ASSIGNMENT 1

RT1902B48 SUBMITTED TO : MR. AMIT DUTT SIR

Pharmaceutical
10 RT1902B48 10
Products

To develop A student will Model:

analytical be required to Analysis
and analyze the about the
reasoning potential and business
skills among propose potential:
the students. strategies for 10 marks.
marketing of Strategies-
that product line 5 marks
assigned to him
in different
countries by
detail study of
export direction.
For this they
can use the site
comtrade.com
and for different
product line i.e
H S Codes
(2004/1994 can
be used) they
can refer to
unctad.org.

Exports
India’s exports registered growth of 11.5% in January 2010 to $14.34 billion, from $12.86
billion a year earlier. The areas that posted growth included commodities such as tea, coffee,
basmati rice, agricultural products and sectors such as gems and jewelry, drugs and petroleum
products and plastics. Petroleum exports reached $2.4 billion in November 2009, up from
$1.3 billion in November 2008. Gold and jewelry exports reached $2.15 billion in November
2009, up from $1.6 billion in November 2008. According to the Ministry of Commerce and
Industry, the Special Economic Zones (SEZs) registered impressive growth in export,
investment and employment generation.
The exports from the SEZs for the Q1, Q2 and Q3 2009 totaled $32.42 billion, up from
$14.23 billion in the same period in 2008. SEZ exports during April-December 2009 grew by
127% to $32 billion YOY.

External Sector
India’s balance of payments surplus in July-September 2009 was $9.42 million, up from $4.7
billion during the same period in 2008. According to the RBI, India posted a surplus of $115
million in Q2 2009. Thetrade deficit remained lower at $58.82 billion during April-
September 2009, down from $64.4 billion in April-September 2008. The remittances from
Indians living abroad increased to $27.5 billion in April-September 2009, up from $26.4
billion in April-September 2008.

Indian Pharmaceutical Industry

The pharmaceutical industry in India is among the most highly organized sectors. This
industry plays an important role in promoting and sustaining development in the field of
global medicine. Due to the presence of low cost manufacturing facilities, educated and
skilled manpower and cheap labor force among others, the industry is set to scale new heights
in the fields of production, development, manufacturing and research. In 2008, the domestic
pharma market in India was expected to be US$ 10.76 billion and this is likely to increase at
a compound annual growth rate of 9.9 per cent until 2010 and subsequently at 9.5 per cent till
the year 2015.

Post 2005
As part of India's commitment to WTO, India issued the patent ordinance, to recognize
foreign product patents from January 1, 2005, the conclusion of a 10 year process. Under
these circumstances Indian pharmaceutical manufacturers would not be able to manufacture
patented drugs.

To meet the challenges of this new initiative, the industry started probing new business
models.

Some of the features of the new model included

• Contract research (drug discovery and clinical trials).
• Contract manufacturing.
The focus of the industry shifted from process improvisation to drug discovery and research
and development.

Contract Research
By 2002 the market for clinical trials in India was $70 million and this market is increasing at
a rate of 20% per annum. Companies specialized in this line of business offered services
which include product development, formulation and manufacturing, clinical trial
management, toxicology and clinical, medical and safety monitoring.

Contract Manufacturing
Many pharmaceutical multi nationals are looking to outsource manufacturing to Indian
companies, which have a cost advantage in comparison to companies in the developed
countries.

With regard to this, the pharmaceutical companies are undertaking compliance with reputed
International regulatory agencies like USFDA, MCC for their manufacturing units.

SWOT Analysis

Strengths
• Cost Effective
 • Strong Manufacturing Base
• Availability of high quality skilled workforce.
• Excellent marketing and distribution network
• Diverse ecosystem
Weaknesses
• Less investment in research and development
• Lack of coordination between industry and academia.
• Negligible expenditure on healthcare in the country.
• Manufacture of fake and low quality medicines bring
Opportunities
• Increased export potential
• Marketing ties ups with multinational companies to sell their products in domestic
market.
• Immense scope to position India as a centre for international clinical trials.
• Key player in global pharmaceutical R&D.
• Export of generic drugs to developed markets.
Threats
• Product patent regime is a major threat to domestic industry unless the industry takes
up R&D initiative aggressively.
• Drug Price Control Order puts undue pressure on product prices, affecting the
profitability of the pharmaceutical companies.
• The new MRP based excise duty regime threatens the business of smaller
pharmaceutical companies.
Future Trends
• The Pharmaceutical industry is expected to grow at a rate of 10.8 per cent and reach
$168 billion in the year 2009.
• India and China are expected to account for nearly 40 per cent of the outsourced
market for dynamic pharmaceutical constituents, finished dosage formulations and
intermediates.
• Experts believe the combined effect of increase in business due to many premium
drugs coming of patent and the increased confidence of international companies on
India due to the product patent regime would mean a boom for the pharmaceutical
industry.

Industry Trends

The pharma industry generally grows at about 1.5-1.6 times the Gross Domestic Product
growth
Globally, India ranks third in terms of manufacturing pharma products by volume
The Indian pharmaceutical industry is expected to grow at a rate of 9.9 % till 2010 and after
that 9.5 % till 2015
In 2007-08, India exported drugs worth US$7.2 billion in to the US and Europe followed by
Central and Eastern Europe, Africa and Latin America
The Indian vaccine market which was worth US$665 million in 2007-08 is growing at a rate
of more than 20%
The retail pharmaceutical market in India is expected to cross US$ 12-13 billion by 2012
The Indian drug and pharmaceuticals segment received foreign direct investment to the tune
of US$ 1.43 billion from April 2000 to December 2008
Challenges
Every industry has its own sets of advantages and disadvantages under which they have to
work; the pharmaceutical industry is no exception to this. Some of the challenges the industry
faces are:

Regulatory obstacles
Lack of proper infrastructure
Lack of qualified professionals
Expensive research equipments
Lack of academic collaboration
Underdeveloped molecular discovery program
Divide between the industry and study curriculum
Government Initiatives

The government of India has undertaken several including policy initiatives and tax breaks
for the growth of the pharmaceutical business in India. Some of the measures adopted are:

Pharmaceutical units are eligible for weighted tax reduction at 150% for the research and
development expenditure obtained.
Two new schemes namely, New Millennium Indian Technology Leadership Initiative and the
Drugs and Pharmaceuticals Research Program have been launched by the Government.
The Government is contemplating the creation of SRV or special purpose vehicles with an
insurance cover to be used for funding new drug research
The Department of Pharmaceuticals is mulling the creation of drug research facilities which
can be used by private companies for research work on rent

Pharma Export

In the recent years, despite the slowdown witnessed in the global economy, exports from the
pharmaceutical industry in India have shown good buoyancy in growth. Export has become
an important driving force for growth in this industry with more than 50 % revenue coming
from the overseas markets. For the financial year 2008-09 the export of drugs is estimated to
be $8.25 billion as per the Pharmaceutical Export Council of India, which is an organization,
set up by the Government of India. A survey undertaken by FICCI, the oldest industry
chamber in India has predicted 16% growth in the export of India's pharmaceutical growth
during 2009-2010.

Key players in Indian Pharmaceutical Industry

There are several national and international pharmaceutical companies that operate in India.
Most of the country's requirements for pharmaceutical products are met by these companies.
Some of them are briefly described below:

Ranbaxy Laboratories Limited is the biggest pharmaceutical manufacturing company in

India. The company is ranked at the 8th position among the global generic pharmaceutical
companies and has presence in 48 countries including world class manufacturing facilities in
10 countries and serves to customers from over 125 countries. Ranbaxy Laboratories 2009-
2010 Q3 Net Profit Results showed a profit of Rs 116.6 crore as compared to Rs 394.5 crore
deficit, recorded during the corresponding period last fiscal.
Dr. Reddy's Laboratories manufactures and markets a wide range of pharmaceuticals both in
India and abroad. The company has 60 active pharmaceutical ingredients to manufacture
drugs, critical care products, diagnostic kits and biotechnology products. The company has 6
FDA plants that produce active pharma ingredients and 7 FDA inspected and ISO 9001 and
ISO 14001 certified plants. Dr. Reddy's Q1 FY10 result shows the revenues of the company
at Rs. 18,189 million which is up by 21%. During this quarter the company introduced 24
new generic products, applied for 22 new generic product registrations and filed 4 DMFs.
Cipla is an Indian pharmaceutical company renowned for the manufacture of low cost anti
AIDS drugs. The company's product range comprises of anthelmintics, oncology, anti-
bacterials, cardiovascular drugs, antibiotics, nutritional supplements, anti-ulcerants, anti-
asthmatics and corticosteroids. Cipla also offers other services like quality control,
engineering, project appraisal, plant supply, consulting, commissioning and know-how
transfer, support. For the financial year 2008-09 the company registered an increase of 22%
in sales and other income over the previous year.
Nicholas Piramal is the second largest pharmaceutical healthcare company in India. The
brands manufactured by the company include Gardenal, Ismo, Stemetil, Rejoint, Supradyn,
Phensedyl and Haemaccel. Nicholas Piramal has entered into join ventures and alliances with
several international corporations like Cheissi, Italy; IVAX Corp; UK, F. Hoffmann-La
Roche Ltd., Allergan Inc., USA etc.
Glaxo Smithkline (GSK) is a United Kingdom based pharma company; it is the world's
second largest pharmaceutical company. The company's portfolio of pharma products consist
of central nervous system, respiratory, oncology, vaccines, anti-infectives and gastro-
intestinal/metabolic products among others. On November 2009, the FDA had announced
that the H1N1 vaccine manufactured by GSK would join the list of the four vaccines
approved.
Zydus Cadila also known as Cadila Healthcare is an Indian pharmaceutical company located
in Gujarat. The company's 1QFY2010 results show the net sales at Rs880.3cr which is higher
than the estimated Rs773cr. The net profit was Rs124.8cr which was increase of 39%; the
increase was on account of higher sales and improvement in the OPM.
India's Domestic Pharmaceutical Market (12 Months Ended January 2009)

Company Size ($ Billion) Market Share (%) Growth Rate (%)

Total Pharma Market 6.9 100.0 9.9
Cipla .36 5.3 13.4
Ranbaxy .34 5.0 11.5
Glaxo Smithkline .29 4.3 -1.2
Piramal Healthcare .27 3.9 11.7
Zydus Cadila .24 3.6 6.8
Source: ORG IMS

Future Scenario

With several companies slated to make investments in India, the future scenario of the
pharmaceutical industry in looks pretty promising. The country's pharmaceutical industry has
tremendous potential of growth considering all the projects that are in the pipeline. Some of
the future initiatives are:

According to a study by FICCI-Ernst & Young India will open a probable US$ 8 billion
market for MNCs selling expensive drugs by 2015
The study also says that the domestic pharma market is likely to reach US$ 20 billion by
2015
The Minister of Commerce estimates that US$ 6.31 billion will be invested in the domestic
pharmaceutical sector
Public spending on healthcare is likely to raise from 7 per cent of GDP in 2007 to 13 per cent
of GDP by 2015
Dr Reddy's Laboratories has tied up with GlaxoSmithKline to develop and market generics
and formulations in upcoming markets overseas
Lupin, a Mumbai based pharmaceutical company is looking to tap opportunities of about US$
200 million in the US oral contraceptives market
Due to the low cost of R&D, the Indian pharmaceutical off-shoring industry is designated to
turn out to be a US$ 2.5 billion opportunity by 2012

References:
http://www.economywatch.com/indianeconomy/india-external-sector.html
http://business.mapsofindia.com/pharmaceutical/
Wikipedia.org