A Report

On
The Pharmaceutical
Industry of India
Security Analysis & Portfolio Management
Institute for Technology & Management
B School Navi Mumbai
Submitted By:
Vaibhav Goel
Manvi J ain
Priyanka J ethwani
Sanidhya J ain
Shardul Chimote
Hemant Verma



CONTENTS
S.No. DESCRIPTION PAGE(S)
1 About Pharmaceutical Industry 1-5
2 Porters Five Force Model 5-7
3 SWOT Analysis 8-9
4 Main Players 10
5 Sun Pharma 11
6 Ranbaxy 12
7 Biocon 13
8 Ratio Analysis 14-26
9 Variation in Share Valuation 26-28
10 Scope 28-29
11 Conclusion 30-31

ABOUT PHARMACEUTICAL INDUSTRY
The Pharmaceutical industry in India is the world's third-largest in terms of volume.
According to Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, the total
turnover of India's pharmaceuticals industry between 2008 and September 2009
was US$21.04 billion. While the domestic market was worth US$12.26 billion. The industry
holds a market share of $14 billion in the United States.
According to Brand India Equity Foundation, the Indian pharmaceutical market is likely to
grow at a compound annual growth rate (CAGR) of 14-17 per cent in between 2012-16. India
is now among the top five pharmaceutical emerging markets of the world.
Exports of pharmaceuticals products from India increased from US$6.23 billion in 200607
to US$8.7 billion in 200809 a combined annual growth rate of 21.25%.According
to PricewaterhouseCoopers (PWC) in 2010, India joined among the league of top 10 global
pharmaceuticals markets in terms of sales by 2020 with value reaching US$50 billion.
The government started to encourage the growth of drug manufacturing by Indian companies
in the early 1960s, and with the Patents Act in 1970. However, economic liberalisation in 90s
by the former Prime Minister P.V. Narasimha Rao and the then Finance Minister, Dr.
Manmohan Singh enabled the industry to become what it is today. This patent act removed
composition patents from food and drugs, and though it kept process patents, these were
shortened to a period of five to seven years.
The lack of patent protection made the Indian market undesirable to the multinational
companies that had dominated the market, and while they streamed out. Indian companies
carved a niche in both the Indian and world markets with their expertise in reverse-
engineering new processes for manufacturing drugs at low costs. Although some of the larger
companies have taken baby steps towards drug innovation, the industry as a whole has been
following this business model until the present.
India's biopharmaceutical industry clocked a 17 percent growth with revenues of Rs. 137
billion ($3 billion) in the 200910 financial year over the previous fiscal. Bio-pharma was the
biggest contributor generating 60 percent of the industry's growth at Rs. 88.29 billion,
followed by bio-services at Rs. 26.39 billion and bio-agri at Rs. 19.36 billion.
In 2013, there were 4,655 pharmaceutical manufacturing plants in all of India, employing
over 345 thousand workers.
The Indian pharmaceutical industry ranks among the top five countries by volume
(production) and accounts for about 10% of global production. The industrys turnover has
grown from a mere US$ 0.3 bn in 1980 to about US$ 21.73 bn in 2009-10. Low cost of
skilled manpower and innovation are some of the main factors supporting this growth.
According to the Department of Pharmaceuticals, the Indian pharmaceutical industry
employs about 340,000 people and an estimated 400,000 doctors and 300,000 chemists.
Industry structure
The Indian pharmaceutical industry is fragmented with more than 10,000 manufacturers in
the organised and unorganised segments. The products manufactured by the Indian
pharmaceutical industry can be broadly classified into bulk drugs (active pharmaceutical
ingredients - API) and formulations. Of the total number of pharmaceutical manufacturers,
about 77% produce formulations, while the remaining 23% manufacture bulk drugs. Bulk
drug is an active constituent with medicinal properties, which acts as basic raw material for
formulations. Formulations are specific dosage forms of a bulk drug or a combination of bulk
drugs. Drugs are sold as syrups, injections, tablets and capsules.
Formulations can be categorised under various therapeutic groups (Exhibit 2.1):
Therapeutic groups in the Indian formulations market

Source: D&B Research
Based on the pharmaceutical customer base, the Indian API manufacturing segment can be
divided into two sectors innovative or branded and generic or unbranded. In 2009, the
global generic drug market was estimated to be US$ 84 bn, of which the US accounted for
42%. Indias generic drug industry is estimated to be US$ 19 bn and it ranks third globally,
contributing about 10% to global pharmaceutical production.
Pharmaceutical manufacturing units are largely concentrated in Maharashtra and Gujarat.
These states account for about45% of the total number of pharmaceutical manufacturing units
in India.
State-wise number of pharmaceutical manufacturing units in India

Source: Department of Pharmaceuticals, Government of India
Concentration of pharmaceutical manufacturing units in India (%)

Source: Department of Pharmaceuticals, GoI
SMEs in the pharma industry
According to the Confederation of Indian Industries (CII), there are around 8,000 small and
medium enterprises (SME) units, accounting for about 70% of the total number of the pharma
units in India. Indian SMEs are also opening up for emerging opportunities in the
pharmaceutical industry in the field of CRAMS, clinical research etc. These would drive
them to play a definitive role in the transitional global pharmaceutical environment, where a
sizeable number of drugs are expected to go off patent in the coming years. The Indian
government has been making every attempt to support SMEs through several incentives. One
such effort is the development of SME clusters in various parts of the country.
Investment in the Indian pharmaceutical industry
100% foreign direct investment (FDI) is allowed under automatic route in the drugs and
pharmaceuticals sector, including those involving use of recombinant technology. Also, FDI
up to 100% is permitted for brown field investments (i.e. investments in existing companies),
in the pharmaceuticals sector, under the Government approval route. The drugs and
pharmaceuticals industry attracted foreign direct investment to the tune of US$ 9.17 bn for
the period between April 2000 and January 2012.
FDI inflow in the drugs and pharmaceutical industry (US$ mn)

*Fiscal year; Cumulative: April 2000 to January 2012
Source: Ministry of Commerce & Industry
The Indian pharmaceutical industry enjoys certain advantages, which attracts FDI in the
country: 1) low cost of innovation and capital expenditure (to operate good manufacturing
practices-compliant facilities) which provides leverage in pricing of drugs 2) transparency in
the regulatory framework 3) proven track record in bulk drug and formulation patents 4)
strong domestic support in production, from raw material requirements to finished goods and
5) India emerging as a hub for contract research, bio-technology, clinical research and
clinical data management.
Factors influencing growth of the industry
The Indian pharmaceutical industry ranks 14th in the world by value of pharmaceutical
products. With a well-established domestic manufacturing base and low-cost skilled
manpower, India is emerging as a global hub for pharma products and the industry continues
to be on a growth trajectory. Moreover, India is significantly ahead in providing chemistry
services such as analogue preparation, analytical chemistry and structural drug design, which
will provide it ample scope in contract research and other emerging segments in the
pharmaceutical industry. Some of the major factors that would drive growth in the industry
are as follows:
Increase in domestic demand: More than half of Indias population does not have access to
advanced medical services, as they usually depend on traditional medicine practices.
However, with increase in awareness levels, rising per capita income, change in lifestyle due
to urbanisation and increase in literacy levels, demand for advanced medical treatment is
expected to rise. Moreover, growth in the middle class population would further influence
demand for pharmaceutical products.
Rise in outsourcing activities: Increase in the outsourcing business to India would also drive
growth of the Indian pharmaceutical industry. Some of the factors that are likely to influence
clinical data management and bio-statisticsmarkets in India in the near future include: 1) cost
efficient research vis--vis other countries 2) highly-skilled labour base 3) cheaper cost of
skilled labour 4) presence in end-to-end solutions across the drug-development spectrum and
5) robust growth in the IT industry.
Growth in healthcare financing products: Development in the Indian financial industry has
eased healthcare financing with introduction of products such as health insurance policy, life
insurance policy and cashless claims. This has resulted in increase in healthcare spending,
which in turn, has benefitted the pharmaceutical industry.
Demand in the generics market: During 2008-2015, prescription drugs worth about US$
300 bn are expected to go off patent, mostly from the US. Prior experience of Indian
pharmaceutical companies in generic drugs would provide an edge to them.
Demand from emerging segments: Some of the emerging segments such as contract
research and development, biopharma, clinical trials, bio-generics, medical tourism and
pharma packaging are also expected to drive growth of the Indian pharmaceutical industry.
Foreign trade in pharmaceutical products
The Indian pharmaceutical industrys growth has been fuelled by exports. Its products are
exported to a large number of countries with a sizeable share in the advanced regulated
markets of the US and Western Europe. India currently exports drug intermediates, active
pharmaceutical ingredients, finished dosage formulations, bio-pharmaceuticals and clinical
services to various parts of the world. The top five export destinations of Indian
pharmaceutical products are USA, Germany, Russia, UK and China. Indian exports of drugs
and pharmaceuticals grew at a CAGR of 16.5% to ` 451.4 bn over FY02-FY12 (up to Dec
2011).
Export of drugs and pharmaceuticals from India

*Up to Dec 11
Source: Directorate General of Commercial Intelligence and Statistics (DGCIS) Kolkata
Import of drugs and pharmaceuticals into India recorded a CAGR of 17.6% during FY02-
FY12 (up to Dec 2011). During FY12 (up to Dec 2011), pharmaceutical products worth `
102.2 bn were imported into India. India is almost self sufficient in formulations; its imports
mostly comprise bulk drugs and some intermediaries. These imports are freely permitted,
except those that are restricted in the foreign trade policy. Import restrictions are mostly on
drugs that contain narcotics and psychotropic components.



Chart 2.5: Import of drugs and pharmaceuticals into India

*Up to Dec 11
Source: Directorate General of Commercial Intelligence and Statistics (DGCIS) Kolkata
Major challenges faced by the industry
The Indian pharmaceutical industry was on a strong growth trajectory in the last decade. It
has achieved several milestones and is well positioned to leverage emerging opportunities.
However, the industry needs to tackle various issues related to its operations and regulations.
It faces several challenges in the form of pricing of pharmaceutical products and impact of
some agreements. This section touches upon several key issues and challenges faced by the
industry:
Impact of GATT-TRIPS agreement: The General Agreement on Tariffs and Trade1
(GATT) and Trade Related aspects of Intellectual Property Rights2 (TRIPS) have an adverse
impact on pricing of pharmaceutical products. Pharmaceutical companies are not allowed to
re-generate existing drugs and formulations and change the existing process and manufacture
the same drug. New investments are required to perform research. This is a major obstacle for
pharma companies, especially the micro, small and medium enterprises. Moreover, transfer
of technology from abroad is difficult and expensive. Consequently, revenue of the pharma
companies is impacted. Hence, adequate measures should be taken to support the industrys
revenue and minimise losses.
Pricing: At present, pricing of 74 bulk drugs and their formulations, which account for a
large share in the retail pharma market, are controlled by the Drug Price Control Order
(DPCO)-1995. The Government had considered reducing the number of regulated drugs, but
it has not been implemented. There is a need to reduce the number of regulated drugs to
facilitate the growth of the pharmaceutical industry.
Drug diversions by institutions: Most of the institutional clients of the Indian
pharmaceutical companies comprise government hospitals, the Indian defence service and
private hospitals; the defence sector is mandated to buy drug stocks through tenders in
quantities twice as large as the projected demand for those drugs in the following year at
discounted rice. At the year-end, surplus available at the institutions is pushed to regular
channels by leveraging the price discounts, resulting in a loss for companies through the
regular distribution channel.
The number of purely Indian pharma companies is fairly less. Indian pharma industry is
mainly operated as well as controlled by dominant foreign companies having subsidiaries in
India due to availability of cheap labor in India at lowest cost. In 2002, over 20,000 registered
drug manufacturers in India sold $9 billion worth of formulations and bulk drugs. 85% of
these formulations were sold in India while over 60% of the bulk drugs were exported,
mostly to the United States and Russia. Most of the players in the market are small-to-
medium enterprises; 250 of the largest companies control 70% of the Indian market. Thanks
to the 1970 Patent Act, multinationals represent only 35% of the market, down from 70%
thirty years ago.
Most pharma companies operating in India, even the multinationals, employ Indians almost
exclusively from the lowest ranks to high level management. Home grown pharmaceuticals,
like many other businesses in India, are often a mix of public and private enterprise.
In terms of the global market, India currently holds a modest 12% share, but it has been
growing at approximately 10% per year. India gained its foothold on the global scene with its
innovatively engineered generic drugs and active pharmaceutical ingredients (API), and it is
now seeking to become a major player in outsourced clinical research as well as contract
manufacturing and research. There are 74 US FDA-approved manufacturing facilities in
India, more than in any other country outside the U.S, and in 2005, almost 20% of all
Abbreviated New Drug Applications (ANDA) to the FDA are expected to be filed by Indian
companies. Growth in other fields notwithstanding, generics is still a large part of the picture.
London research company Global Insight estimates that Indias share of the global generics
market will have risen from 4% to 33% by 2007. The Indian pharmaceutical industry has
become the third largest producer in the world and is poised to grow into an industry of $20
billion in 2015 from the current turnover of $12 billion.

As it expands its core business, the industry is being forced to adapt its business model to
recent changes in the operating environment. The first and most significant change was the 1
January 2005 enactment of an amendment to Indias patent law that reinstated product
patents for the first time since 1972. The legislation took effect on the deadline set by the
WTOs Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, which
mandated patent protection on both products and processes for a period of 20 years. Under
this new law, India will be forced to recognise not only new patents but also any patents filed
after 1 January 1995. Indian companies achieved their status in the domestic market by
breaking these product patents, and it is estimated that within the next few years, they will
lose $650 million of the local generics market to patent-holders.
In the domestic market, this new patent legislation has resulted in fairly clear segmentation.
The multinationals narrowed their focus onto high-end patients who make up only 12% of the
market, taking advantage of their newly bestowed patent protection. Meanwhile, Indian firms
have chosen to take their existing product portfolios and target semi-urban and rural
populations.
Indian companies are also starting to adapt their product development processes to the new
environment. For years, firms have made their ways into the global market by researching
generic competitors to patented drugs and following up with litigation to challenge the patent.
This approach remains untouched by the new patent regime and looks to increase in the
future. However, those that can afford it have set their sights on an even higher goal: new
molecule discovery. Although the initial investment is huge, companies are lured by the
promise of hefty profit margins and have a legitimate competitor in the global industry. Local
firms have slowly been investing more money into their R&D programs or have formed
alliances to tap into these opportunities.
As promising as the future is for a whole, the outlook for small and medium
enterprises (SME) is not as bright. The excise structure changed so that companies now have
to pay a 16% tax on the maximum retail price (MRP) of their products, as opposed to on the
ex-factory price. Consequently, larger companies are cutting back on outsourcing and what
business is left is shifting to companies with facilities in the four tax-free states Himachal
Pradesh, Jammu & Kashmir, Uttaranchal and J harkhand. Consequently a large number of
pharmaceutical manufacturers shifted their plant to these states, as it became almost
impossible to continue operating in non-tax free zones. But in a matter of a couple of years
the excise duty was revised on two occasions, first it was reduced to 8% and then to 4%. As a
result the benefits of shifting to a tax free zone were negated. This resulted in, factories in the
tax free zones, to start up third party manufacturing. Under this these factories produced
goods under the brand names of other parties on job work basis.
As SMEs wrestled with the tax structure, they were also scrambling to meet the 1 July
deadline for compliance with the revised Schedule M Good Manufacturing Practices (GMP).
While this should be beneficial to consumers and the industry at large, SMEs have been
finding it difficult to find the funds to upgrade their manufacturing plants, resulting in the
closure of many facilities. Others invested the money to bring their facilities to compliance,
but these operations were located in non-tax-free states, making it difficult to compete in the
wake of the new excise tax.
Even after the increased investment, market leaders such as Ranbaxy and Dr. Reddys
Laboratories spent only 510% of their revenues on R&D, lagging behind Western
pharmaceuticals like Pfizer, whose research budget last year was greater than the combined
revenues of the entire Indian pharmaceutical industry. This disparity is too great to be
explained by cost differentials, and it comes when advances in genomics have made research
equipment more expensive than ever. The drug discovery process is further hindered by a
dearth of qualified molecular biologists. Due to the disconnect between curriculum and
industry, pharma in India also lack the academic collaboration that is crucial to drug
development in the West and so far.
Unlike in other countries, the difference between biotechnology and pharmaceuticals remains
fairly defined in India. Bio-tech there still plays the role of pharmas little sister, but many
outsiders have high expectations for the future. India accounted for 2% of the $41 billion
global biotech market and in 2003 was ranked 3rd in the Asia-Pacific region and 11th in the
world in number of biotech. In 2004-5, the Indian biotech industry saw its revenues grow
37% to $1.1 billion. The Indian biotech market is dominated by bio pharmaceuticals; 75% of
20045 revenues came from bio-pharmaceuticals, which saw 30% growth last year. Of the
revenues frombio-pharmaceuticals, vaccines led the way, comprising 47% of sales. Biologics
and large-molecule drugs tend to be more expensive than small-molecule drugs, and India
hopes to sweep the market in bio-generics and contract manufacturing as drugs go off patent
and Indian companies upgrade their manufacturing capabilities.
Most companies in the biotech sector are extremely small, with only two firms breaking 100
million dollars in revenues. At last count there were 265 firms registered in India, over 75%
of which were incorporated in the last five years. The newness of the companies explains the
industrys high consolidation in both physical and financial terms. Almost 50% of all biotech
are in or around Bangalore, and the top ten companies capture 47% of the market. The top
five companies were home grown; Indian firms account for 62% of the bio-pharma sector and
52% of the industry as a whole. The Association of Biotechnology-Led Enterprises (ABLE)
is aiming to grow the industry to $5 billion in revenues generated by 1 million employees by
2009, and data from the Confederation of Indian Industry (CII) seem to suggest that it is
possible.
The government has also taken steps to encourage foreign investment in its biotech sector.
An initiative passed earlier this year allowed 100% foreign direct investment without
compulsory licensing from the government. In April, a delegation headed by the Kapil Sibal,
the minister of science and technology and ocean development, visited five cities in the US to
encourage investment in India, with special emphasis on biotech. Just two months later, Sibal
returned to the US to unveil Indias biotech growth strategy at the BIO2005 conference in
Philadelphia.
The biotech sector faces some major challenges in its quest for growth. Chief among them is
a lack of funding, particularly for firms that are just starting out. The most likely sources of
funds are government grants and venture capital, which is a relatively young industry in
India. Government grants are difficult to secure, and due to the expensive and uncertain
nature of biotech research, venture capitalists are reluctant to invest in firms that have not yet
developed a commercially viable product.
The government has addressed the problem of educated but unqualified candidates in its
Draft National Biotech Development Strategy. This plan included a proposal to create a
National Task Force that will work with the biotech industry to revise the curriculum for
undergraduate and graduate study in life sciences and biotechnology. The governments
strategy also stated intentions to increase the number of PhD Fellowships awarded by the
Department of Biotechnology to 200 per year. These human resources will be further
leveraged with a "Bio-Edu-Grid" that will knit together the resources of the academic and
scientific industrial communities, much as they are in the US.

PORTER FIVE FORCE MODEL
Today's business environment is extremely competitive and in economics parlance where
perfect competition exists, the profits of the firms operating in that industry will become zero.
However, this is not possible because, firstly no company is a price taker (i.e. no company
will operate where profits are zero).
Secondly, they strive to create a competitive advantage to thrive in the competitive scenario.
Michael Porter, considered to be one of the foremost gurus' of management, developed the
famous five-force model, which influences an industry.
In this article, we apply this model for the Indian pharma industry.

Competition
Pharma industry is one of the most competitive industries in the country with as many as
10,000 different players fighting for the same pie. The rivalry in the industry can be gauged
from the fact that the top player in the country has only 6% market share, and the top five
players together have about 18% market share.
Thus, the concentration ratio for this industry is very low. High growth prospects make it
attractive for new players to enter in the industry.
Another major factor that adds to the industry rivalry is the fact that the entry barriers to
pharma industry are very low. The fixed cost requirement is low but the need for working
capital is high.
The fixed asset turnover, which is one of the gauges of fixed cost requirements, tells us that
in bigger companies this ratio is in the range of 3.5 to 4 times. For smaller companies, it
would be even higher.
Many smaller players that are focused on a particular region, have a better hang of the
distribution channel, making it easier to succeed, albeit in a limited way.
An important fact is that pharma is a stable market and its growth rate generally tracks the
economic growth of the country with some multiple (1.2 times average in India). Though
volume growth has been consistent over a period of time, value growth has not followed in
tandem.
The product differentiation is one key factor, which gives competitive advantage to the firms
in any industry. However, in pharma industry product differentiation is not possible since
India has followed process patents till date, with laws favouring imitators.
Consequently, product differentiation is not the driver, cost competitiveness is. However,
companies like Pfizer and Glaxo have created big brands in over the years, which act as
product differentiation tools. This will enhance over the long term, as product patents come
into play from 2005.
Bargaining power of buyers
The unique feature of pharma industry is that the end user of the product is different from the
influencer (read doctor). The consumer has no choice but to buy what doctor says. However,
when we look at the buyer's power, we look at the influence they have on the prices of the
product. In pharma industry, the buyers are scattered and they as such does not wield much
power in the pricing of the products. However, government with its policies, plays an
important role in regulating pricing through the NPPA (National Pharmaceutical Pricing
Authority).
Bargaining power of suppliers
The pharma industry depends upon several organic chemicals. The chemical industry is again
very competitive and fragmented. The chemicals used in the pharma industry are largely a
commodity.
The suppliers have very low bargaining power and the companies in the pharma industry can
switch from their suppliers without incurring a very high cost.
However, what can happen is that the supplier can go for forward integration to become a
pharma company. Companies like Orchid Chemicals and Sashun Chemicals were basically
chemical companies, who turned themselves into pharmaceutical companies.
Barriers to entry
Pharma industry is one of the most easily accessible industries for an entrepreneur in India.
The capital requirement for the industry is very low, creating a regional distribution network
is easy, since the point of sales is restricted in this industry in India.
However, creating brand awareness and franchisee amongst doctors is the key for long-term
survival. Also, quality regulations by the government may put some hindrance for
establishing new manufacturing operations.
Going forward, the impending new patent regime will raise the barriers to entry. But it is
unlikely to discourage new entrants, as market for generics will be as huge.
Threat of substitutes
This is one of the great advantages of the pharma industry. Whatever happens, demand for
pharma products continues and the industry thrives. One of the key reasons for high
competitiveness in the industry is that as an on going concern, pharma industry seems to have
an infinite future.
However, in recent times, the advances made in the field of biotechnology, can prove to be a
threat to the synthetic pharma industry.
Conclusion
This model gives a fair idea about the industry in which a company operates and the various
external forces that influence it.
However, it must be noted that any industry is not static in nature. It's dynamic and over a
period of time the model, which have used to analyse the pharma industry may itself evolve.
Going forward, we foresee increasing competition in the industry but the form of competition
will be different. It will be between large players (with economies of scale) and it may be
possible that some kind of oligopoly or cartels come into play.
This is owing to the fact that the industry will move towards consolidation. The larger players
in the industry will survive with their proprietary products and strong franchisee.
In the Indian context, companies like Biocon, Cipla, Ranbaxy and Glaxo are likely to be key
players. Though consolidation within the current big names is not ruled out. Smaller fringe
players, who have no differentiating strengths, are likely to either be acquired or cease to
exist.
The barriers to entry will increase going forward. The change in the patent regime will see
new proprietary products coming up, making imitation difficult. The players with huge
capacity will be able to influence substantial power on the fringe players by their aggressive
pricing which will create hindrance for the smaller players.
Economies of scale will play an important part too. Last but not the least, in a vast country of
India's size, government too will have bigger role to play.
SWOT Analysis of the Industry
The SWOT analysis of the industry reveals the position of the Indian pharmaceutical industry
in respect to its internal and external environment.

a) Strengths
Higher GDP growth leading to increased disposable income in the hands of general public
and their positive attitude towards spending on healthcare.
Low-cost, highly skilled set of English speaking labour force and proven track record in
design of high technology manufacturing devices.
Growing treatment naive patient population.
Low cost of innovation, manufacturing and operations.

b) Weaknesses
Stringent pricing regulations affecting the profitability of pharma companies.
Poor all-round infrastructure is a major challenge.
Presence of more unorganised players versus the organised ones, resulting in an
increasingly competitive environment, characterised by stiff price competition.
Poor health insurance coverage.

c) Opportunities
Global demand for generics rising.
Rapid OTC and generic market growth.
Increased penetration in the non - metro markets.
Large demand for quality diagnostic services.
Significant investment from MNCs.
Public-Private Partnerships for strengthening Infrastructure.
Opening of the health insurance sector and increase in per capita income - the growth
drivers for the pharmaceutical industry.
India, a potentially preferred global outsourcing hub for pharmaceutical products due to low
cost of skilled labour.

d) Threats
Wage inflation.
Government expanding the umbrella of the Drugs Price Control Order (DPCO).
Other low-cost countries such as China and Israel affecting outsourcing demand for Indian
pharmaceutical products
Entry of foreign players (well equipped technology-based products) into the Indian market.
Conclusion
Overall growth outlook for the Indian drugs and pharmaceutical industry appears positive.
Pharma manufacturers are likely to benefit from rise in demand for generic products. Some of
the factors that would drive growth in the domestic pharma industry are: 1) low cost
operations 2) research-based processes 3) improvements in API and 4) availability of skilled
manpower.
The domestic formulations and bulk drugs markets are currently facing price pressure as
benefits of cheaper drugs have been shifted to end-users and trade channels. Hence,
consolidation, partnership and alliances are expected to gather momentum in the near future.
Off patenting of branded drugs would increase demand for generic drugs. This provides
immense opportunities to the Indian pharmaceutical companies especially given their prior
experience in generic drug development. Some other factors such as high penetration in the
global markets and increase of share in Abbreviated New Drug Application (ANDA) filings
are likely to power growth of the formulations market. Major growth drivers for the Indian
bulk drug industry include rise in demand for contract manufacturing, increase of share in
Drug Master Files (DMF) filings and process innovation.
Furthermore, initiatives of the Government will act as a backbone for growth. Some such
initiatives include: 1) allowing 100% FDI under the automatic route in drugs and
pharmaceuticals including those involving use of recombinant technology 2) increasing
weighted tax deduction on expenditure in in-house R&D activities to 200% in the Budget
2010 and 3) setting up a US$ 639.56 mn venture capital fund to support drug discovery and
strengthen pharmaceutical infrastructure.

Main Players of the Pharma Industry of India:

1. Dr Reddys Labs: With total net sales of Rs 8,434 crore, Dr Reddys Labsis the
largest pharmaceutical company in India.
2. Cipla: With total net sales of Rs 8,202 crore Cipla is the second largest
pharmaceutical company in India.
3. Lupin: With total net sales of Rs 7,122.51 crore Lupin is the third largest
pharmaceutical company in India.
4. Ranbaxy Labs: It is the fourth largest pharma company in India with the total net
sales of Rs 6,303.54 crore.
5. Aurobindo Pharma: Aurobindo Pharma is on 5th position with the total net sales of
Rs 5,425.10 crore.
6. Cadila Health: Cadila Health is the sixth largest pharma company with the total sales
revenue of Rs 3,152.20 crore.
7. Torrent Pharma: It is the seventh largest pharma company with the total sales
revenue of Rs 2,766.23 crore.
8. Jubilant Life: Eight largest company has the total sale revenue at Rs 2,641.07 crore.
9. Glaxo SmithKline:It has the total net sales of 2,630.30 crore and the ninth largest
pharmaceutical company in India.
10. Wockhardt: Revenue of Rs 2,560.10 crore makes Wockhardt India's 10th largest
pharma firm by sales.

SUN PHARMA
Sun Pharmaceutical Industries Limited (NSE: SUNPHARMA, BSE: 524715) is an
multinational pharmaceutical company headquartered in Mumbai, Maharashtra that
manufactures and sells pharmaceutical formulations and active pharmaceutical ingredients
(APIs) primarily in India and the United States. The company offers formulations in various
therapeutic areas, such
as cardiology, psychiatry, neurology, gastroenterology anddiabetology. It also provides APIs
such as warfarin, carbamazepine, etodolac, and clorazepate, as well as anticancers, steroids,
peptides, sex hormones, and controlled substances.
Sun Pharmaceuticals was established by Mr. Dilip Shanghvi in 1983 in Kolkata with five
products to treat psychiatry ailments. Cardiology products were introduced in 1987 followed
by gastroenterology products in 1989. Today it is the largest chronic prescription company in
India and a market leader in psychiatry, neurology, cardiology, orthopedics, ophthalmology,
gastroenterology and nephrology. Some of the top brands of the company include pantocid,
susten, aztor, gemer, repace, glucored, strocit, clopilet and cardivas. Over 57% of Sun
Pharma sales are from markets outside India, primarily in the US. Manufacturing is across 23
locations, including the US, Canada, Brazil, Mexico and Israel. In the US, the company
markets over 200 generics, with another 150 awaiting approval from the U.S. Food and Drug
Administration (FDA).
Sun Pharma was listed on the stock exchange in 1994 in an issue oversubscribed 55 times.
The founding family continues to hold a majority stake in the company. Today Sun Pharma is
the third largest and the most profitable pharmaceutical company in India as well as the
largest pharmaceutical company by market capitalisation on the Indian exchanges. The Indian
pharmaceutical industry has become the third largest producer in the world in terms of
volumes and is poised to grow into an industry of $20 billion in 2015 from the current
turnover of $12 billion. In terms of value India still stands at number 14 in the world.

Ranbaxy Laboratories Limited
Ranbaxy Laboratories Limited (BSE: 500359) is an Indian
multinational pharmaceutical company that was incorporated in India in 1961. The company
went public in 1973 and Japanese pharmaceutical company Daiichi Sankyo acquired a
controlling share in 2008. Ranbaxy exports its products to 125 countries with ground
operations in 43 and manufacturing facilities in eight countries. In 2011, Ranbaxy Global
Consumer Health Care received the OTC Company of the year award.
It is a research based international pharmaceutical company serving customers in over 150
countries. For more than 50 years, they have been providing high quality, affordable
medicines trusted by healthcare professionals and patients. Most of its products are
manufactured under licence from foreign pharmaceutical developers, though a significant
percentage of their products are off-patent drugs that are manufactured and distributed
without licensing from the original manufacturer because the patents on such drugs have
expired.
It is a vertically integrated company that develops, manufactures and market Generic,
Branded Generic, Value-added and Over-the-Counter (OTC) products, Anti-retroviral
(ARVs), Active Pharmaceutical Ingredients (APIs), and Intermediates. It has a large portfolio
of over 500 molecules that cover multiple dosage forms including tablets, capsules,
injectables, inhalers, ointments, creams and liquids.

BIOCON
Biocon, India's largest biotech company is focused on delivering affordable innovation.
It is committed to reduce therapy costs of chronic diseases like diabetes, cancer and
autoimmune diseases by leveraging India's cost advantage to deliver affordable healthcare
solutions to patients, partners and healthcare systems across the globe.
Biocon's key innovations include world's first Pichia based recombinant human Insulin,
INSUGEN

, insulin analogue Glargine, BASALOG

and India's first indigenously produced

monoclonal antibody BioMAb-EGFR

, for head & neck cancer. INSUPen

is a next
generation affordable insulin delivery device introduced in India by Biocon.
Its aspiration to become a US $ 1 billion company by FY 18 is fuelled by five powerful
growth accelerators, Small Molecules, Biosimilars, Branded Formulations, Novel Molecules,
and Research Services with a focus on emerging markets.
Over the decades, Biocon has successfully evolved into an emerging global biopharma
enterprise, serving its partners and customers in over 75 countries.

As a fully integrated bio pharma company it delivers innovative biopharmaceutical solutions,
ranging from discovery to development and commercialization, leveraging the cutting edge
science, cost-effective drug development capabilities and global scale manufacturing
capacities, to move ideas to market.
Leveraging India's globally competitive cost base and exceptional scientific talent, the
Company is advancing its in-house R&D programs, and is also providing integrated research
services to leading global pharmaceutical and biotechnology companies through Syngene and
Clinigene.
Biocon has rapidly developed a robust novel and biosimilars pipeline, focusing on Diabetes,
Oncology and auto-immune diseases, which has several molecules at different stages of the
development cycle.
With the successful commercial launch of its first anti-cancer drug and several promising
discovery partnerships in the clinic, the Company remains committed to scaling new heights
in frontier science and achieving new milestones in affordable medicine.
To navigate the challenges of innovation in the next decade we have adopted a well-defined
strategic framework that will transform scientific discoveries into advances in human
healthcare and generate incremental value for our shareholders.
RATIO ANALYSIS:
Ratio Analysis is very important concept to judge a industry's fundamentals,
it can be said that it is a tool used to conduct a quantitative analysis of information in a
company's financial statements like Profit and Loss account, Balance sheets and cash flow
statement . With the help of past data u can judge the companys current financial
performance. Important ratios are listed below:

1. Liquidity Ratio.
2. Solvency Ratio
3. Profitability Ratio
4. Management Efficiency Ratio
5. Valuation Ratio

1. LIQUIDITY RATIO: These ratios refer to the ability of a firm to meet its short term
obligations, as and when they become due. These are further categorized as:

Current Ratio: An indication of a company's ability to meet short-term
debt obligations; the higher the ratio, the more liquid the company is. Current ratio is
equal to current assets divided by current liabilities. If the current assets of a company
are more than twice the current liabilities, then that company is generally considered
to have good short-term financial strength. If current liabilities exceed current assets,
then the company may have problems meeting its short-term obligations.
A liquidity ratio that measures a company's ability to pay short-term obligations.
The Current Ratio formula is:


Also known as "liquidity ratio", "cash asset ratio" and "cash ratio".
The ratio is mainly used to give an idea of the company's ability to pay back its short-
term liabilities (debt and payables) with its short-term assets (cash, inventory,
receivables). The higher the current ratio, the more capable the company is of paying
its obligations. A ratio under 1 suggests that the company would be unable to pay off
its obligations if they came due at that point. While this shows the company is not in
good financial health, it does not necessarily mean that it will go bankrupt - as there
are many ways to access financing - but it is definitely not a good sign.
The current ratio can give a sense of the efficiency of a company's operating cycle or
its ability to turn its product into cash. Companies that have trouble getting paid on
their receivables or have long inventory turnover can run into liquidity problems
because they are unable to alleviate their obligations. Because business operations
differ in each industry, it is always more useful to compare companies within the
same industry.
This ratio is similar to the acid-test ratio except that the acid-test ratio does not
include inventory and prepaid as assets that can be liquidated. The components of
current ratio (current assets and current liabilities) can be used to derive working
capital (difference between current assets and current liabilities). Working capital is
frequently used to derive the working capital ratio, which is working capital as a ratio
of sales.

Name Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Current Ratio 2.03 1.62 0.81 1.95 1.59 2.31



INTERPRETATION: As said above the current ratio signifies the capability of a firm
to pay back its short-term liabilities (debt and payables) with its short-term assets (cash,
inventory, receivables). So we conclude that Sun Pharma has the maximum to meet short
term liabilities while Ranbaxy has the least capability.
1. QUICK RATIO: An indicator of a companys short-term liquidity. The quick
ratio measures a companys ability to meet its short-term obligations with its most
2.03
1.62
0.81
1.95
1.59
2.31
Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Current Ratio
Current Ratio
liquid assets. For this reason, the ratio excludes inventories from current assets, and is
calculated as follows:
( )
s Liabilitie Current
s Inventorie Asset Current
Ratio Quick
_
_
_

=



The quick ratio measures the dollar amount of liquid assets available for each dollar
of current liabilities. Thus, a quick ratio of 1.5 means that a company has $1.50 of
liquid assets available to cover each $1 of current liabilities. The higher the quick
ratio, the better the company's liquidity position. Also known as the acid-test ratio"
or "quick assets ratio."
Quick ratio specifies whether the assets that can be quickly converted into cash are
sufficient to cover current liabilities.
Ideally, quick ratio should be 1:1.
If quick ratio is higher, company may keep too much cash on hand or have a problem
collecting its accounts receivable. Higher quick ratio is needed when the company has
difficulty borrowing on short-term notes. A quick ratio higher than 1:1 indicates that
the business can meet its current financial obligations with the available quick funds
on hand.
A quick ratio lower than 1:1 may indicate that the company relies too much on
inventory or other assets to pay its short-term liabilities.
Many lenders are interested in this ratio because it does not include inventory, which
may or may not be easily converted into cash.
Name Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Liquid Ratio 1.76 2.02 0.95 1.68 1.69 1.82

1.76
2.02
0.95
1.68 1.69
1.82
Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Liquid Ratio
Liquid Ratio
INTERPRETATION: As discussed earlier, quick ratio measures a companys ability to
meet its short-term obligations with its most liquid assets
2. SOLVENCY RATIO: These ratios reflects the ability of the firm to meet its long
term obligations, the long term amount borrowed from debenture holders, those who
have sold their assets on credit and long term loan from bank or financial institutes.
i. Debt Equity Ratio: A measure of a company's financial leverage
calculated by dividing its total liabilities by stockholders' equity. It indicates
what proportion of equity and debt the company is using to finance its assets.


Note: Sometimes only interest-bearing, long-term debt is used instead of total
liabilities in the calculation.
Also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal
financial statements as well as corporate ones. A high debt/equity ratio generally
means that a company has been aggressive in financing its growth with debt. This can
result in volatile earnings as a result of the additional interest expense.
If a lot of debt is used to finance increased operations (high debt to equity), the
company could potentially generate more earnings than it would have without this
outside financing. If this were to increase earnings by a greater amount than the debt
cost (interest), then the shareholders benefit as more earnings are being spread among
the same amount of shareholders. However, the cost of this debt financing may
outweigh the return that the company generates on the debt through investment and
business activities and become too much for the company to handle. This can lead to
bankruptcy, which would leave shareholders with nothing.
The debt/equity ratio also depends on the industry in which the company operates. For
example, capital-intensive industries such as auto manufacturing tend to have a
debt/equity ratio above 2, while personal computer companies have a debt/equity of
under 0.5.

Name Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Debt Equity Ratio 0.07 0.2 2.48 0.11 0.11 0.01

INTERPRETATION: Higher debt to equity ratio signifies more pressure on the equity
holders. As seen from above only Ranbaxy is facing problems in terms of debt equity ratio
i.e. only Ranbaxy has more debt than the equity and that too of 2.48 times. Sun Pharma is in
the best condition with a minimal debt equity ratio of 0.01:1.
3. DEBT-COVERAGE RATIO: Debt coverage ratio refers to the amount of cash flow
available to meet annual interest and principal payments on debt.
i. Interest Coverage Ratio: A ratio used to determine how easily a company
can pay interest on outstanding debt. The interest coverage ratio is calculated by
dividing a company's earnings before interest and taxes (EBIT) of one period by
the company's interest expenses of the same period:

The lower the ratio, the more the company is burdened by debt expense. When a
company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses
may be questionable. An interest coverage ratio below 1 indicates the company is not
generating sufficient revenues to satisfy interest expenses.
Significance:
- This ratio reflects earning capacity of the business to pay its interest burden. It
shows EBIT as number of times the interest.
- Higher the ratio, business can easily pay the interest.
- If the ratio is low or EBIT is declining, there may arise financial difficulty for
payment of interest or short term solvency is in danger.
Name Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Interest Coverage Ratio 165.18 29.55 1.73 61.27 52.8 Not Available

165.18
29.55
1.73
61.27
52.8
0
Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Interest Coverage Ratio
Interest Coverage Ratio
INTERPRETATION: Interest coverage ratio as said earlier, signifies the
efficiency to pay interest on the loan. Ranbaxy already under high debt (as discussed
earlier) so the interest paying capability is low for Ranbaxy.
4. PROFITABILITY RATIO: A class of financial metrics that are used to assess
a business's ability to generate earnings as compared to its expenses and other relevant
costs incurred during a specific period of time. For most of these ratios, having a
higher value relative to a competitor's ratio or the same ratio from a previous period is
indicative that the company is doing well.

i. Returns on Capital Employed: Return on Capital Employed ratio indicates
whether the company is earning sufficient revenues and profits in order to
make the best use of its capital assets. It measures managements performance.
A higher ROCE indicates more efficient use of capital. ROCE should be
higher than the companys capital cost; otherwise it indicates that the company
is not employing its capital effectively and is not generating shareholder value.
Significance -

- Return on Capital Employed expresses efficiency and inefficiency of a
business.
- This ratio has a great importance to the shareholders and investors and also to
investors.
- TO the shareholders it indicates how much their capital is earning and to the
management as to how efficiently it has been working.
- The ratio influences the market price of the shares.
Employed Capital
Tax Interest before ofit
Employed Capital on turn
_
& _ _ Pr
_ _ _ Re =

Name Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Return on Capital Employed 12.52 19.36 7.68 20.79 32.52 Not Available


12.52
19.36
7.68
20.79
32.52
0
Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Return on Capital Employed
Return on Capital Employed
INTERPRETATION: Return on capital Employed signifies the efficiency of the
management to utilize the available capital in earning the maximum profit. Lupin is
the most efficient in utilizing fund due to proper management of the available assets.
Leading to attract maximum investors. Similarly Ranbaxy is performing not up to the
mark. Thus the valuation of Ranbaxy is going down.
ii. EARNING BEFORE INCOME & TAX MARGIN: EBIT margin is the
ratio of Earnings before Interest and Taxes to net revenue earned. It is a
measure of a companys profitability on sales over a specific time period. This
indicator gives information on a companys earnings ability. Increase in EBIT
is mainly due to growth of net revenue, good cost control and strong
productivity, Decrease in EBIT margin largely results from reduction in
revenue and higher operating costs. EBIT margin is most useful when
compared against other companies in the same industry. The higher EBIT
margin reflects the more efficient cost management or the more profitable
business. If no positive EBIT margin can be generated over a longer period,
then the company should rethink the business model.

100 *
Re _
& _ _
arg _
|
|
.
|

\
|

=
Earned venue Net
Tax Interest Before Earning
in M EBIT


In other words, EBIT is all profits before taking into account interest payments and income
taxes. An important factor contributing to the widespread use of EBIT is the way in which it
nulls the effects of the different capital structures and tax rates used by different companies.
By excluding both taxes and interest expenses, the figure hones in on the company's ability to
profit and thus makes for easier cross-company comparisons.
EBIT was the precursor to the EBITDA calculation, which takes the process further by
removing two non-cash items from the equation (depreciation and amortization).

Name Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
EBIT 15 19.5 3.91 21.53 24.26 Not Available




INTERPRETATION: Lupin has marginal benefit over Cipla in terms of EBIT margin i.e.
Lupin has better earning ability over other competitors. Ranbaxy as seen from other
parameters is suffering high operating cost is the least again in this ratio as well.

5. MANAGEMENT EFFICIENCY RATIO: Ratios that are typically used to analyze
how well a company uses its assets and liabilities internally. Efficiency Ratios can
calculate the turnover of receivables, the repayment of liabilities, the quantity and
usage of equity and the general use of inventory and machinery.
i. Inventory Turnover Ratio: Inventory turnover ratio is one of the efficiency
ratios and measures the number of times, on average; the inventory is sold and
replaced during the fiscal year. Inventory Turnover Ratio formula is:
|
|
|
|
.
|

\
|
+
=
2
_ _ _ _
_ _
_ _
Balanace Inventory Ending Balance Inventory Beginning
Goods of Cost
Ratio Turnover Inventory
This ratio should be compared against industry averages. A low turnover implies poor sales
and, therefore, excess inventory. A high ratio implies either strong sales or ineffective
buying.

High inventory levels are unhealthy because they represent an investment with a rate of
return of zero. It also opens the company up to trouble should prices begin to fall.

Name Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Inventory Turnover Ratios 4.9 5.53 3.64 3.5 5.35 Not Available



INTERPRETATION: Dr. Reddys being the leader of Indian Pharma industry has
the maximum inventory turnover ratio, i.e. they are able to sell maximum times their
inventories. Whereas Cipla finds it most difficult to sell their inventories.

ii. Debtors Turnover Ratio: It is a component of current assets and as such has
direct influence on working capital position (liquidity) of the business. Perhaps,
no business can afford to make cash sales only thus extending credit to the
customers is a necessary.
Significance:
- Debtor turnover ratio is computed to judge the efficiency of firms credit
policy.
- Higher the debtors turnover ratio better it is. Higher turnover signifies speedy
and effective collection. Lower turnover indicates sluggish and inefficient
collection leading to the doubts that receivables might contain significant
doubtful debts.
- A low turnover is usually a bad sign because products tend to deteriorate as
they sit in a warehouse.
- Companies selling perishable items have very high turnover.
- For more accurate inventory turnover figures, the average inventory figure,
((beginning inventory + ending inventory)/2), is used when computing
inventory turnover. Average inventory accounts for any seasonality effects on
the ratio.
- Receivables collection period is expressed in number of days. It should be
compared with the period of credit allowed by the management to the
customers as a matter of policy. Such comparison will help to decide whether
receivables collection management is efficient or inefficient.


Debtors Turnover Ratio = Net Credit Sales
Average Debtors +Average Bills Receivable

Name Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Debtor Turnover Ratio 3.6 3.44 2.46 5.18 4.23 3.35



3.6
3.44
2.46
5.18
4.23
3.35
Biocon Dr. Reddy Ranbaxy Cipla Lupin Sun Pharma
Debtor Turnover Ratio
Debtor Turnover Ratio
INTERPRETATION: Higher the debtors turnover ratio better it is. Higher turnover
signifies speedy and effective collection. Lower turnover indicates sluggish and inefficient
collection leading to the doubts that receivables might contain significant doubtful debts.
Cipla having the maximum debtor turnover ratio, has best credit policy while Ranbaxy again
faces problem in the credit policy as well.

6. CASH FLOW INDICATOR RATIO: The statement of cash flows has three distinct
sections, each of which relates to an aspect of a company's cash flow activities -
operations, investing and financing. In this ratio, we use the figure for operating cash
flow, which is also variously described in financial reporting as simply "cash flow",
"cash flow provided by operations", "cash flow from operating activities" and "net
cash provided (used) by operating activities".

i. Dividend Payout Ratio: Dividend payout ratio compares the dividends paid by a
company to its earnings. The relationship between dividends and earnings is
important. The part of earnings that is not paid out in dividends is used for
reinvestment and growth in future earnings. Investors who are interested in short
term earnings prefer to invest in companies with high dividend payout ratio. On
the other hand, investors who prefer to have capital growth like to invest in
companies with lower dividend payout ratio.

100 *
_ _
_
_ _
|
|
.
|

\
|
=
Earnings Net Total
Dividends Total
Ratio Payout Dividend
The payout ratio provides an idea of how well earnings support the dividend
payments. More mature companies tend to have a higher payout ratio.

Name Biocon
Dr.
Reddy Ranbaxy Cipla Lupin Sun Pharma
Divident Payout Ratos 39.13 20.13
Not
Available 12.46 16.61 100.24



INTERPRETATION: An average dividend payout ratio is always appreciated as the
company should always pay dividends to its share holders but at the same time it should also
save some amount for the growth of organization. Sun Pharma has very high dividend payout
ratio, which signifies that it is not saving its earnings for the future growth. Whereas Cipla
and Lupin have very low dividend payout ratio, which might get dissatisfaction in share
holders mind. Biocon maintains a decent dividend payout ratio to maintain a harmony
among the investors and the growth of the organization.

VARIATION IN STOCK VALUES

DR. Reddys

YEAR BSE NSE
2010 1662.55 1662.85
2011 1577.95 1577.95
2012 1826.85 1829.75
2013 2533.05 2534.6
2014 (7th march) 2726.25 2725.30

Cipla

YEAR BSE NSE
2010 369.9 369.05
2011 321.25 319.9
2012 416.4 414.25
2013 400.25 400.05
2014 (7th march) 380.95 381.2

Lupin

YEAR BSE NSE
2010 473.6 482.45
2011 439.85 436.7
2012 613.05 613.5
2013 908.6 905.95
2014 (7th march) 965.75 966.3

Ranbaxy

YEAR BSE NSE
2010 598.65 572.5
2011 405.25 404.9
2012 502.45 500.05
2013 453.1 452.2
2014 (7th march) 370.1 370.35

BIOCON
YEAR BSE NSE
2010 421.75 417.2
2011 279.15 267.75
2012 283.65 286.8
2013 461.6 461.4
2014 (7th march) 442.25 442.05

INTERPRETATION: All the company lays in approximately the same region, other
than Dr. Reddys proving the market supremacy yet again.

SCOPE: Over the years pharmacy has grown in the form of pharmaceuticals sciences
through research and development processes. It is related to product as well as to services.
This profession has a large socio-economic relevance to the Indian economy. In India this
sector is among the future economy drivers. It is committed to deliver high quality drugs and
formulations at an affordable price, so that majority of people can afford them. The
transformation of the sector from conventional pharmacy to drug experts, which is both
desired and necessary to reach the global standards, has already made commendable progress.

Liberalization, privatization and globalization (LPG) have helped the Indian pharmaceutical
companies to achieve international recognition. It's remarkable to note that today several
Indian pharma companies are approved by US FDA and are listed at NASDAQ.

The multibillion-dollar pharma industry grows mainly through knowledge wealth creation.
This sector has transformed a lot over the years. The big pharma companies that were there
about 15-20 years back are not in picture these days.

The analysis of Indian pharmaceutical sector shows that the innovative products, product life
cycle management and marketing management steps taken by the pharma companies have led
them to flourish. And the companies that refused to change their strategy lost the race. Cipla
and Sun Pharma are two companies that are focused on new product development and have
grown tremendously.

The Indian Pharma industry has been able to claim a share in the global market by leveraging
its strengths and enhancing its regulatory and technical maturity. Formulations manufactured
in India constitute 20 per cent of the global generics market by value, and the overall share of
Indian manufactured formulations is as high as 46 per cent in the generics segment in the
emerging markets.


The drugs and pharmaceuticals sector attracted foreign direct investments (FDI) worth US$
5.03 billion between April 2000 and November 2013, according to the latest data published
by Department of Industrial Policy and Promotion (DIPP)

CONCLUSION:

Overall growth outlook for the Indian drugs and pharmaceutical industry appears positive.
Pharma manufacturers are likely to benefit from rise in demand for generic products. Some of
the factors that would drive growth in the domestic pharma industry are: 1) low cost
operations 2) research-based processes 3) improvements in API and 4) availability of skilled
manpower.
The domestic formulations and bulk drugs markets are currently facing price pressure as
benefits of cheaper drugs have been shifted to end-users and trade channels. Hence,
consolidation, partnership and alliances are expected to gather momentum in the near future.
Off patenting of branded drugs would increase demand for generic drugs. This provides
immense opportunities to the Indian pharmaceutical companies especially given their prior
experience in generic drug development. Some other factors such as high penetration in the
global markets and increase of share in Abbreviated New
Drug Application (ANDA) filings are likely to power growth of the formulations market.
Major growth drivers for the
Indian bulk drug industry include rise in demand for contract manufacturing, increase of
share in Drug Master Files (DMF) filings and process innovation.
Furthermore, initiatives of the Government will act as a backbone for growth. Some such
initiatives include: 1) allowing
100% FDI under the automatic route in drugs and pharmaceuticals including those involving
use of recombinant technology
2) Increasing weighted tax deduction on expenditure in in-house R&D activities to 200% in
the Budget 2013 and 3) setting up a US$ 639.56 mn venture capital fund to support drug
discovery and strengthen pharmaceutical infrastructure.

Indias drug discovery and development capabilities will without doubt continue to expand.
In their efforts to outsource and to partner drug discovery projects, Western pharmaceutical
companies will be faced with the challenge, given the wealth of activities and services
available, to decide internally on what activities to perform externally, then to select the right
partner, without falling into the classical traps that have in the past hampered outsourcing
initiatives. These include above all inefficient preparation, unrealistic expectations, lack of
trust, and lack of communication, not to mention perceived cultural differences. All of these
potential issues can be significantly reduced, even avoided, provided externalising drug
discovery is not anymore considered as a tactical tool to reduce R&D costs, but as a unique
strategic opportunity to tap into a wealth of drug discovery resources. It is a dynamic and
challenging environment, which requires preparation, company intelligence and, once
collaboration is in place, an appropriate alliance management, but the results can be uniquely
rewarding.