroad.
 Opportunities
• Significant export potential
• Licensing deals with MNCs for NDDS
• Marketing alliances to sell MNC products in
domestic market
• Contract manufacturing arrangements with
MNCs
• Potential for developing India as a centre for
international clinical trials
• Niche player in global pharmaceutical R&D.
• Strong base of scientific as well as technical
manpower and also due to pioneering work
done in process development
• Supply of generic drugs to developed markets
 Threats
• Product patent regime poses serious challenge to
domestic industry unless it invests in research and
development.
• DPCO puts unrealistic ceilings on product prices and
profitability and prevents pharmaceutical companies
from generating investible surplus
• R&D efforts of Indian pharmaceutical companies
hampered by lack of enabling regulatory requirement.
• Entrants of newer players in highly fragmented
market.
TRENDS IN INDIAN PHARMACEUTICAL
INDUSTRY IN 2008
• Outsourcing & Off-shoring to Continue
• Global Licensing: licensing from companies in India and other
emerging countries
• Growing importance and dominance of generic companies
• Challenging times for Wholesalers
• M&A / Consolidation: It more M&A and consolidation
• Prevention of Medical errors
• Emergence of new global players
IMPACT OF UNION BUDGET 2008-09
ON INDIAN PHARMA SECTOR
• Cut in excise duty to 8% from 16%
• Weighted deduction of 125% on any payment made to
companies engaged in R&D
• The allocation under ‘National Rural Health Mission’ has been
increased to Rs 12,050 crore
• allocation of Rs 993 crore for National Aids control
programme
• Provision of Rs 1042 crore for 2008-09 for eradication of
Polio auguring well for the industry
 KINDS OF RESEARCH
• Basic R&D
• ANALOGUE OR DISCOVERY RESEARCH
• BIOTECHNOLOGY RESEARCH
• BRINGING OUT A GENERIC DRUG
• NDDS RESEARCH
 FUTURE OUTLOOK
• Better growth is expected in the domestic market & the
players’ initiatives
• Pharmaceuticals in India has strong potential for increased
growth from 2008 right through to 2023
• Prevalence values of many diseases are likely to increase with
expansion of population and urbanization
• demand for medicines would never lessen, on the other hand
this would increase owing to new disease discovery & the
discovery of drugs to counter these diseases
Future state (2010): at least 100 molecules in various
stages of development

Contract Research: High end drug discovery services

Clinical Research: At least 10 % of global trials

Global Distribution: Top 15-20 Indian players to have

direct presence
 Conclusion
• Focus of the pharmaceutical market continues to shift towards
emerging countries where the growth rate is higher
• Availability of a skilled scientific workforce at low cost, a
fairly stringent regulatory environment and largest number of
US FDA approved plants outside the USA
• Contract research and contract manufacturing is one area
offering plenty of opportunities to India
• India has made its name in the global arena and laid the
groundwork for rapid growth
• Further effort and unwavering commitment are needed for
Indian pharmaceutical companies
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