ALKEM LABORATORIES

STRATEGY ANALYSIS

Siddhartha Shankar Paul | Suman Mondal | Sumit Kumar | Yogesh Khairnar

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1 Table of Contents
2

Industry Background ............................................................................................................... 5

2.1
The Global Pharmaceuticals Industry ...................................................................................5
2.1.1
Dominance of the US Market and Growth in the Emerging Markets ................................6
2.2
The Indian Pharmaceuticals Industry ...................................................................................6
2.2.1
Factors Influencing Growth of the Domestic Indian Pharmaceuticals Market....................7

Alkem Laboratories Limited (ALL) .......................................................................................... 7

3.1

Overview ............................................................................................................................7

Top Management Role and Structure .................................................................................. 11

4.1
Key managerial personnel and their responsibilities:-......................................................... 12
4.2
Current strategy of the company management- ................................................................. 12
1. Consolidate and further grow domestic sales ...................................................................... 12
2. Continue to grow business in international focus markets .................................................... 13
3. Focus on research and development to enhance product portfolio ....................................... 13
4. Use of strategic international and domestic acquisitions and partnership arrangements to
enhance growth ........................................................................................................................ 13

Organisation Structure.......................................................................................................... 14

Products of the Company ..................................................................................................... 15

Anti-infectives.............................................................................................................................. 15
Gastro-intestinal .......................................................................................................................... 15
Pain/ analgesics ........................................................................................................................... 15
Vitamins/ minerals/ nutrients ...................................................................................................... 15
Dermatology and aesthetics ......................................................................................................... 16
Oncology...................................................................................................................................... 16

Competitors Profile............................................................................................................... 17
7.1
7.2
7.3
7.4

Dr. Reddys Laboratories ................................................................................................... 17

Cipla Limited ..................................................................................................................... 18
Sun Pharmaceuticals ......................................................................................................... 19
Lupin Limited.................................................................................................................. 19

Alkem Laboratories Competitive Strengths ..................................................................... 21

Market leadership in various therapeutic areas and ability to build market leading brands ....... 21
in the domestic market................................................................................................................ 21
Extensive sales, marketing and distribution network in India ..................................................... 21
Strong research and development capabilities which enhance our portfolio................................ 21
Fast growing and established international operations................................................................ 21
Experienced founders and professional management team ......................................................... 22
8.1
Alkem Laboratories Risks and Threats................................................................................ 22
8.2
Alkem Laboratories Strategy.............................................................................................. 23
8.2.1
Consolidate and further grow domestic sales ............................................................... 23
8.2.2
Continue to grow business in their international focus markets..................................... 23

8.2.3
Focus on research and development............................................................................ 23
8.2.4
Developing differentiated product portfolio ................................................................. 24
8.2.5
Use of strategic international and domestic acquisitions and partnership arrangements to
enhance growth ........................................................................................................................ 24
8.3
Pharmaceuticals Porters Five Forces ................................................................................. 25
Competitive Rivalry .................................................................................................................... 25
Threat of new entrants ................................................................................................................ 25
Threat of Substitutes................................................................................................................... 25
Bargaining power of suppliers .................................................................................................... 25
Bargaining power of customers ................................................................................................... 25
8.4
SWOT Analysis of Indian Pharmaceutical Industry.............................................................. 26

Competitor Analysis ............................................................................................................ 27

9.1
Dr. Reddys ....................................................................................................................... 27
Business Strategy ...................................................................................................................... 27
Value net analysis...................................................................................................................... 27
PARTS Analysis .......................................................................................................................... 29
Technology Strategy .................................................................................................................. 30
International Strategy ................................................................................................................ 30
9.2
Sun Pharma....................................................................................................................... 31
Strategy outline......................................................................................................................... 31
Growth Strategy........................................................................................................................ 31
Strategic moves in 2015-16 ........................................................................................................ 32
9.3
Cipla ................................................................................................................................. 32
Key strengths and capabilities .................................................................................................... 32
Growth strategy ........................................................................................................................ 32
Market Strategy ........................................................................................................................ 33

10

Key Success Factors ........................................................................................................... 34

11

Future Scenario.................................................................................................................. 36

11.1 Indian Scenario ................................................................................................................. 36

11.1.1 Government Initiatives: .............................................................................................. 36
11.2 Global Scenario ................................................................................................................. 37

12

The challenges ahead for the Company ........................................................................... 38

13

Conclusion.......................................................................................................................... 40

14

References ......................................................................................................................... 41

15

Annexure ........................................................................................................................... 42

15.1

Facility and Production capacity of Alkem Labs: ................................................................. 42

Figure 1:Global Pharmaceutical Sales ...................................................................................................5

Figure 2:Market Share-Pharmerging countries .....................................................................................6
Figure 3: Top management Structure ................................................................................................. 11
Figure 4: Organisational Structure ..................................................................................................... 14
Figure 5:Strategic Business Unit-Dr. Reddy's Laboratory...................................................................... 17
Figure 6: Strategic Business Unit-Cipla .............................................................................................. 18
Figure 7: Strategic Business Units: Sun Pharmaceuticals ...................................................................... 19
Figure 8: Strategic Business Units: Lupin Limited................................................................................. 20
Figure 9:Porter's 5 forces .................................................................................................................. 25
Figure 10:SWOT analysis ................................................................................................................... 26
Figure 11:Business Strategy ............................................................................................................... 27
Figure 12:International Strategy ........................................................................................................ 30
Figure 13:Strategic outline ................................................................................................................ 31
Figure 14:New Technologies in Healthcare ......................................................................................... 37
Table 1 Indian Pharmaceutical Industry by sales ...................................................................................7
Table 2: Revenue growth .................................................................................................................. 10
Table 3:CAGR for major companies.................................................................................................... 48
Table 4: Market share in 2015 ........................................................................................................... 48
Table 5: R&D Expenditures................................................................................................................ 48
Table 6: Market Share of ALL............................................................................................................. 49
Table 7: Installed Capacity vs. Actual Production ................................................................................ 49
Table 8: Financial Performance of Lupin Limited ................................................................................. 50
Table 9:Financial Performance of Sun Pharma.................................................................................... 51
Table 10: Financial Performance of Cipla Limited ................................................................................ 53
Table 11: Financial performance Alkem Labs Limited .......................................................................... 54

2 Industry Background
2.1 The Global Pharmaceuticals Industry
The pharmaceuticals industry is one of the largest industries in the world and comprises companies
that are involved in the development, production and marketing of pharmaceutical products.
Its continued growth has been driven by factors such as an increase in elderly populations and a
growing middle class in emerging economies that have boosted the demand for pharmaceutica ls.
The increased focus by governments to improve healthcare infrastructure that provide people with
greater access to treatment and medication has also contributed to the growth in the global
pharmaceuticals industry.
According to IMS Health, the size of the global pharmaceuticals market is expected to grow at a
CAGR of approximately 4.1% between 2014 and 2019, to reach sales of approximate ly
US$1,294.6 billion by 2019, compared with US$1,057.1 billion in 2014.

Figure 1:Global Pharmaceutical Sales

(Source: Market Prognosis Global 2015-2019 dated May 2015, published by IMS Health)

The Global pharmaceuticals industry can be broadly classified into the following three categories:
(i)
Regulated and Semi-Regulated Markets
(ii)
Patented and Generic Products
(iii)
Geography.

2.1.1 Dominance of the US Market and Growth in the Emerging Markets

According to IMS Health, the US pharmaceuticals market is, in terms of sales, expected to remain
the largest market. However, further according to IMS Health, the growth of the global
pharmaceuticals market is expected to also be heavily driven by the rapid growth in certain
countries which IMS Health refers to as the pharmerging countries. Pharmerging countries are
those countries where absolute pharmaceuticals spending is expected to grow by more than US$1
billion between 2014 and 2019 and IMS Health has identified 21 such countries.
Collectively, the pharmerging countries had combined pharmaceutical sales of approximate ly
US$260.0 billion in 2014, constituting 25.3% of the overall global pharmaceuticals industry in the
same year, according to IMS Health. China, the largest market in the group, accounted for 42.1%
of the total pharmerging market value in 2014, while Brazil, Russia and India accounted for 12.3%,
6.4% and 5.8%, respectively. According to IMS Health, the fits 'BRIC' countries, Brazil, Russia,
India and China, are predicted to contribute to over 76% growth of the pharmerging markets during
the period 2014 to 2019, with each country forecast to have CAGRs of between 8% and 11% for
the same period.
The pharmerging countries are expected to account for half of the top 20 pharmaceutical markets
by 2019.

Figure 2:Market Share-Pharmerging countries

(Source: Market Prognosis Global 2015-2019 dated May 2015, published by IMS Health)

2.2 The Indian Pharmaceuticals Industry

According to CRISIL Research, the Indian pharmaceuticals market is estimated to be worth
US$36.8 billion in revenues for the fiscal year 2015. The Indian pharmaceuticals market can be

broadly classified into the domestic and export segments in terms of the target geographica l
sales markets.
The chart below illustrates the outlook of the Indian pharmaceuticals industry by sales in the key
segments:
Table 1 Indian Pharmaceutical Industry by sales

2009-2010
Domestic formulation (`
billion)
Formulation exports (US$
billion)
Bulk drug exports (US$
billion)
Total market (US$ billion)

417.1

20142015 2019-2020
Past 5 year Future 5 year
(projected) CAGR up to CAGR up to
2014-2015
2019-2020
745.8 1,359-1,484

12.3

13-15

5.2

11.7

18.9-20.4

17.7

11-13

6.3
20.3

12.9
36.8

20.4-22.3
61.9-67.4

15.2
12.6

10-12
11-13

(Source: CRISIL Research)

2.2.1 Factors Influencing Growth of the Domestic Indian Pharmaceuticals

Market

Increasing
Increasing
Increasing
Growth in

Population
Disposable Income and Government Expenditure in the Healthcare Sector
Insurance Coverage
Lifestyle Related Diseases

3 Alkem Laboratories Limited (ALL)

3.1 Overview
Alkem Laboratories is a leading Indian pharmaceutical company with global operations, engaged
in the development, manufacture and sale of pharmaceutical and nutraceutical products. For fiscal
year 2015, It was the fifth largest pharmaceutical company in India in terms of domestic sales.
Further, it had the largest number of brands (five) in the top 50 brands of the Indian pharmaceutic a l
industry for fiscal year 2015 in terms of domestic sales (along with another leading pharmaceutic a l
company).
Established in 1973, It produce branded generics, generic drugs, active pharmaceutical ingredie nts
(APIs) and nutraceuticals, which It market in India and 55 countries internationally, primarily
the United States. It has seen strong growth under the vision, leadership and guidance of its
founders, Mr. Samprada Singh and Mr. Basudeo N. Singh, who have both been associated with
the pharmaceutical business for over fits decades.
Its pharmaceutical business is organized into domestic (i.e. Indian) and international operatio ns,
according to the geographies in which It operate. For fiscal year 2015, its domestic and
7

international operations accounted for 74.7% and 25.3%, respectively, of its net revenues from
operations. Its consolidated net revenues from operations grew at a compounded annual growth
rates (CAGR) of 22.3% in the period from fiscal year 2011 to fiscal year 2015.
Its domestic operations are further divided according to the various therapeutic areas in which It
operate. In the last fiscal year, It had a portfolio of 736 brands in India. It has been among the top
ten pharmaceutical companies in India in terms of domestic sales for the past 12 years. Its domestic
business has grown at a CAGR of 17.6% in the period from fiscal year 2011 to fiscal year 2015.
According to IMS Health, It was the third-fastest growing company in terms of sales in this period
among the ten largest pharmaceutical companies in the Indian domestic formulations market.
Net revenues from operations from its international operations have grown from 12.6% of its net
revenue from operations in fiscal year 2011 to 25.3% of its net revenue from operations in fiscal
year 2015. As part of its international operations, It focus on the United States, through its
marketing subsidiary, Ascend Laboratories LLC (Ascend).
Its most significant therapeutic areas in domestic market are anti-infectives, gastro-intestinal, pain
and analgesics, and vitamins, minerals and nutrients. These therapeutic areas accounted for 80.7%
of its total sales in the domestic market for fiscal year 2015. It has established products in various
therapeutic areas in India, including:

Anti-infectives is the largest therapeutic area in the pharmaceutical industry in India. It has
consistently been ranked number one in terms of revenue in this therapeutic area for the
past ten years. For fiscal year 2015, It had the largest market share of 11.2% out of a total
market size of `106,551.1 million. Its key anti-infective brands are Clavam (for fiscal year
2015, It had the second largest market share in its molecule category, which had a market
size of `13,891 million), Taxim-O (for fiscal year 2015, It had the second largest market
share in its molecule category, which had a market size of `7,685.5 million) and Taxim (for
fiscal year 2015, It had the largest market share in its molecule category, which had a
market size of `1,974.8 million).
Gastro-intestinal (in which It had the third-largest market share of 5.6% out of a total
market size of `84,091.1 million for fiscal year 2015). Its key gastro-intestinal brands are
Pan (for fiscal year 2015, It had the largest market share in its molecule category, which
had a market size of `5,027.4 million) and Pan-D (for fiscal year 2015, It had the largest
market share in its molecule category, which had a market size of 4,944.8 million)
Pain/ analgesics (in which It had the third-largest market share of 5.0% out of a total
market size of `62,688.5 million for fiscal year 2015)
Vitamins/ minerals/ nutrients (in which It had the sixth-largest market share of 3.7% out of
a total market size of `60,179.1 million for fiscal year 2015)
In addition to the above categories, It have a fast-growing portfolio in other therapeutic
areas such as neuro-psychiatry, cardiology, dermatology, diabetology and oncology. In
these therapeutic areas, it has built brands which include Olkem for hypertension, Donep
for Alzheimers disease, Glucoryl-M for diabetes, Kojiglo for hyper-pigmentation and
Melbild for hypo-pigmentation.

Having established itself in the Indian pharmaceuticals market, it has expanded internationa lly
through both organic growth and certain strategic acquisitions in the United States, which is its
key focus market. Its products are sold in 56 countries, either directly through its Subsidiaries or
indirectly, through supply, distribution and other arrangements with various global companies and
local distributors.
In July 2010, It acquired The Pharmanetwork LLC in the United States, the holding company of
Ascend, which provided us with the commercial platform through which It was able to market and
sell its portfolio of products in the United States. Ascend was established in 2003 and had its own
portfolio of generic products in the market prior to its acquisition. Ascend has relationships with
major chains, wholesalers, managed care companies, distributors, food and grocery stores and
pharmaceutical retailers in the United States. Further, in December 2012, It acquired
manufacturing assets from NORAC, Inc. in the United States, focused primarily on manufactur ing
specialty APIs and providing contract research and manufacturing services. Recently, in June
2015, It acquired a formulation manufacturing facility from Long Pharmaceuticals LLC in the
United States that has semi-solids, liquid and nasal formulation manufacturing capabilities.
In the United States, It have filed 66 abbreviated new drug applications (ANDAs) (of which 18
have received final approval and two have received tentative approval), of which 29 Itre Para IV
filings including first-to-files (FTFs) and one new drug application (NDA) (that has received
final approval). Please refer to Its International Operations Its United States Operations for
details. It sell a range of high-quality, cost-effective generic drugs to major drug chains,
pharmaceutical retailers, wholesalers, food and grocery stores, distributors and managed care
companies in the United States.
In addition to the United States, Australia is also an important focus market for us. In June 2009,
It acquired a majority stake in an Australia company, Pharmacor Pty Ltd (Pharmacor) to enable
us to enter the Australian market. Pharmacor targets individual pharmacies, pharmacy groups,
pharmacy co-ops, aged care and hospitals to offer prescription drugs and over-the-counter generic
medicines. It have also built its presence in other developed and emerging markets in Europe,
South-East Asia, Latin America, Africa and the CIS through its Subsidiaries in these countries as
well as through building relationships with international companies and local distributors. Please
refer to - Its International Operations for details.
It have a total of 16 manufacturing facilities: 14 manufacturing facilities at five locations in India
and two in the United States. Five of its facilities are USFDA, TGA and UK-MHRA approved. Of
the Indian manufacturing facilities, 12 are for manufacturing formulations and two for
manufacturing APIs. Please refer - Its Manufacturing Facilities for details.
It have strong research and development capabilities which enhance its portfolio of products. It
have fits research and development facilities, two in India and two in the United States. As of June
30, 2015, It employed 483 scientists in research and development functions. Please refer Research and Development for details. For fiscal year 2015, its expenditure on research and
development amounted to 4.5% of its net revenues from operations.
It generates demand for its products in India through its field force of medical representatives, who
frequently visit prescribers across specialties to market its product portfolio and also visit

pharmacies and distributors to ensure that its brands are adequately stocked. As of June 30, 2015,
It had a field force of 5,856 medical representatives spread across all the states in India.
Its consolidated net revenues from operations for the years ended March 31, 2015, 2014 and 2013
was `37,831.7 million, ` 31,260.0 million and `24,952.3 million respectively. The following table
sets forth certain information regarding its net revenue from operations for its geographic
segments. Its United States subsidiary, ThePharmaNetwork LLC had consolidated net revenues of
`6,459.7 million for fiscal year 2015.
Table 2: Revenue growth

(in ` million)
2015
Geographic segments
Domestic
International
Total

For the year ended

March 31,
2014

28,262.1
9,569.6
37,831.7

23,607.2
7,652.8
31,260.0

2013
20,475.1
4,477.2
24,952.3

10

4 Top Management Role and Structure

Alkem Laboratories have gained a significant competitive advantage for the growth from the
experience and healthcare domain knowledge of their management team.

Board of Directors

Chief Executive Officer

Domestic Business

President- Sales &

Marketing

International Business

PresidentInternational BusinessRegulated Market

Support Functions

President- R&D

CFO

Sr. Vice PresidentManufacturing

Sr. VP- Legal, company

secretary &
compliance officer

Sr. Vice PresidentSales & Marketing

VP- Coporate Quality

VP- Business Finance

Vice President- Sales &

Marketing

VP- Regulatory &

Medical affairs

VP- Supply Chain

Vice President- Sales &

Marketing

Sr. VP- Purchase & API

marketing

Sr. Vice PresidentSales & Marketing

Sr. Vice President- Rest

of the world markets

Associate VP- Strategy

& Business
development

Assistant VP- Human

Resource

Figure 3: Top management Structure

11

4.1 Key managerial personnel and their responsibilities:The key managerial personnel of the Company are as follows:
Mr. Prabhat Agrawal, aged 38 years, is the Chief Executive Officer of the Company.
Mr. Rajesh Dubey, aged 49 years, is the Chief Financial Officer of the Company.
Mr. Girish Jain, aged 50 years, is the President, Research and Development, of the Company.
Mr. Arvind Sharma, aged 55 years, is the President, Sales and Marketing, of the Company.
Mr. Manish Narang, aged 45 years, is the Senior Vice President, Legal, Company Secretary and
Compliance Officer of the Company.
Mr. Rajbir Sandhu, aged 54 years, is the Senior Vice President, Sales and Marketing, of the
Company.
Mr. Amit Ghare, aged 44 years, is the President, International Business. He is responsible for
regulated markets including U.S., Australia, Europe, North America, South America and Asia.
Mr. Anil Arora, aged 51 years, is the Senior Vice President, Manufacturing of Company. He is
responsible for global manufacturing operations.
Mr. Mukesh Tiwary, aged 49 years, is the Vice President, Sales and Marketing, of the Company.
Mr. K.R. Prakash, aged 47 years, is the Vice President, Head Corporate Quality, of the
Company.
Mr. Satyavan Manikani, aged 47 years, is the Assistant Vice President, Strategy and Business
Development, of the Company.
Mr. Ambrish Kumar Srivastava, aged 57 years, is the Vice President, Regulatory and Medical
Affairs, of the Company.
Mr. Venkatesh S., aged 48 years, is the President and CEO of Ascend Laboratories LLC,
Subsidiary in the United States

4.2 Current strategy of the company management-

1. Consolidate and further grow domestic sales

Continue to consolidate the market leadership positions in therapeutic areas such as antiinfective, pain and gastroenterology and aim for growth in these areas through the
following initiatives:

12

 focus on brand building and driving the growth of focused set of the brands with
high growth potential;
identification of gaps in product portfolio for the introduction of new products;
growth in prescriptions and prescriber base in key specialty areas;
invest in the training and effectiveness of field force; and
Increasing market shares in those geographies where market shares are lower than
the national average.

2. Continue to grow business in international focus markets

As part the growth strategy for the United States, company intend to enhance product
portfolio by accelerating ANDA filings. The company intends to further grow United
States operations through Subsidiary Ascend, by leveraging its established relations hips
with key retail and national accounts.
The company will continue to focus efforts in select geographies such as Australia, Europe,
Chile, Kazakhstan and Philippines, and consolidate presence there

3. Focus on research and development to enhance product portfolio

This includes increased initiatives in research and development in order to enhance
differentiated product portfolio in both the domestic market and internatio na l
markets,
working towards developing capabilities and expertise in niche areas with high
entry barriers such as modified release products, transdermal products and
osmotic controlled release oral delivery systems
Integrated
clinical
research
organization
facility
where
bioequivalence/bioavailability studies for generic drugs are carried out in
relation to filing in various countries.

4. Use of strategic international and domestic acquisitions and partnership

arrangements to enhance growth
Continue using combination of organic initiatives and acquisitions to drive
growth
Using strategic acquisitions to drive growth, to enter into partnership
agreements for out-licensing and in-licensing pharmaceutical products.
As regards to strategy on in-licensing, they collaborate with innovator
companies to launch differentiated products in the domestic market, which
forms an important part of the new products launch strategy

13

Organisation Structure

Alkem laboratories follows a simple yet effective organisation structure, where a separate
Research council and Management council works independently beside the Director. The
functionalities under Director are broadly divided under three arms, namely1. Technical infrastructure divisions
2. R&D divisions
3. General Administration and Facilities

Director
General, CISR

Research Council

Technical Infrastructure
Divisions

Computer Centre

Laboratory Animals
Facility

S&T Management Unit

Knowledge Resource
Centre

Sophisticated Analytical
Instrument facility

Academic affairs unit

Other Lab services

Laboratory Engineering

Management
Council

Director

R&D Divisions

Bio Chemistry
Botany
Clinical & Experimental
Medicine
Endocrinology
Medicinal & Process
Chemistry
Microbiology
Molecular & Structural
biology
Parasitology
Pharmaceuticals
Pharmacokinetics &
Metabolism
Pharmacology
Toxicology

General Administration and

Facilities

Administration

Accounts

Stores & Purchases

CSIR Dispensary

Canteen
Field Section

CDRI clinical pharmacology

unit, Seth G.S. Medical
College, Mumbai

Figure 4: Organisational Structure

Services

Business Development
Unit

14

6 Products of the Company

The company has a total of 16 manufacturing facilities: 14 manufacturing facilities at five locations
in India and two in the United States. Five of the facilities are USFDA, TGA and UK -MHRA
approved. Of the Indian manufacturing facilities, 12 are for manufacturing formulations and two
for manufacturing APIs.
Alkem Labs had the highest number of brands (five) among the top 50 brands (along with another
leading pharmaceutical company) in the Indian pharmaceutical industry for fiscal year 2015 and
also had 13 brands among the top 300 brands in the Indian pharmaceutical industry for fiscal year
2015
Alkem Laboratories have developed a portfolio of more than 700 branded generic drugs and
command market leadership in select key therapeutic areas in the Indian pharmaceutica l
formulations
market.
Its brands are well recognized in their respective therapeutic areas and, according to IMS Health,
13 of the brands are featured among the top 300 brands in India according to domestic sales for
fiscal
year
2015.
Their most significant therapeutic areas are anti-invectives, gastro-intestinal, pain & analgesics,
vitamins, minerals and nutrients. These therapeutic areas accounted for 80.7% of total sales in the
domestic market for fiscal year 2015. Alkem Laboratories have established products in various
therapeutic areas in India, including:

Anti-infectives is the largest segment in the pharmaceutical industry in India. The company has
consistently been ranked number one in terms of revenue in this therapeutic area for the past ten
years. For fiscal year 2015, they had the largest market share of 11.2% out of a total market size
of `106,551.1 million. its key anti-infective brands are Clavam (for fiscal year 2015, had the second
largest market share in its molecule category, which had a market size of `13,891 million), TaximO (for fiscal year 2015, had the second largest market share in its molecule category, which had a
market size of `7,685.5 million) and Taxim (for fiscal year 2015, had the largest market share in
its molecule category, which had a market size of `1,974.8 million)

Gastro-intestinal (in which the company had the third-largest market share of 5.6% out of a total
market size of `84,091.1 million for fiscal year 2015). Its key gastro-intestinal brands are Pan (for
fiscal year 2015, had the largest market share in its molecule category, which had a market size of
`5,027.4 million) and Pan-D (for fiscal year 2015, had the largest market share in its molecule
category, which had a market size of 4,944.8 million)

Pain/ analgesics (in which the company had the third-largest market share of 5.0% out of a total
market size of `62,688.5 million for fiscal year 2015).

Vitamins/ minerals/ nutrients (in which the company had the sixth-largest market share of 3.7%
out of a total market size of `60,179.1 million for fiscal year 2015)

15

Dermatology and aesthetics has always been the focus area for Alkem. They have a basket of
products ranging from acne, skin infections, melasma, moisturizers, dermatitis, alopecia and skin
revitalization. Some of the highlights are

Melbild (brand of Decapeptide) was the biggest new launch in Dermatology segment in
2015
The company acquired Clindac-A (leader brand in Clindamycin topical market) from
Galderma
Renocia (range for Alopecia available as Solution, Shampoo and Conditioner) is an inlicensed product from South Korea and leader in its segment

Oncology is a branch of medicine that deals with the prevention, diagnosis and treatment of cancer.
Alkem has dedicated division for anticancer products, it is Cytomed division. Cytomed division is
serving the need of cancer medication to Indian cancer patients since last 14 years. As far as
anticancer medicines are concerned Alkem Cytomed has hormonal preparations, cytotoxic drugs
and

targeted

therapeutic

drugs

in

its

product

basket.

Alkem recently entered into the era of bio similar drugs by launching Rituximab (Cytomab) which
is a monoclonal antibody. Monoclonal antibody is the novel targeted therapy and the most
advanced form of drugs which are used to cure or to stop complicated chronic diseases. Rituximab
is highly recommended by oncologists as targeted therapy for treatment of one of the cancer NonHodgkin

lymphoma

(NHL) and autoimmune

disorder like rheumatoid

arthritis

(RA).

Enzene Biosciences a dedicated research unit of Alkem laboratories, which is currently working
on number of monoclonal antibodies. Several other bio similar drugs are in pipeline and soon will
be available for the affordable cure of Indian patients.
In addition to the above categories, the company has a fast-growing portfolio in other therapeutic
areas such as neuro-psychiatry, cardiology and diabetology. In these therapeutic areas, it has built
brands which include Olkem for hypertension, Donep for Alzheimers disease, Glucoryl-M for
diabetes, Kojiglo for hyper-pigmentation and Melbild for hypo-pigmentation.
For fiscal year 2015, the company was the leader in the largest therapeutic area (anti-infective)
with a 11.2% market share and was ranked third in terms of market share for both the gastrointestinal (with a market share of 5.6%) and pain/analgesics therapeutic areas (with a market share
of 5.0%), in each case, in India. Revenues from the anti-infectives, gastro-intestinal and
pain/analgesics therapeutic areas in India grew at a CAGR of 10.1%, 17.5% and 12.0% in the
period from fiscal year 2011 to fiscal year 2015. In the same period, these therapeutic areas in
India as a whole grew at a lower CAGR of 6.8%, 12.8% and 10.9%, respectively. They are also
among the top ten companies in the vitamins, minerals, nutrients and gynaecology therapeutic
areas in terms of Indian market share for March 2015.

16

7 Competitors Profile
7.1 Dr. Reddys Laboratories
Dr. Reddys Laboratories a global organization, founded by Mr. Anji Reddy with products across
the pharmaceutical value chain designed to offer solutions for unmet medical needs and better
access to existing medicines. Their offerings cover Active Pharmaceutical Ingredients (APIs),
Branded Formulations, Generic Drugs, Biologics, Specialty Products and New Chemical Entities
(NCE). The main corporate mandate is to create greater access to affordable medicines and reach
patients worldwide.
DRL have a strong presence in key generics markets globally. Medicines and services are available
in North America, Europe and the emerging markets of Asia, Africa and South America.
The headquarter is in Hyderabad, India, with a presence across 26 countries. Manufactur ing
facilities are supported by 5 technology development centers, 2 integrated product development 3
R&D centers.
Dr. Reddy's began as a supplier to Indian drug manufacturers, but it soon started exporting to other
less-regulated markets that had the advantage of not having to spend time and money on a
manufacturing plant that would gain approval from a drug licensing body such as the U.S. Food
and Drug Administration (FDA). By the early 1990s, the expanded scale and profitability from
these unregulated markets enabled the company to begin focusing on getting approval from drug
regulators for their formulations and bulk drug manufacturing plants in more-developed
economies. This allowed their movement into regulated markets such as the US and Europe. In
2014, Dr. Reddy Laboratories was listed among 1200 of India's most trusted brands according to
the Brand Trust Report 2014.

Global generics

Offers more than 200 high-quality generic drugs, keeping costs

reasonable by leveraging integrated operations

Active
Ingredients

One of the worlds largest manufacturers of Active Pharmaceuticals

Ingredients (APIs)
APIs development efforts enable generics business to be cost
competitive and get to market faster.

Proprietary
products &
others

Focused on developing treatment solutions for patients suffering

from skin and neurological disorders

Pharmaceutical
Services

Offers end to end product development and manufacturing services

and solutions to innovator companies.
Figure 5:Strategic Business Unit-Dr. Reddy's Laboratory

17

7.2 Cipla Limited

Cipla Limited is an Indian multinational pharmaceutical and biotechnology company,
headquartered in Mumbai, India, Belgium, Surrey in the European Union and Miami, Florida,
in the United States. Cipla primarily develops medicines to treat cardiovascular disease, arthritis,
diabetes, weight control and depression; other medical conditions.
Established with a vision to meet Indias needs & lay the foundatio n of Indian Pharmaceutica l
Industry; Cipla was founded in 1935 by Dr. K A Hamied. First Indian company to be approved by
US FDA in 1985 Through the comprehensive partnership approach model, Cipla has been
dedicated to providing access to medicines to US patients for over 30 years
Cipla has

~5% market share 13 specialized divisions catering to wide range of therapeutic areas
Market leader in 3 therapies Respiratory, Urology, ARV
7 brands in the top 100 (2nd highest for any company)
Largest field force in India with ~9,400 employees
More than 85% of medical practitioners in India prescribe Cipla products
Focus on enhancing patient awareness, medical education
Network of 6500 distributor partners helps Cipla reach 700,000 pharmacists

The Global business of Cipla includes Africa, Middle East, Latin America, Asia-Pacific (excluding

India), Russia, Australia & New Zealand Presence across 120+ countries
Relationship with 100+ partners Market leader in many countries High focus on Africa contributes
50% of international sales Strong tie-ups with governments and funding agencies Strengthened
front end presence over the last 18 months in 16 markets, examples include Morocco, Algeria,
Yemen, Sri Lanka, Uganda.

API

A pioneer in API manufacturing in India for over 5 decades, Cipla

currently manufactures more than 200 generic and complex APIs

Repiraotry

Cipla has been at the forefront of innovation for inhalation therapy

in India
Cipla offers the worlds largest portfolio of inhalation products,
with 27 molecules and combinations

Cipla Global
Access

Cipla Global Access (C-GA) is a tender based institutional business

that concentrates on four key therapy areas: HIV/AIDS, malaria,
multi drug-resistant tuberculosis, and reproductive health.

Veterinary

Cipla Vet, Ciplas animal health division, is Indias largest Veterinary

Pharmaceutical Exporter with a presence in over 100 countries.
Figure 6: Strategic Business Unit-Cipla

18

7.3 Sun Pharmaceuticals

Sun Pharma is a leading global specialty generic and Indias top pharmaceutical company was
established by Mr. Dilip Shanghvi in 1983 in Vapi. A vertically integrated business, economies
of scale and an extremely skilled team enable it to deliver quality products in a timely manner at
affordable prices. It provides high quality, affordable medicines trusted by customers and patients
in over 150countries, globally.

More than 150 Markets served

Largest Indian pharmaceutical company in emerging markets
US$ 4.5 billion Global revenues per year
More than 2,000 Products marketed
No. 1 Rank by prescriptions with 13 different doctor categories in India
48 Manufacturing facilities across six continents
5th largest generic pharmaceutical company in the US

The 2014 acquisition of Ranbaxy will make the company the largest pharma company in India,
the largest Indian pharma company in the US.

API

APIs such as warfarin, carbamazepine, etodolac, and clorazepate,

as well as anticancers, steroids, peptides, sex hormones, and
controlled substances

Global
Consumer
Healthcare
Business

Consumer Healthcare (CHC) is a separate business division

engaged in developing and marketing over-the-counter (OTC)
products in India. This division offers five key brands and many
products, including two of the top 10 OTC brands Revital and
Volini

Branded
Generics
Business

Products have the hallmark of technology-based differentiation and

cover the full range of dosage forms, including tablets, capsules,
injectables.
Figure 7: Strategic Business Units: Sun Pharmaceuticals

7.4 Lupin Limited

Lupin Limited, headquartered in Mumbai, India is an innovation led transnational pharmaceutica l
company producing a wide range of quality, affordable generic and branded formulations and APIs
for the developed and developing markets of the world.
Founded in 1968 by Dr. Desh Bandhu Gupta with vision and dream to fight life threatening
infectious diseases and to manufacture drugs of the highest social priority. Lupin has been able to
achieve the distinction of becoming one of the fastest growing Generic pharmaceutical companies
globally. Lupin first gained recognition when it became one of the world's largest manufacturers
of Tuberculosis drugs. The Company today has significant market share in key markets in the
19

Cardiovascular (prils and statins), Diabetology, Asthma, Pediatrics, CNS, GI, Anti-Infectives and
NSAIDs therapy segments, not to mention global leadership positions in the Anti-TB and
Cephalosporin segments.
Lupin is

5th largest and fastest growing top 10 generics player in the US (5.6% market share by
prescriptions, IMS Health, September 2015)
2nd largest Indian pharmaceutical company by market capitalization
9th largest generic pharmaceutical player in Japan
4th largest generic pharmaceutical company in South Africa (IMS Health, March 2016)

Global
Formulations
Business

Lupin is a global leader in Cephalosporins, Cardiovasculars and

the anti-TB space

Active
Ingredients

API group into making further inroads into markets such as US,
Europe, Japan and exploring new opportunities in emerging
markets like China, Brazil, Mexico, Korea and Russia

Advanced Drug
Delivery

Lupins Advanced Drug Delivery program is focused on creating

and leveraging technologies that not only provide clinical
advantage but also transform and facilitate better patient
convenience and experience

Biotechnology

200+ strong Biotechnology Group has developed a robust pipeline

of biosimilars addressing therapies like Oncology, AntiInflammatory, Anti- Virals, Rheumatoid Arthritis, Endocrinology,
Diabetes, Ophthalmology and Womens Health
Figure 8: Strategic Business Units: Lupin Limited

20

8 Alkem Laboratories Competitive Strengths

Market leadership in various therapeutic areas and ability to build market leading brands
in the domestic market
Alkem laboratories is one of Indias leading pharmaceutical companies and it was ranked 5 th in
the Indian pharmaceutical market in terms of domestic sales for fiscal year 2015. For fiscal year
2015, they were the leader in the largest therapeutic area (anti-infective) with a 11.2% market
share and were ranked third in terms of market share for both the gastro-intestinal (with a market
share of 5.6%) and pain/analgesics therapeutic areas (with a market share of 5.0%), in each case,
in India. Their revenues from the anti-infectives, gastro-intestinal and pain/analgesics therapeutic
areas in India grew at a CAGR of 10.1%, 17.5% and 12.0% in the period from fiscal year 2011 to
fiscal year 2015. In the same period, these therapeutic areas in India as a whole grew at a lower
CAGR of 6.8%, 12.8% and 10.9%, respectively. They are also among the top ten companies in
the vitamins, minerals, nutrients and gynaecology therapeutic areas in terms of Indian market share
for March 2015.

Extensive sales, marketing and distribution network in India

They have strong sales, marketing and distribution capabilities in India. Their marketing and
distribution network in India comprises a field force of 5,856 medical representatives. Their
medical representatives cover all states in India, including rural areas. As of June 30, 2015, their
domestic distribution network includes 39 sales depots, 55 clearing and forwarding (C&F)
agents, 15 consignees and eight central warehouses covering 6,576 stockists.
Further, the integration of their information technology systems with sales and distributio n
infrastructure enables them to standardize their processes, reduce cost, enhance productivity,
improve workflow and communications and improve risk control mechanisms. They have
implemented SAP, which handles all our sales and distribution transactions, demand planning and
sales forecasting process. Further, they have implemented barcode technology at warehouses and
depots to maximize accuracy and efficiency in stock handling.

Strong research and development capabilities which enhance our portfolio

As of June 30, 2015, they employed 483 scientists working on various drug products and
substances in India and the United States. Their research and development department carries out
process development, formulation development and analytical research for their domestic and
international markets. In addition, they also have a regulatory affairs team, which is responsible
for various filings and approvals related to products in India and internationally. They also have a
dedicated in-house team of intellectual property experts, who work towards understanding and
filing with respect to intellectual property rights of our products and processes in various
geographical markets.

Fast growing and established international operations

Alkem has expanded internationally through both organic growth and certain strategic
acquisitions. In addition to the United States, their products are sold in 54 countries, includ ing
Australia, Chile, Philippines and Kazakhstan. Revenues from their international operations have
grown at a CAGR of 45.7% between fiscal year 2011 and fiscal year 2015. The contribution of
their net revenues from our international operations has grown from 12.6% of our net revenues

21

from operations in fiscal year 2011 to 25.3% of our net revenues from operations in fiscal year
2015.

Experienced founders and professional management team

They have seen strong growth under the vision, leadership and guidance of their founders, Mr
Samprada Singh and Mr Basudeo N. Singh, who have both been associated with the
pharmaceutical business for over four decades. Their founders have played a key role in
developing their business and they benefit from their industry expertise, vision and leadership.
They also have a qualified senior management team with experience in the domestic and
international pharmaceutical industries (including those integrated from our acquisitions) across
functions.

8.1 Alkem Laboratories Risks and Threats

Following are a few risks that Alkem laboratories is exposed to:

Their business is subject to extensive regulation. If they fail to comply with the applicable
regulations prescribed by governments and regulatory agencies, our business, results of
operations and financial condition could be adversely affected.

Their top 20 brands account for a majority of their domestic sales. Additionally, certain
therapeutic areas and certain states generate a significant portion of their total domestic
revenue. Their business, prospects, results of operations and financial condition may be
adversely affected if any of their top 20 brands or their other products in key therapeutic or
geographic areas do not perform as expected or if competing products become available
and gain wider market acceptance.

Any manufacturing or quality control problems may damage their reputation for high
quality products and expose them to litigation or other liabilities, which could adversely
affect financial results.

Any shortfall in the supply of our raw materials or an increase in raw material costs or other
input costs may adversely impact the pricing and supply of our products and have an
adverse effect on their business.

Significant portion of their sales in the United States are from our top five customers and
top five products.

Their international operations expose them to complex management, legal, tax and
economic risks, which could adversely affect their business.

They have entered into a number of related party transactions, which may be on less
favourable terms for the Company.

They are subject to risks arising from exchange rate fluctuations.

The availability of counterfeit drugs, such as drugs passed off by others as our products,
could adversely affect goodwill.

Their business is substantially affected by prevailing economic, political and others

prevailing conditions in India.

They may be affected by competition law in India.

22

8.2 Alkem Laboratories Strategy

8.2.1 Consolidate and further grow domestic sales

Alkem Laboratories intends to continue to consolidate their market leadership positions in
therapeutic areas such as anti-infective, pain and gastroenterology and aims for growth in these
areas through the following initiatives:
1. Focus on brand building and driving the growth of focused set of brands with high growth
potential
2. Identification of gaps in product portfolio for the introduction of new products
3. Growth in prescriptions and prescriber base in key specialty areas
4. Investing in the training and effectiveness of field force
5. Increasing market shares in those geographies where their market shares are lower than the
national average.
In addition, it intends to build its market shares in fast-growing therapeutic areas such as
cardiology, diabetology, neuro-psychiatry, dermatology and oncology.
They also intend to selectively pursue areas with growth opportunities such as development of
biosimilar products especially monoclonal anti-bodies and therapeutic proteins in various
therapeutic areas such as oncology, osteoporosis, psoriasis and rheumatoid arthritis as well as
entering therapeutic areas that are complementary to or synergistic with their existing portfolio.

8.2.2 Continue to grow business in their international focus markets

As part of their growth strategy for the United States, they intend to further grow their operations
through their Subsidiary Ascend, by leveraging its established relationships with key retail and
national accounts. In addition to products manufactured, Ascend will also continue to expand its
product portfolio by in-licensing products from third parties. Further, they are looking to market
and sell drugs/products that they develop for the United States in other developed and emerging
markets.
Their focus is on select geographies such as Australia, Europe, Chile, Kazakhstan and Philippines,
where they want to consolidate their presence. Growth strategy in these markets will be to create
strong local presence and expertise with required infrastructure and develop capabilities to exploit
growth potential offered by these markets. Their strong focus will remain on acquiring new
customers, retaining existing customers and providing strong customer service and support.

8.2.3 Focus on research and development

They intend to increase their initiatives in research and development in order to enhance their
differentiated product portfolio in both the domestic market and international markets and to
enhance ANDA filings in the United States. They are looking to focus on formulation development
and API research. Further, they have identified biosimilars as a long-term growth opportunity.

23

8.2.4 Developing differentiated product portfolio

They are also working towards developing their capabilities and expertise in niche areas with high
entry barriers such as modified release products, transdermal products and osmotic controlled
release oral delivery systems. Their in-house R&D capabilities are integral to the success of their
business and provides them with the capacity to develop a wide range of dosage forms and APIs.

8.2.5 Use of strategic international and domestic acquisitions and partnership

arrangements to enhance growth
In the past, they have used a combination of organic initiatives and acquisitions to drive growth,
and they intend to continue to use this strategy in the future. They have undertaken acquisitions as
part of their entry strategy into new geographies or new market segments. For instance, in July
2010, they acquired ThePharmanetwork LLC in the United States, the holding company of Ascend
Laboratories LLC. ThePharmanetwork LLC provided them with the commercial platform through
which they were able to market and sell their portfolio of products in the United States. They have
also recently acquired a manufacturing facility with capabilities of manufacturing semi-solids,
liquid and nasals in the United States. They intend to continue to actively seek and evaluate
potential acquisitions of brands, companies or assets that will enhance their capabilities. As regards
their international business, they plan to continue to acquire targets to enhance their capabilities,
enter new market segments and expand their presence in their focus markets.
In addition to using strategic acquisitions to drive growth, they also intend to enter into partnership
agreements for out-licensing and in-licensing pharmaceutical products. They have relations hips
with various pharmaceutical companies in various countries. In particular, they have been
increasing their operations in Germany, central and Eastern Europe, Vietnam, Colombia and South
Africa through their relationships with established pharmaceutical companies in these countries.
In these markets, they typically register a product under their name and thereafter out-license to
one or more of the established companies to leverage their marketing infrastructure and capabilities
in these markets. They continue to own the registration and associated intellectual property with
the product. They will continue to leverage their international product portfolio and their
relationships with the companies in these countries to grow their international operations.
As regards their strategy on in-licensing, they collaborate with innovator companies to launch
differentiated products in the domestic market, which forms an important part of the new products
launch strategy. They have strategically identified segments such as anti-infectives, cardiology,
diabetology, neuropsychiatry and dermatology for potential collaborations. They have
collaborated with innovator companies for launching new products in anti-diabetic, osteoarthritis,
dermatology and anti-infective space. They intend to identify the right international companies to
in-license products for the domestic market.

24

8.3 Pharmaceuticals Porters Five Forces

Competitive Rivalry

Growth opportunities for Pharma

companies is expected to grow in next few yearmany
Threat of New Entrants
drugs going off-patent in the US and 5other countries. Thus, increasing competition.

Indian Pharma companies will face competition from big Pharma companies backed huge
4
financial muscle
3

Bargaining Power
of Buyers

Bargaining Power
of Suppliers

Threat of Rivalry

Threat of Substitutes
Figure 9:Porter's 5 forces

Threat of new entrants

Strict government regulation for entry of new player

Difficult to survive due to high gestation period

Threat of Substitutes

Threats of substitutes is low however, homeopathy and Ayurvedic medicines could act as
substitutes

Bargaining power of suppliers

Difficulty to manufacture APIs such as steroids, sex hormones and peptides gives
bargaining power to suppliers

Generic APIs do not have much of that power

Bargaining power of customers

Generic drugs offer a cost effective alternative to drug innovators and significant savings
to customers

Biosimilars offer significant cost saving for insurance companies in India

25

8.4 SWOT Analysis of Indian Pharmaceutical Industry

Strength
Matured
Industry- Large
Home Market
Fast Changing
Lifestyle
Low cost
manufacturing
Quick adoption
of new
technology
Increasing
population and
per caipta
Income

Weakness
Lack of pricing,
Power impact
growth
Low margins
Lower investment
in R&D
Highly fragmented
industry
Intense
competition
High exposure to
global marketsboth political and
currency risk
High input costs
due to inflation

Opportunity

Threat

Potential to
absorb high
priced products
Opening of OTC
segment
Large number of
drugs going off
patent
Increasing
penetration of
Insurance
industry
Biosimilars

Non tariff
barrier imposed
by developed
countries
Internal
fragmentation
Chinese
intrusion into
domestic
markets
Small number of
discoveries
Outdated sales
and marketing
methods
Increasing
influence of
foreign MNCs

Figure 10:SWOT analysis

26

9 Competitor Analysis
9.1 Dr. Reddys

Business Strategy

Figure 11:Business Strategy

Dr Reddys core purpose is to provide affordable medicines to enable people lead healthier lives.
Through its branded and unbranded generics company offers low cost alternatives to highly priced
innovative brands. Some examples are company successfully introduced Fluoxetine (generic
version of Prozac), Donepezil hydrochloride tablets (generic version of Aricept), Venlafa xine
(generic version of Effexor XR) and Letrozole (generic version of Femara). Company capitalizes
on low labour and manufacturing costs in India by producing and exporting these generic drugs to
other markets. It also capitalizes on economies of scale achieved through centralized production.
Company also produces and markets APIs/bulk drugs at low costs to both domestic and exports
market. Thus company follows overall cost leadership business strategy in case of Generic drugs
and APIs.
Dr Reddys is also using its R&D to bring differentiated formulations and New Chemical Entities
(NCEs) into the market. Its strategy with respect to these products is overall Differentiation as it
tries to bring new effective drugs into the market.
Dr Reddys operates in highly dynamic environment due to intense rivalry in the industry and
changing regulations.

Value net analysis

Customers

Companys strategy from beginning is to provide low cost and high quality drugs to the customers.
In this direction it has launched generic versions of many patented drugs (Lipitor, Prozac, etc) and
made good profits. Company has launched 65 products last years and is planning to launch another
55 products this year. It is not big work for company as it has already launched these products in
several other markets.
27

Made an agreement with GSK to sell its products in markets other than India through GSKs global
marketing network. This step will increase the market access to Dr Reddys in some emerging
economies like Brazil, Latin America, Africa, the Middle East and Asia Pacific, excluding India.
The Company has entered into an agreement with its customers for the API segment to set-up their
facilities near the manufacturing operations unit of Dr. Reddys. This has ensured higher switching
costs for the buyers of Dr. Reddys.
Dr Reddys is fastly making steps to provide its drugs to rural customers. It has put together a new
brand portfolio for such markets (Redikate, Redihealth and Redihope, to name a few) based on the
insight that rural prescriptions are often different from urban prescriptions. Dr Reddy's is trying
three models to reach the customers in rural areas:

The first plan is to use local entrepreneurs who can diagnose ailments like hypertensio n
and refer patients to doctors. They could be paid for every referral. The model, like
Hindustan Unilevers Shakti, is self-sustaining and scalable

The second plan is to link people through health camps. In fact, Dr Reddy's has held
anaemia camps in the last three months for 50,000 villagers, of which 40 per cent were
found anaemic

The third plan is to use the infrastructure of agencies and programmes which are already
there in villages, like the World Health Foundation and ITC's e-choupal

Substitutors

Dr Reddys is in all game to increase its market share in India. Seeing that urban markets are
saturated with huge presence of competitors from domestic and foreign MNCs, it is putting as its
efforts to quickly penetrate into rural markets. It has increased its field force by adding 1000
representatives to quickly setup network with doctors and medical practitioners in the rural areas.
The problem is Substitutors are also eager to join the rural bandwagon. So company is making fast
steps to quickly capture the market and gain the first mover advantage.
In US markets, company has been aggressive in litigious para IV filings to launch new generic
drugs. In the late 1990s Dr. Reddy's was the original action hero in taking on the large
multinationals and launching generic versions of their products. It was also the early one to start
the trend of settling with multinationals to arrive at a middle ground to launch drugs. In 2006
company changed its US strategy to special therapy segments from core segments in the face of
lost litigations against Pfizer.
As an additional differentiation, Dr. Reddy's is increasing its focus on bio generics, an area not
many large companies are focusing on. It already has three products, though it competes with
Roche, the innovator company of the drugs.
9.1.1.1 Suppliers
Dr Reddys API manufacturing plants supply most of the raw materials required for the companys
formulations manufacturing. This gives the company lot of flexibility and control with regards to
raw materials supply and also minimizes the raw materials cost which forms almost 40% of total
cost. In case of other required materials it uses broad base of suppliers in order to minimize the
risk arising from dependence on a single supplier. It prescribes strict supplier code of conduct and
requires its suppliers to be US FDA approved plants.

28

Complementors

In order to enhance business, Dr Reddys frequently seeks to acquire or make strategic investme nts
in complementary businesses or products, or to enter into strategic partnerships or alliances with
third parties. In September 2005, it entered into a co-development and commercializa tio n
agreement with Denmark based Rheoscience A/S for the joint development and commercializa tio n
of Balaglitazone (DRF 2593), a partial PPAR-gamma agonist, for the treatment of type 2 diabetes.
During the year ended March 31, 2011, it entered into collaborations with discovery biotechnolo gy
companies to initiate new chemical entities (NCEs) and differentiated formulations programs in
the therapeutic areas of interest. In addition company has in house R&D division working on
several differentiated formulations, biosimilars, ANDAs for generics and new molecule
innovations. Some of its developments were in Clinical trials and human trials phases.

PARTS Analysis
Players: In the Indian Pharmaceutical market players are mainly the domestic companies and foreign
MNCs. As the industry is highly fragmented and competition is high, these players are always on their
toes to retain and increase their market share. Other players include Suppliers (in most cases the
companies themselves), Indian Government and Regulatory framework, US FDA, buyers (doctors,
hospitals, retailers and patients), Alliance partners (R&D houses).
Added Values: Dr Reddys has done much value add activities from its inception. It is successful in
bringing many low cost generic version drugs making them affordable to many customers across. It did
so by taking litigation gambling of fighting Big Pharma through para IV filings. It entered into alliance
with GSK to market and distributes its products to Latin America and Asia pacific markets where GSK has
strong distribution network. It formed alliances with other domestic and foreign R&D houses to
innovate new molecules, differentiated formulations and ANDAs. It cut down its API manufacturing
business as it became little value add due to decreased margins. It sources raw materials for its generics
manufacturing from its own API plants, thus reducing supplier dependency, costs and increasing
flexibility.
Rules: It followed GMP (Good Manufacturing Practices) to manufacture high quality products. It
enforced strict supplier code of conduct to ensure high quality of raw materials supplied.
Tactics: Company played generics tactic in US. It used its R&D to develop ANDAs and launched these
generics in US to gain the market share. In expanded though acquisitions and alliances in international
markets and became the worlds top five generics producer. But, throughout it ignored domestic
market. Failures in some International markets (Germany) made the company rethink its strategy and
made company realise that it is cost competitive but not cost conscious. It moved its focus now to only
its top five markets and is aiming to be in top 5 in all these markets. It has fired all its cylinders and is
aggressively launching various products across to gain the market share. It sees huge Indian rural market
potential and it making fast steps to gain first mover advantage in this market. . In 2002-03 when the
Indian Pharma companies were at crossroads of choosing between R&D and generics development, it
has chosen a R&D route different from the competition. As the company consistently believed in R&D
and product innovation to develop new molecules. It formed alliances in this regard with foreign R&D
houses.

29

Scope: DR Reddys started as API manufacturer. It soon increased its product scope to bring in Generics
and branded formulations seeing the patent expiries and capitalizing on Indias process patents rule. It
increased its market scope by rapidly expanding into countries like UK, Russia, Germany , etc. It formed
alliances to expand into other small markets. Now it is all guns to gain domestic share and is rapidly
laying path to capture rural in roads.

Technology Strategy

Generics Generic Drugs are low cost reinforced versions of actual patented drugs.
Here, the core concept, basic mix and linkages are not changed

Biosimilars High Quality and bio equivalent alternative of the innovative drugs. Here
the core concept is not changed but the architecture is changed to bio equivalents

Differentiated Formulations/NCEs: These are new drug innovations of the company to

cure the diseases

International Strategy

Figure 12:International Strategy

DR Reddys has followed Global international strategy. It produced standardized drugs mostly
through its plants in India, and marketed and sold in different international markets. It has achieved
economies of scale through centralized manufacturing in six FDA approved plants in India. It also
benefited from low labour and manufacturing costs in India.

30

9.2 Sun Pharma

Strategy outline

Focus on s uper
s peciality
pres criber a nd
thera peutic niche
s egments such as
ps ychiatry,
neurology

Ma rketing
s tra tegy cl early
focus sed on
opti mizing profits

Pri ci ng strategy
ba s ed on par with
the l eading players

Product s ta rtegy is
to provi de a
compl ete ra nge of
products i n a given
pres criber format

Attra cti ve
i ncentives on
a chi ving targeted
s a les

Figure 13:Strategic outline

Growth Strategy
Create Sustainable revenue streams

Enhance share of specialty business globally

Achieve differentiation by focusing on technically complex products
Focus on key markets achieve critical mass
Speed to market
Ensure sustained compliance with global regulatory standards

Cost leadership

Vertically integrated operations

Optimize operational costs

Business development

Use acquisitions to bridge critical capability gaps. E.g.-Acquisition of Ranbaxy and

Novaritis
Focus on access to products, technology, market presence
Ensure acquisitions yield high return on Investment
Focus on payback timelines

Balance profitability & investments for future

Increasing contribution of specialty and complex products

Future investments directed towards differentiated product

31

Strategic moves in 2015-16

Ramping up specialty pipeline

In-licensed Tildrakizumab (a monoclonal antibody targeting IL-23) from MSD for treating
chronic plaque psoriasis
Entered into a joint venture with Intrexon Corporation for developing gene-based therapies
for ocular diseases
Acquired Dusa Pharma in US - Enabling access to patented drug-device combinatio n
useful for treating Actinic Keratosis, a dermatology ailment
Acquired InSite Vision - Focuses on developing new specialty ophthalmic products, has
three late stage programs

Branded businesses in the US, India and RoW

Ranked no. 3 branded dermatology company in the US market

Market leader in specialty chronic segments in India
Among the largest Indian companies in branded emerging markets

Complex generics in the US

Firmly established as the no. 1 supplier of generic dermatology products in the US

Current offerings in the US include many specialty generics across different dosage forms.
Future product development targeted at complex generics
One of the few companies globally to have farm-to market capabilities for controlled
substances
Key focus areas include dermatology, ophthalmic, oncology, controlled substances, among
others

9.3 Cipla

Key strengths and capabilities

Leading healthcare provider for the merging world

Strong product pipeline backed by innovation and strategic alliances
World class manufacturing infrastructure and quality culture
Unmatched capabilities in Respiratory
Profitable global access business based on cost leadership and therapy expertise

Growth strategy
Strong Product Development & Filing Capabilities
Continue to invest in pipeline

Ensure on-track progress for development and filing timelines of top 50 projects

Accelerate execution plan for in-house biologics clinical trial for Bevacizumab, proofof-concept for 2-3 other products

Target R&D spend to continue to increase, up to ~8% of sales

Enhance leadership position in key emerging markets

32

India growth plan to target above market rate of growth, with focus on in-licensing and
new product introductions

Retain momentum in South Africa and continue to focus on building private market share

Retain leadership in key front-ends, such as Yemen, Sri Lanka, North Africa and Iran, with
focus on respiratory, oncology and global access segments

Upcoming North America franchise

Enhance scale of US DTM play through seamless integration of InvaGen and Exelan
businesses
o

Launch 5-7 products in InvaGen pipeline

Launch 8-10 products from Cipla pipeline, including some in limited -com peti tio n
areas

Target filing of 20-25 ANDAs in 2016-17, including some respiratory and

oncology filings

Continue to build on successful partnerships for launch of first-to-market and

differentiated generics

Impeccable Manufacturing capability and Quality focus

Maintain best-in-class quality record with key regulatory entities

Market Strategy
Strategic Tie-Ups

Cipla has set up a wholly owned subsidiary, Cipla FZE situated at Jebel Ai Free Zone in Dubai,
United Arab Emirates. This is the part of strategy to explore the growing markets in Middle East
countries through exports. Cipla entered agreement with Pentech Pharma of USA for marketing
a range of generic products for American market. Pentech is involved in developing therapies for
lifestyle and quality of life conditions. This will further boost its export performance.
Low-risk business model

Robust partnership model CIPLA has entered into global tie-ups with various generic players
(like Watson, Mylan, Barr and Ivax) for supplying its generic products. This strategy enables Cipla
to leverage local market knowledge of its partners and utilize its own R&D, product development,
and manufacturing skills. Cipla's offer to sell anti- aids drugs at one-third the price to developing
countries like South Africa or any other country. The questions were raised against the strategy
the company follows but Cipla is not committing any illegal or unethical act as it is entitled to sell
anti- aids drugs in any country that does not have the requisite patent protection. Cipla is not using
pirated technology since India does not have a product patent regime. Therefore, Cipla has the
right to develop and reverse engineer any pharmaceutical product not protected by the country's
laws. Therefore, the issue is whether Cipla is selling its products below its costs or is it able to sell
cheaply because it has not incurred any research and development (R&D) expenses like
multinationals incur in developing drugs. Cipla is entitled to "make hay while the sun shines', in
other words, capitalize on a sympathetic patent law in India, but keeping in mind that after 2010,
the world (and Indian) pharmaceutical industry will become a "jungle', where only the "fittest' will
survive.

33

10 Key Success Factors

Key success factors common to every organization touch on financial image, technologica l
reputation, market share, risk, profit, employee morale and performance. Key success factors
identify the performance areas of greatest importance in implementing the company's strategies
and must therefore receive continuous management attention. Some of the Key Success Factors
related to pharmaceutical industry are as follows.

Market Position

Companys competitive market position, which could be quantitatively and qualitative ly

determined using the companys market share, size in terms of sales value and volume, as well as
its growth history and anticipated growth prospect going forward. Brand recognition or brand
equity is also important particularly for over the counter (OTC) branded products. Strong market
position leads to stronger bargaining power to distributors, hospitals, physicians and retailers. In
addition, the analysis considers any opportunities for having alliances with other leading global
pharmaceutical producers and additional licenses to grab potential new market.

Product Mix and Development

It includes companys diversification strategy and policy in terms of demographic profile, products
and market segments in an effort to maintain steady revenue and profitability. Pharmaceutica l
industry is identical with high variety types of product that generates wide range of profits.
Managements strategy to focus on higher margin products is important. We also need to consider
the companys research and development (R&D) capabilities, including the cost allocation to its
total sales and policy related to new products to be invented.

Operating Management

It implies how well the company manages its daily business operation, as a failure to effective ly
and efficiently manage the operation would adversely affect the companys future operating
results. The companys cost control strategy and policy is also diligently assessed, as the
companys strong ability to control costs is crucial, particularly for low margin nature of generic
pharmaceutical. Generally, larger players have competitive advantages, as they have stronger
bargaining power and economies of scale in purchasing, logistics and advertising. Condition and
utilization of the equipment and the integration of technologica l improvements will also become
important factors to achieve the companys degree of efficiency in its operational activities.

Marketing and Distribution Channel

This factor examines the company's strategies to distribute products (how well the company adopts
to the needs of retailers, how well the distribution matches the retail forms, how well the company
manages distributors, what kind of linkage/relationship/agreement between the company and
distributors) and examines others related factors that can ensure continuous product availability in
the market in an effort to support sales. The companys ability to maintain good relationships with
its business network (including with distributors and retailers) as well as terms and condition of
the cooperation are further assessed in rating determination.

34

Inclusion of patent protection

It is of prime importance to the pharmaceutical industry where new innovative products are
protected This creates an entry barrier and can be a route to above-average profits in the industry.
A technological breakthrough can have a sudden and dramatic effect on a firms environment. It
can spawn sophisticated new markets and products or significantly shorten the anticipated life of
a manufacturing facility. This applies to the pharmaceutical industry where technology is driving
innovation and research is currently centered at the molecular level to come with up with new
therapies for illnesses such as cancer, acid related disorders and metabolic illnesses.

Industry profitability

It is one of the critical success factors of a profitability is the maintaining goal of a business
organization no matter how profit is measured or defined. Profit over the long term is the closest
indication of a firms ability to satisfy the principal aims and desire of employees and stock
holders.

Financial Policy

This includes a review of management's philosophy, strategy and policies toward financial risk
(historical, current and future). It also includes examination of management's financial targets
(growth, leverage, debt structure and dividend policy), hedging and other policies in an effort to
reduce the company's overall financial risk (historical vs. future). The company's track record on
fulfilling its previous financial obligations is also examined to determine the degree of its
commitments and willingness and consistency to pay obligations on a timely basis.

Capital Structure

This contains company's historical, current and projected leverage (total and net debt in relation to
equity and EBITDA), debt structures and composition (rupiah vs. Foreign currencies, short-term
debt vs. long-term debt, fixed rate vs. floating rate). Management of its liabilities is also thoroughly
reviewed.

Human resources

It represents a valuable intangible asset. Latest study research indicates that human resources are
progressively becoming the key success factor in organizations especially in strategy
implementation. However, employees have to be motivated in order for them to work hard. The
employee motivation comes in terms of rewards. Some employees are motivated through
recognition which often may be through financial rewards. Action plans and short term objectives
that clarify personal and group roles in a firm's strategy that are also measurable, realistic and
challenging. This is very important for the pharmaceutical industry where personal selling through
medical representatives is the widely used promotional mix in reaching the target audience.
Apart from above other important critical success factors in the pharmaceutical branch are
customer orientation and social responsibility.

35

11 Future Scenario
11.1 Indian Scenario
The Indian pharmaceuticals market increased at a CAGR of 17.46 per cent in 2015 from
USD 6 billion in 2005 and is expected to expand at a CAGR of 15.92 per cent to USD55
billion by 2020
By 2020, India is likely to be among the top three pharmaceutical markets by incrementa l
growth and sixth largest market globally in absolute size
Indias cost of production is significantly lower than that of the US and almost half of that
of Europe. It gives a competitive edge to India over others.
Increase in the size of middle class households coupled with the improvement in medical
infrastructure and increase in the penetration of health insurance in the country will also
influence in the growth of pharmaceuticals sector.
Indias patient pool is expected to increase to over 20% in the next 10 years, mainly due to
the rise in population.
Following the introduction of product patents, several multinational companies are
expected to launch patented drugs in India
Pharma companies have increased spending to tap rural markets and develop better
infrastructure. The market share of hospitals is expected to increase from 13.1% in 2009 to
26% in 2020.
With increasing penetration of chemists, especially in rural India, OTC drugs will be
readily available.
The Indian government has taken many steps to reduce costs and bring down healthcare
expenses. Speedy introduction of generic drugs into the market has remained in focus and
is expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural
health programs, lifesaving drugs and preventive vaccines also augurs well for the
pharmaceutical companies.
Rising levels of education are set to increase the acceptability of pharmaceuticals.

11.1.1 Government Initiatives:

The Government of India recently launched 'Pharma Vision 2020' aimed at making India
a global leader in end-to-end drug manufacture. Approval time for new plants, facilities
has been reduced to boost investments in this sector. Further, to deal with the issue of prices
of medicines, the government introduced mechanisms such as the Drug Price Control Order
and the National Pharmaceutical Pricing Authority.
Some of the major initiatives taken by the government to promote the pharmaceutica l
sector in India are as follows:
Increase Foreign Direct Investment (FDI) in existing pharmaceuticals companies to 74 per
cent is expected to boost Mergers and Acquisitions (M&As) and Private Equity (PE)
investments in the pharmaceuticals sector in the country.
Indian Pharmaceutical Association (IPA), the professional association of pharmaceutica l
companies in India, plans to prepare data integrity guidelines to measure and benchmark
the quality of Indian companies with global players.

36

 The Government of India plans to incentivize bulk drug manufacturers, including both
state-run and private companies, to encourage Make in India initiative and reduce
dependence on imports of Active Pharmaceutical Ingredients (API), nearly 85 per cent of
which come from China.
The Department of Pharmaceuticals has planned to launch a venture capital fund of Rs
1,000 crore (US$ 148 million) to support start-ups in the R&D in the pharmaceutical and
biotech industry.
At the launch of Cluster Development Program of pharmaceutical sector, Mr. Ananth
Kumar, Minister of Fertilizer and Chemicals, announced that six pharmaceutical parks will
be approved and established this year which will have sufficient infrastructure and facilities
for testing and treatment of drugs and also for imparting training to industry professionals

11.2 Global Scenario

The current weakness of the euro and other currencies against the U.S. dollar and while
spending growth is expected to pick up beginning in 2016, the pressure to reduce costs,
increase efficiency, and prove value remains intense. Because of these contradictory trends,
global health care spending is expected to increase by only an average of 4.3 percent in
2015-2019
Entering the second half of this decade, most life sciences organizations appear to be
adopting an attitude of cautious optimism
Spending growth in pharmaceuticals (pharma), biotechnology (biotech), and medical
technologies (medtech) is projected to follow an upward trend due to increasing demand,
but pricing challenges are still an issue

Vaccines

Human-computer
interfaces

Regenerative
medicines

Vaccines to
prevent
new infectious
diseases

Biomonitiring
technologies
and implants

Vaccines to
treat
chronic diseases
and addictions

Self -regulating
Drug Delivery
technologies

Tissue
replacement

M ind-controlled
Prosthetics

Autologus
replacement
body parts

Vaccines to
prevent diseases
and addictions

Tissue Repair

Artificial organs
and
exoskeletons
Figure 14:New Technologies in Healthcare

Source: From vision to decision Pharma 2020 by pwc

37

12 The challenges ahead for the Company

Business is subject to extensive regulation: ALL (Alkem Laboratories Limited) operates in

industry which is highly regulated industry and its operations are subject to extensive
regulation in each market in which it does business. Regulatory authorities in each of these
markets must approve its products before ALL or its distribution agents can market them.
There could be a delay in the submission or grant of approval for the manufactur ing and
marketing new products due to failure in compliance with the regulatory environment.
The regulatory uncertainty associated with pharmaceutical pricing, reimbursement and
related matters could adversely affect the marketing, pricing and demand for the products
Changing laws, rules and regulations and legal uncertainties in India, including adverse
application of tax laws and regulations, may adversely affect the business and financ ia l
performance
Top 20 brands account for a majority of domestic sales. ALL is heavily dependent on its
top 20 brands, which together generated 54.8% of its total domestic revenues for fiscal year
2015. This revenue from therapeutic areas may decline as a result of increased competitio n,
regulatory action, pricing pressures or fluctuations in the demand for or supply of its products.
Similarly, in the event of any breakthroughs in the development of alternative drugs for these
therapeutic areas, its products may become obsolete or be substituted by such alternatives.
Any manufacturing or quality control problems may damage reputation for high quality
products and expose to litigation or other liabilities, which could adversely affect financ ia l
results
Delay in production at, or shutdown of, any of manufacturing facilities could adversely
affect business, results of operations and financial condition. The success of ALLs
manufacturing activities depends on, among other things, the productivity of its workforce,
compliance with regulatory requirements and the continued functioning of its manufac tur ing
processes and machinery. Additionally, it relies on certain third party contract manufacturers
for the supply of certain products. In the event that there are disruptions in the manufactur ing
facilities of such third party contract manufacturers, it will impact ALLs ability to deliver such
products and meet with its contractual commitments
Any shortfall in the supply of raw materials or an increase in raw material costs or other input
costs may adversely impact the pricing and supply of products. Raw materials (includ ing
packaging materials) are subject to supply disruptions and price volatility caused by various
factors, including commodity market fluctuations, the quality and availability of supply,
currency fluctuations, consumer demand, changes in government programs and regulatory
sanctions. Substantially all its raw materials are purchased from third parties.
Decreased opportunities to obtain U.S. market exclusivity products may adversely affect
revenues and Profits. ALLs ability to achieve continued growth and profitability through sales
of generic pharmaceuticals is dependent on its success in challenging patents, developing noninfringing products or developing products with increased complexity to provide opportunities
with U.S. market exclusivity or limited competition.

38

Significant portion of sales in the United States are from its top five customers and top five
Products. Sales to ALLs top five customers accounted for a majority of its total sales in the
United States for fiscal year 2015 and for the six months ended September 30, 2015. If these
customers stop or reduce purchases of products from ALL, it could adversely affect the
business, financial condition and results of operations
The products that ALL commercialize may not perform as expected which could adversely
affect the business, financial condition and results of operations
If research and development efforts do not succeed, this may hinder the introduction of new
products. In order to remain competitive, ALL must develop, test and manufacture new
products, which must meet regulatory standards and receive requisite regulatory approvals. Its
ongoing investments in new product launches and research and development for future
products could result in higher costs without a proportionate increase in revenues.
If ALL inadvertently infringe on the patents of others, its business may be adversely affected.
Patent litigation can result in significant damages being awarded and injunctions that could
prevent the manufacture and sale of certain products or require it to pay significant royalties in
order to continue to manufacture or sell such products. The occurrence of any of these risks
could adversely affect the business, financial condition and results of operations
If ALL cannot respond adequately to the increased competition it expects to face, it will lose
market share and profits will decline. ALL products face intense competition from products
commercialized or under development by competitors in all of its therapeutic areas. It
competes with local companies in India, multi-national corporations and companies in the
countries in which it operates. Many of its competitors may have greater financ ia l,
manufacturing, research and development, marketing and other resources, more experience in
obtaining regulatory approvals, greater geographic reach, broader product ranges and stronger
sales forces. Its competitors may succeed in developing products that are more effective, more
popular or cheaper than any it may develop, which may render ALLs products obsolete or
uncompetitive and adversely affect its business and financial results.
ALL also operate in a rapidly consolidating industry. The strength of combined companies
could affect its competitive position in all of the business areas. Furthermore, if one of its
competitors or their customers acquires any of its customers or suppliers, it may lose business
from the customer or lose a supplier of a critical raw material, which may adversely affect its
business, results of operations and financial condition.
Results of operations are subject to risks arising from exchange rate fluctuations. Although
ALL reporting currency is Indian Rupees, it transacts a significant portion of its business in
several other currencies. Substantially all of its non-Indian revenue is denominated in foreign
currencies, primarily United States Dollars. Additionally, ALL also procure a portion of its
raw material requirements outside India and, as a result, incur such costs in currencies other
than Indian Rupees. ALL is thus exposed to exchange rate fluctuations due to the revenue that
it receives, raw materials that it purchase and its financing arrangements that are denominated
in currencies other than the Indian Rupee.

39

13 Conclusion
The key drivers of growth in pharmaceutical industry include:
1. Rising healthcare awareness leading to an increase in spending on medicines
2. Changing life-styles leading to growing incidence of chronic ailments
3.Improving
health
insurance
coverage driven
by various
measures being
planned/implemented by the Indian government to bring 80% of the population under health
insurance cover
4. Increased access to modern medicines driven by rapid urbanization
The key challenges for the Indian pharmaceutical industry include the following:
Ensuring 24x7 compliance with global cGMP standards; this will involve continuo us
improvement in systems and processes as well as training of the workforce
Government-mandated price controls on pharmaceutical products
Consolidation among customers in the US market
Increasing competition from smaller new entrants
The great companies like ALL are the products of strong values and a determination to
translate those values into tangible outcomes. These iconic companies look beyond industry
challenges, market cycles and behavior and economic volatilities to bring enduring differe nce
to society with the help of great team.
Since foundation in 1973, ALL have emerged as one of the dominant players in the domestic
pharmaceutical Industry .and it is reinforcing footprint on international markets. This
achievement was largely made possible by the determinationand commitment of its
employees .
Rapid change is a constant reality in the pharmaceutical sector globally. With changing
regulatory landscape and intensifying competition, it is imperative for us to learn,adapt and
transform at a rapid pace. ALL must view these changes as an opportunity to raise the bar for
themselves and align their strategies for growth.

40

14 References
[1] What pharma will look like in 2016
http://www.livemint.com/Industry/QqSWwdIchcS59r1oAb1WvN/What-pharma-will-look-like-in2016.html
[2] http://www.businesstoday.in/opinion/deep-dive/expert-view-pharmaceutical-companies-indiachallenges-growth/story/202812.html
[3] Indian Pharmaceutical Industry http://www.ibef.org/industry/pharmaceutical-india.aspx
[4] Lupin Limited http://lupin.com/
[5] Sun Pharmaceuticals http://www.sunpharma.com/
[6] Cipla Limited http://www.cipla.com/en/
[7] Dr. Reddys Laboratory Limited http://www.drreddys.com/
[8] Moneycontrol http://www.moneycontrol.com/
[9] deloitte - 2016 Global life sciences outlook
https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/gxlshc-2016-life-sciences-outlook.pdf
[10]Indian pharma in 2020 http://www.mckinsey.com/~/.../india-pharma-2020-propelling-access-andacceptance.as

41

15 Annexure
15.1 Facility and Production capacity of Alkem Labs:

Facility

1. Alkem - Sikkim
Kumrek

2. Alkem - Sikkim Samardung

3. Alkem - Baddi
Unit 1

Owned/
Leased

Builtup Area
(sq. ft.)

Land - 19,274
Leaseh
old

Land - 12,441
Leaseh
old

Owne
d

27,
502

Year
of
establ
ishme
nt

Manufa
cturing
capabili
ties

Installe
d
Capacit
y*(in
millions
)

Actual
Production

Major
certifications
and
approvals**

Geogra
phical
focus

2007

Tablet

2,556

1,737.60

WHO-GMP

India

WHO-GMP

India

2012

200

Injecta 134.3
bles

78.1

Dry
syrup

9.2

2.1

Tablet

221.8

132.3

Injecta 135
bles

88.7

Dry
syrup

41.4

24.3

Tablet

46.82

15.85

Dry
syrup

0.12

0.02

Capsul
e

116.42

3.81

Immunosu Global
ppre
ssant Block:
USFDA,
UKMHRA,
TGA
Australia,
INVIMA
Columbia

42

Facility

Baddi
Cephalosporin
Block

Baddi General
block

Owned/
Leased

Builtup Area
(sq. ft.)

Year
of
establ
ishme
nt

NA

2005

NA

11,484

2005

2012

Manufa
cturing
capabili
ties

Tablet

Installe
d
Capacit
y*(in
millions
)

Actual
Production

93

17

Major
certifications
and
approvals**

Geogra
phical
focus

Cephalospo India
r
in Block:
ColumbiaIN
VIMA,

Injecta 52.8
bles

17.6

Dry
syrup

13.6

2.8

Capsul
e

229.2

34.5

Tablet

693

463.4

General
India
Block:
USFDA,
UK-MHRA,
TGAAustrali
a,

Capsul
e

332.6

119.3

ColumbiaIN
VIMA

280.9

95.3

WHO-GMP

Sudan,
UAE,
Malawi,
Ethiop

India

43

Facility

4. Alkem - Baddi
lactam

5A. Alkem - Daman

-Amaliya (C Block)

5B. Alkem - Daman

-Amaliya (G Block)

Owned/
Leased

Builtup Area
(sq. ft.)

Year
of
establ
ishme
nt

Owne
d

Owne
d

Owne
d

Manufa
cturing
capabili
ties

Installe
d
Capacit
y*(in
millions
)

Actual
Production

Major
certifications
and
approvals**

Geogra
phical
focus

Tablet

21,789

NA

2002

2000

Injecta 24.5
bles

10.3

Dry
syrup

21.1

15.5

Capsul
es

332.6

105.3

Tablet
/

316.6

101.4

Dry
syrup

6.1

0.2

Tablet
/

1,365.
70

Capsul
es

Cephalospo USA
r
in -Block:
USFDA,
UK-MHRA,
TGAAustrali
a,
MCC South
Africa

Includ
ed in
Tablet
s

843.3

Included
in

USFDA,
USA
UK- MHRA,
TGAAustrali
a,
MCC-South
Africa,
WHOGenev
a

44

Facility

6. Alkem - Daman
lactam

Owned/
Leased

Owne
d

Builtup Area
(sq. ft.)

Year
of
establ
ishme
nt

11,930

2004

NA

Installe
d
Capacit
y*(in
millions
)

Actual
Production

Tablet
-

40

32.5

Capsul
es -

254.1

29.8

Dry
syrup

17

3.4

Manufa
cturing
capabili
ties

Major
certifications
and
approvals**

Geogra
phical
focus

IndianGMP,

Global

Injecta 22.4
bles

4.6

1998

Tablet

N/A

N/A

IndianGMP

India

7. Alkem - Daman
Kachigam

Owne
d

8. Alkem Ankaleshwar

Land - 3,997
Leaseh
old

2001

APIs

N/A

N/A

IndianGMP,

Captiv
e
API
plant
for the
US

9. Alkem Mandwa

Owne
d

26,478

1992

APIs#

N/A

N/A

Indian GMP

India

1,880

2015

116.8

61.8

India

45

Facility

10. Indchemie Daman-Somnath

Owned/
Leased

Builtup Area
(sq. ft.)

Year
of
establ
ishme
nt

Owne
d

Manufa
cturing
capabili
ties

Installe
d
Capacit
y*(in
millions
)

Actual
Production

Capsul
es

Jelly &
Candy

206.9

115.92

Soft
352.4
gelatin

2015

Tablet
-

172.6

167.9

Capsul
es

565.4

544.5

Dry
syrup

28.1

15.2

Ointm
ent

9.4

2.2

11. Indchemie Daman-Amaliya

12. Indchemie Baddi-Beta lactum

Owne
d

11,988

Geogra
phical
focus

ISO
22000:200
5
certificatio

2015
Leased 5,108

Major
certifications
and
approvals**

Liquids 62.4

53.2

Capsul
es

614

693.1

WHO-GMP,
Kenya FDA,
Tanzania

India

WHO-GMP,

India

India

46

Facility

13. Indchemie Sikkim-Kumrek

14. Cachet - Baddi

Owned/
Leased

Builtup Area
(sq. ft.)

Leased 4,422

Owne
d

11,500

Year
of
establ
ishme
nt

2015

2015

Installe
d
Capacit
y*(in
millions
)

Actual
Production

Major
certifications
and
approvals**

Geogra
phical
focus

Capsul
e

65.2

43.5

WHO-GMP

India

Tablet
-

282.7

173.7

Liquid

54.7

46.3

Tablet
-

903.3

823.2

Manufa
cturing
capabili
ties

15. California,
United States

Owne
d

33,000

2012

APIs

N/A

N/A

9001:2008, GLobal
ISO
22000:200
5,
ISO
14001:200
4,
FSSAI
(Food
products),
UAE,
Yemen,
Ethiopia,
Ivory Coast,
Ugand
USFDA
USA

16. St
Louis(Missouri),
United States

Owne
d

75,000

2015

Liquids N/A
, nasal

N/A

USFDA

USA

47

Table 3:CAGR for major companies

Company

Sun

CAGR (%) over the

period fiscal year
2011 and fiscal year
2015
12.2

Abbott

10.8

Cipla

10.8

Mankind

16.2

Alkem

14.2

Zydus Cadila

7.9

Table 4: Market share in 2015

Company

Macleods
25.7
Pharma
GlaxoSmithKline 5.7
Pfizer

9.8

Lupin Limited

13.6

Sun

Market share (%)

for fiscal year
2015
8.4

Abbott

6.5

Cipla

4.9

Mankind

3.7

Alkem

3.6

Zydus Cadila

3.5

Macleods
Pharma
GlaxoSmithKline

3.3

Pfizer

2.9

Lupin Limited

2.8

3.3

Table 5: R&D Expenditures

Company

Dr.Reddy's
Laboratory

SUN
Pharmaceutical

Lupin Limited

Cipla Limited

(Rs Crore)

200910

2010-11

2011-12

2012-13*

2013.14*

2014-15*

Total R & D
expenditure
% to total
turnover
Total R & D
expenditure
% to total
turnover
Total R & D
expenditure
% to total
turnover
Total R & D
expenditure
% to total
turnover

389.7

591.8

624.3

791.5

1263.2

1744.9

8.79

11.26

9.36

6.9

9.4

11.8

159.98

309.61

425.32

310.22

422.39

909.23

8.5

5.09

5.1

13.8

15.09

11.8

411.9

530.09

593.97

770.85

958.28

1118.54

8.7

9.3

8.5

8.1

8.6

8.8

262.68

284.85

323.83

425.14

517.51

844.14

4.6

5.4

8.26

48

Table 6: Market Share of ALL

Therapeutic Areas
Anti-infectives
Gastro intestinal
Pain/Analgesics
Vitamins/Minerals/Nutrients

Rank
1
3
3
3

Market Share (FY 2016)

11.60%
5.70%
5.10%
3.70%

Table 7: Installed Capacity vs. Actual Production

Company

Dr. Reddy's

Class of Goods

Unit

Installed
Capacity

Formulations (iii)

Million
Units
Tonne
Million
Units
Grams
Tonne

6363(5581*)

Actual
Production
(Prev Year)
4759(4282)

4087(3831)
11727(10014)

3560(3267)
6656(6578)

1492.9(1866.1)

13426(6951)
1601.2(1316.9)

Tablets & Capsules

Liquids
Creams
Aerosols/Inhalation
Devices

Million
Kilolitre
Tonne
Thousand

17496.1(16662.4)
3191.5 (1346.4)
689(861.3)
143452.5(96030

17935.3(16632.9)
9009.8(8600.9)
898.9(1021.7)
55256.9(53387.5)

Injection/Sterile
Solutions

k ilolitre

1739(1168)

2525.9(2204.0)

Tablets/ Capsules/
Parenterals /Ointments

Million No.

7157.4(7216.3)

2085.7(2544.4)

Bulk Drugs /Chemicals

KiloLitres

1181.7(1093.6)

2252.5(2227.2)
(000' Kgs)

API
Generics
Biotechnology
Bulk Drugs (including
Malts)
Cipla

Sun
Pharmaceuticals

(Source :http://pharmabiz.com)

49

Table 8: Financial Performance of Lupin Limited

Consolidated Profit & Loss

account

Lupin Limited
------------------- in Rs. Cr. ------------------Mar '16
12 mths

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Miscellaneous Expenses
Total Expenses
Operating Profit
PBDIT
Interest
PBDT
Depreciation
Profit Before Tax
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Minority Interest
Net P/L After Minority Interest
& Share Of Associates
Total Value Addition
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
Book Value (Rs)
Source : Dion Global Solutions Limited

Mar '15
12 mths

Mar '14 Mar '13 Mar '12

12 mths 12 mths 12 mths

14,312.44 12,863.52 11,286.57 9,703.20 7,124.93

103.97
93.51
0
61.9
42.02
14,208.47 12,770.01 11,286.57 9,641.30 7,082.91
187.7
239.75
116.48
27.85
14.35
476.02
145.69
200.41
192.2
316.91
14,872.19 13,155.45 11,603.46 9,861.35 7,414.17
5,277.10
381.27
2,107.69
3,164.98
10,931.04
3,753.45
3,941.15
44.62
3,896.53
463.5
3,433.03
3,433.03
1,153.58
2,279.45
8.76
2,270.69

4,667.38
362.81
1,747.34
2,518.58
9,296.11
3,619.59
3,859.34
9.81
3,849.53
434.7
3,414.83
3,414.83
970.4
2,444.43
41.19
2,403.24

4,296.52 3,978.58 3,112.65

334.29
320.22
268.82
1,464.65 1,248.79
969.53
2,388.73 2,015.95 1,604.11
8,484.19 7,563.54 5,955.11
3,002.79 2,269.96 1,444.71
3,119.27 2,297.81 1,459.06
26.65
41.02
35.47
3,092.62 2,256.79 1,423.59
260.97
332.19
227.52
2,831.65 1,924.60 1,196.07
2,831.65 1,924.60 1,196.07
962.15
584.16
308.56
1,869.50 1,340.44 887.51
33.13
26.28
19.86
1,836.37 1,314.16
867.65

5,653.94
337.94
68.86

4,628.73
337.12
68.64

4,187.67
269.01
24.78

3,584.96
179.01
30.43

2,842.46
152.26
25.45

4,505.83
50.59
243.78

4,494.88
54.38
197.43

4,483.76
41.69
154.59

4,475.29
29.95
116.29

4,466.42
19.87
89.85

50

Table 9:Financial Performance of Sun Pharma

Sun Pharmaceutical Industries

Consolidated Profit & Loss account

------------------- in Rs. Cr. ------------------Mar '15

Mar '14

Mar '13

Mar '12

Mar '11

12 mths

12 mths

12 mths

12 mths

12 mths

27,717.82

16,275.48

11,469.68

8,126.94

5,813.05

284.38

195.12

169.82

107.45

85.15

27,433.44

16,080.36

11,299.86

8,019.49

5,727.90

309.91

-1,965.18

-202.02

470.4

351.55

-114.49

76.54

228.48

448.87

205.77

27,628.86

14,191.72

11,326.32

8,938.76

6,285.22

7,248.23

3,195.44

2,583.24

2,270.97

1,813.07

560.77

232.41

187.1

145.65

96.78

Employee Cost

4,429.86

2,074.44

1,534.53

1,187.73

818.95

Miscellaneous Expenses

7,213.39

3,654.84

2,327.23

1,659.69

1,241.74

19,452.25

9,157.13

6,632.10

5,264.04

3,970.54

7,866.70

6,999.77

4,896.24

3,204.32

1,963.13

8,176.61

5,034.59

4,694.22

3,674.72

2,314.68

578.99

44.19

43.16

28.2

73.88

PBDT

7,597.62

4,990.40

4,651.06

3,646.52

2,240.80

Depreciation

1,194.72

409.23

336.17

291.16

204.85

Profit Before Tax

6,402.90

4,581.17

4,314.89

3,355.36

2,035.95

PBT (Post Extra-ord Items)

6,402.90

4,581.17

4,314.89

3,355.36

2,035.95

914.69

702.17

845.55

313.19

128.58

5,488.21

3,879.00

3,469.34

3,042.17

1,907.37

936.27

737.53

486.28

385.48

91.31

12.56

4,777.13

5,658.88

3,573.17

2,657.80

1,819.29

12,204.02

5,961.69

4,048.86

2,993.07

2,157.47

Equity Dividend

721.95

310.67

517.79

440.12

362.45

Corporate Dividend Tax

146.97

52.8

88

71.4

58.8

Shares in issue (lakhs)

20,711.64

20,711.64

10,355.82

10,355.82

10,355.82

Earning Per Share (Rs)

26.5

18.73

33.5

29.38

18.42

123.53

89.44

144.75

118.15

91.57

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost

Total Expenses

Operating Profit
PBDIT
Interest

Tax
Reported Net Profit
Minority Interest
Share Of P/L Of Associates
Net P/L After Minority Interest & Share
Of Associates
Total Value Addition

Per share data (annualised)

Book Value (Rs)

51

Dr Reddys Laboratories
Consolidated Profit & Loss account

------------------- in Rs. Cr. ------------------Mar '16

Mar '15

Mar '14

Mar '13

Mar '12

12 mths

12 mths

12 mths

12 mths

12 mths

15,782.00

15,106.20

13,359.10

11,895.60

9,814.50

84.2

82.9

15,697.80

15,023.30

13,359.10

11,895.60

9,814.50

-192.8

274.1

169.7

95.7

-3

100.3

55.8

319.6

168.5

152.6

15,605.30

15,353.20

13,848.40

12,159.80

9,964.10

4,171.80

4,219.90

3,753.30

3,787.10

2,851.20

315.2

339.1

319.9

335.4

225.9

3,187.40

2,944.60

2,213.00

1,928.70

1,591.20

243.6

192.9

220.7

188

227.8

3,959.30

3,889.00

3,921.00

3,105.40

2,639.90

11,877.30

11,585.50

10,427.90

9,344.60

7,536.00

3,920.80

3,493.60

3,250.80

2,719.50

2,431.10

3,728.00

3,767.70

3,420.50

2,815.20

2,428.10

82.4

108.2

126.7

100.3

105.6

3,645.60

3,659.50

3,293.80

2,714.90

2,322.50

970.5

759.9

647.5

550.2

518.1

Profit Before Tax

2,675.10

2,899.60

2,646.30

2,164.70

1,804.40

PBT (Post Extra-ord Items)

2,675.10

2,899.60

2,646.30

2,164.70

1,804.40

523.7

563.2

683.1

637.9

503.5

Reported Net Profit

2,151.40

2,336.40

1,963.20

1,526.80

1,300.90

Net P/L After Minority Interest & S hare Of Associates

2,613.50

2,336.40

1,963.20

1,581.00

1,436.20

Total Value Addition

7,705.50

7,365.60

6,674.60

5,557.50

4,684.80

340.5

340.8

306.2

254.8

233.1

69.3

69.4

52

43.3

37.8

1,706.08

1,703.81

1,701.09

1,698.36

1,695.60

126.1

137.13

115.41

89.9

76.72

685.84

578.3

462.36

375.01

294.23

Income
S ales Turnover
Excise Duty
Net S ales
Other Income
S tock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Miscellaneous Expenses
Total Expenses
Operating Profit
PBDIT
Interest
PBDT
Depreciation

Tax

Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
S hares in issue (lakhs)
Earning Per S hare (Rs)
Book Value (Rs)

52

Table 10: Financial Performance of Cipla Limited

Cipla
Consolidated Profit & Loss account

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments

------------------- in Rs. Cr. ------------------Mar '15

Mar '14

Mar '13

Mar '12

Mar '11

12 mths

12 mths

12 mths

12 mths

12 mths

11,454.47

10,217.53

8,279.33

7,020.71

6,323.84

109.03

117.14

11,345.44

10,100.39

8,279.33

7,020.71

6,323.84

165.55

265.37

261.91

139.52

91.68

344.22

64.25

290.6

-5.65

138.87

11,855.21

10,430.01

8,831.84

7,154.58

6,554.39

4,632.60

4,030.57

3,335.01

2,831.12

3,029.50

228.29

218.63

233.12

235.35

198.55

Employee Cost

1,973.67

1,542.96

1,036.26

772.52

565.59

Miscellaneous Expenses

2,693.40

2,239.43

1,767.69

1,517.22

1,299.83

Total Expenses

9,527.96

8,031.59

6,372.08

5,356.21

5,093.47

Operating Profit

2,161.70

2,133.05

2,197.85

1,658.85

1,369.24

PBDIT

2,327.25

2,398.42

2,459.76

1,798.37

1,460.92

168.29

145.74

33.91

38.34

25.1

2,158.96

2,252.68

2,425.85

1,760.03

1,435.82

504.71

372.64

330.48

312.22

273.33

Profit Before Tax

1,654.25

1,880.04

2,095.37

1,447.81

1,162.49

PBT (Post Extra-ord Items)

1,654.25

1,880.04

2,095.37

1,447.81

1,162.49

Total Income
Expenditure
Raw Materials
Power & Fuel Cost

Interest
PBDT
Depreciation

Tax

400.03

463.38

544.31

306.51

195.36

1,254.22

1,416.66

1,551.06

1,141.30

967.13

48.15

15.93

25.3

12.32

6.21

-2.94

-22.44

1,180.77

1,388.41

1,505.08

1,144.24

989.57

4,895.36

4,001.02

3,037.07

2,525.09

2,063.97

160.59

160.58

160.58

160.58

224.81

32.69

27.29

27.29

26.05

36.72

Shares in issue (lakhs)

8,029.60

8,029.21

8,029.21

8,029.21

8,029.21

Earning Per Share (Rs)

15.62

17.64

19.32

14.21

12.05

134.26

125.06

112.32

95.03

82.91

Reported Net Profit

Minority Interest
Share Of P/L Of Associates
Net P/L After Minority Interest & Share Of
Associates
Total Value Addition
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)

Book Value (Rs)

53

Table 11: Financial performance Alkem Labs Limited

Alkem Laboratories
Consolidated Profit & Loss account

------------------- in Rs. Cr. ------------------Mar '16

Mar '15

Mar '14

Income
Sales Turnover
Excise Duty
Net Sales
Other Income

5,160.83
169.29
4,991.54
164.51

3,859.86
116.51
3,743.35
181.04

3,235.97
105.22
3,130.75
169.02

Stock Adjustments
Total Income

90.33
5,246.38

33.68
3,958.07

60.73
3,360.50

Expenditure
Raw Materials

2,097.72

1,766.18

1,472.55

66.3
917.13

53.31
645.87

60.32
520.15

Other Manufacturing Expenses

Selling and Admin Expenses
Miscellaneous Expenses
Preoperative Exp Capitalised

0
0
1,152.49
0

0
0
889.84
0

0
0
714.01
0

Total Expenses

4,233.64
848.23

3,355.20
421.83

2,767.03
424.45

1,012.74
67.06

602.87
81.11

593.47
93.08

945.68
100.58

521.76
70.94

500.39
51.89

Other Written Off

Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)

0
845.1
0
845.1

0
450.82
0
450.82

0
448.5
0
448.5

Tax
Reported Net Profit

160.6
684.5

59.23
391.59

9.5
439

Minority Interest
Share Of P/L Of Associates

11.38
0

0
0

0
0

673.12

391.59

439

2,135.92
0

1,589.02
0

1,294.48
0

151.85
31.11

47.83
8.85

23.91
4.06

1,195.65
57.25
0

1,195.65
32.75
0

119.57
367.16
0

292.95

250.83

2,220.63

Power & Fuel Cost

Employee Cost

Operating Profit
PBDIT
Interest
PBDT
Depreciation

Net P/L After Minority Interest & Share Of

Associates
Total Value Addition
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)

54