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Overview

Presented by:
Mikky Madhogaria
Equity Research Analyst
Eastwind Capital Advisors
 Global mkt size is approx $770-780 bn with low growth of
3-4% in 2009.
 US sales is approx 14 times of India & China sales is approx
4 times of India
 India’s share approx 2% in world pharma mkt.

Market Growth’09(ap
Share(approx) prox)

North America 40% 2%


Europe 32% 2%
Japan 10% 3%
Latin America 6% 10%
Asia/Africa/Australia 12% 9.9%
Revenue Rank
Company   Country   MKT SHARE %
2008
1 Pfizer (with Wyeth) U.S. 9.20
2 Johnson& Johnson U.S. 7.90
3 GSK UK 5.88
4 Bayer Germany 5.78
5 Hoffmann–La Roche Switzerland 5.22
6 Sanofi-Aventis France 5.17
7 Novartis Switzerland 5.15
8 AstraZeneca UK/Sweden 3.82
9 Abbott Laboratories U.S. 3.82
10 Merck & Co. U.S. 3.09
Clinical Trials

Preclinical
   Phase I  Phase II  Phase III  FDA     Phase IV 
Testing 

Years  3.5  1  2  3  2.5  12 Total 

1000 to 
Laboratory  20 to 80  100 to 300 
Test 3000 
and animal  healthy  patient 
Population  patient 
studies  volunteers  volunteers 
volunteers 
Additional 
Verify  Review 
File IND at  File NDA at  Post 
effectivenes process / 
Assess  FDA  Evaluate  FDA  marketing 
Determine  s, monitor  Approval 
safety and  effectivenes    testing 
Purpose  safety and  adverse 
biological  s, look for  required by 
dosage  reactions 
activity  side effects  FDA 
from long-
term use 
5,000 
Success
compounds  5 enter trials  1 approved 
Rate 
evaluated 
 India pharma Mkt size FY09 Rs 93881 ($19 bn) cr on the basis
of sales, g=13%
 India is the world’s 4th largest producer of pharmaceuticals by
volume (accounting for around 8% of global production)
 In value terms, production accounts for around 1.5% of the world
total.
 Employs around 500,000
 Indian company meets 95% of domestic sales
 Fragmented industry contributes 1.6% to GDP.
 5,600 smaller licensed generics manufacturers
 270 large R&D based pharmaceutical companies in India and their
share is around 70%
 India produces 22% of world generics
 Per capita consumption of drugs is very low $93 as compared to
$412(Japan), $222(Germany), $191(US)
 India among top 5 bulk drug producers in world
 Ranbaxy is 7th world’s largest generic manufacture
Top 10 companies contributes 30% of market share(on the
basis of standalone sales)

Company Name MARKET SHARE %
Cipla Ltd. 5.60
Ranbaxy Laboratories Ltd. 4.76
Dr. Reddy'S Laboratories Ltd. 4.47
Sun Pharmaceutical Inds. Ltd. 4.03
Aurobindo Pharma Ltd. 2.98
Cadila Healthcare Ltd. 2.07
Glaxosmithkline Pharmaceuticals Ltd. 1.79
Matrix Laboratories Ltd. 1.60
Ipca Laboratories Ltd. 1.36
Orchid Chemicals & Pharmaceuticals Ltd. 1.29
100 manufacturing facilities approved by the US Food and Drug
Administration (FDA)
 Logistics: Crucial Part of industry as
activities are highly time sensitive & need
temperature controlled storage &
distribution.
•Exports a/c’s for 40% (g=16%) of total sales of which :
III.Formulations = 46%
IV.Bulk Drug = 54%
•Share of exports in total national exports >2%
•Imports mainly of life saving drug & formulation(patent)
•Main market for imports: US, Germany, Switzerland, France

Major API Exports Key Markets (Exports) Share(approx)


Menthol North America 21%
Amoxycillin LAC 7%
Cephalexin EU 21%
Erythromycin Middle East 9%
Ibuprofen CIS 7%
Ciprofloxacin South Asia 4%
Ampicillin Other Asia 14%
Ranitidine Africa 14%
Ephedrines Others 2%
Top 10 Global % Top 10 Indian %
Therapeutic classes share Therapeutic classes share
Oncologics 6.2 Anti Infectives 18
Lipid regulators 5.1 Cardiac (CVS) 10.9
Respiratory agents 4.3 Gastro Intestinal 10.9
Acid pump inhibitors 3.9 Pain / Analgesics 8.8
Antidiabetics 3.6 Respiratory 8.9
Antipsychotics 3.1 Vit / Minerals/ Nut 8.1
Antidepressants 3 Derma 5.4
Angiotensin II antagonists 2.9 Gynec 5.6
Anti-epileptics 2.3 Neuro/CNS 5.5
Autoimmune agents 2 Anti Diabetic 5
Market Share of key drug
classes(‘06)

Total no. of ANDA approvals


(India)
Year Number
2002 21
2003 26
2004 25
2005 52
2006 74
2007 124
2008 134
Q1 2009 50
Product (API) Sales($ Exclusivity Patent Expiry Company
Bn) Expiration

Lipitor (atorvastatin) 13.6 no Sep 24, 2009 PFIZER


unexpired
exclusivity
Plavix (clopidogrel) 8.6 Aug 17, Nov 17, 2011 SANOFI AVENTIS
2009 US

Nexium (esomeprazole) 7.8 Apr 28, Nov 25, 2014 ASTRAZENECA


2009

Seretide 7.7 Apr 30, Aug 12, 2008 GLAXOSMITHKLIN


2011 E
(fluticasone+salmeterol
Enbrel (etanercept) 5.7

Seroquel (quetiapine ) 5.4 Oct 20, Sep 26, 2011 ASTRAZENECA


2009

Zyprexa (olanzapine ) 5.0 Mar 19, Apr 23, 2011 LILLY


2012
Remicade (infliximab) 4.9

Singulair (montelukast) 4.6 Nov 30, Feb 3, 2012 MERCK


2008

Lovenox (enoxaparin) 4.4 May 16, Feb 14, 2012 SANOFI AVENTIS


2010 US
2009 2010
Lansoprazole(Prevacid/Takepron/Zoton) Losartan potassium (Cozaar/Hyzaar)
   
Duloxetine (Cymbalta/XeriStar)  Atorvastatin calcium (Lipitor)

Docetaxel (Taxotere) 
Tamsulosin (Flomax/Omnic/Harnal) 
Gemcitabine (Gemzar) 
Perindopril erbumine (Coversyl/Aceon) 
Lamivudine and zidovudine (Combivir) 
Escitalopram oxalate (Lexapro/Cipralex)
Pantoprazole (Protonix/Pantozol) 
 
Anastrozole (Arimidex)  Donepezil  (Aricept) 

Levofloxacin Levaquin/Cravit/Tavanec) 
 M&A has been the key strategy adopted by
Indian companies to gain a foothold in the export
markets
Deal in 2009 Value
Pfizer-Wyeth $62 bn
Roche-Genentech $46.8 bn (22 times Genentech's
forecast 2010 earnings)

Merck-Schering $48 bn
Sanofi-Shantha $782.1 mn (8 times its projected
sales of $92 mn for FY10)
 The top 20 pharma companies have over
US$7.5bn (Rs378bn) in cash and cash
equivalents. Therefore, expectation of more
deal (BMS, AstraZeneca, Sanofi-Aventis, GSK,
Novartis and J&J due to their strong cash
positions)

 Target: Large pharmaceutical companies with


strong drug development pipelines and low
exposure to patent expiries are the most
attractive M&A target
Strengths
1. India is regarded as having the edge over China in terms of:
◦ Qualified, English-speaking employees
◦ Fair protection of intellectual property rights supported by well-
developed judicial system.

 Availability of skilled scientists/technicians/management


personnel at affordable cost.

 Indian manufactures can produce drugs at 40% to 50% of the


cost to the rest of the world. In some cases, this cost is as low as
90%.

 Well developed chemistry R & D and manufacturing infrastructure


with proven track record in advanced chemistry capabilities,
design of high tech manufacturing facilities and regulatory
compliance.

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 The NPPA (National Pharma Pricing Authority),
sets prices of different drugs, which leads to
lower profitability for the companies.

 Indian pharma market is one of the least


penetrated in the world: India accounts for
almost 16% of the world population while the
total size of industry is just 1-2% of the global
pharma industry

 Large no. of small players increases


competition and reduces efficiency
 The new patent product regime will bring with it new
innovative drugs. This will increase the profitability of MNC
pharma companies and will force domestic pharma
companies to focus more on R&D

 Large number of drugs going off-patent in Europe and in


the US between 2005 to 2009 offers a big opportunity for
the Indian companies to capture this market

 Can become a global outsourcing hub for pharmaceutical


products

 New markets are opening

 Aging of the world population, Growing incomes, Growing


attention for health.
 Containment of rising health-care cost.

 High Cost of discovering new products and


fewer discoveries.

 Stricter registration procedures.

 High entry cost in newer markets.

 Threats from other low cost countries like China


and Israel exist
 Mature pharmaceutical market: is expected to
grow at 1% ~ 4% by 2013

 Emerging pharmaceutical market: is expected


to grow at 13% ~ 16% by 2013

 High growth in generic segment as $123bn


worth patent will expire by 2012 ($18.4bn
benegit to India)

 Pricing pressures and shrinking margins in the


generics space and the increasing litigation
instances in the US are compelling Indian
companies to consider opportunities beyond US
 Steady shift of big pharma towards biotech 
It is not only an API and formulation manufacturing base,
but also as an emerging hub for:
◦ Bio-technology
◦ Bioinformatics
◦ Contract research
◦ Clinical data management and
◦ Clinical trials

 Growth in contract manufactiring & outsourcing of clinical


trials, R&D, etc
CUSTOM DUTY
 Exemption of custom duty for import of all capital goods,
inputs, consumables and reference standards for R&D
purposes

 Extension of customs duty exemption to more life saving


drugs and other anti–Aids and anti–cancer formulations

EXCISE DUTY
 Goods manufactured in R&D centres should be
exempted from excise duty and service tax

 Extension of excise duty exemption to more life saving


drugs and other anti –Aids and anti –cancer formulations

OTHERS
 Strengthen and increase capital outlay for academic
institutions engaged in scientific research
 Requirement of a single window clearances instead of multiple
clearances from different institutions for testing a new
molecule

 Passing of Central Drug Authority Bill –pending for the last five
years

 Removal of cost based price controls

 Continuation of the tax shelter in specified zones like Himachal


Pradesh, Sikkim and Jammu

 Cut off date for the tax holiday should be extended till March
31, 2012.{1}

 Benefit should be expanded to cover expenditure incidental to


research carried outside R&D facility such as clinical trials, bio-
equivalence studies etc carried on in India or in any foreign
NEW Impact
Excise duty 4%
Custom duty on life saving Reduced to 5%
devices particularly
related to cardiac diseases
abolition of Fringe Benefit Positive These will go a long
Tax (FBT) way towards boosting
the clinical research
industry as well as
Indian innovators.
NPPAhas also reduced the Marketed by MNC drug
prices of imported firms like Pfizer, Novo
medicines Nordisk, Sanofi Aventis
and Eli Lilly
MAT ( carry forward of tax Increased to -ve : Sunpharma,
credit under MAT 15% Dishman, Cadila, Biocon
extended from 7 yrs to 10
yrs )
Amendment of 100% Extension by 1 +ve: Divi’s lab, Biocon
profit exemption effective more year
from FY2011 for bs. Units
operating from SEZ
 Acc. to new proposal:
b) Co.’s which have set up overseas subsidiaries in India,
will have to pay tax on their earnings earned abroad
c) US companies who are outsourcing services to overseas
India will be at a disadvantage as their earnings from
these countries will now be treated as income, and they
would be liable to pay tax on it.

 Existing practice wherein companies who are


outsourcing services earned tax credits on income
earned through those services.

 Shocker to Indian pharma companies engaged in


contract manufacturing and research services (could
adversely affect their outsourcing services business as
majority of their clients belong to US.)
For detailscontact:
mikky.ew@gmail.com