Final Pharma

EXECUTIVE SUMMARY:

India is gaining in importance as a manufacturer of pharmaceuticals. The global pharmaceutical

market will grow by 4-6%. It also predicts a compounded annual growth rate of 4-7% between

2008 and 2013. India currently represents just U.S. $6 billion of the $16.6 billion global

pharmaceutical industry but its share is increasing at 10 percent a year, compared to 7 percent

annual growth for the world market overall. Also, while the Indian sector represents just 8

percent of the global industry total by volume, putting it in fourth place worldwide, it accounts

for 13 percent by value and its drug exports have been growing 30 percent annually. Both

multinational and local drug manufacturers could eventually benefit from the market potential of

India's population of over one billion. The pharmaceutical industry is characterised by a highly

risky and lengthy R&D process, intense competition for intellectual property, stringent

government regulation and powerful purchaser pressures.

In addition, India's long-established position as a preferred manufacturing location for

multinational drug manufacturers is quickly spreading into other areas of outsourcing activities.

Soaring costs of R&D and administration are persuading drug manufacturers to move more and

more of their discovery research and clinical trials activities to the subcontinent or to establish

administrative centers there, capitalizing on India's high levels of scientific expertise as well as

low wages. India is a major export player of various drugs & medicine to countries like US,

Europe, China etc. Ever since the TRIPS agreement (patent regime) has been introduced,

pharmaceutical market is witnessing several changes & it is likely to have increased sales in the

domestic pharmaceutical industry.

Alliance Business School Page 1

Major Highlights of the report:

The key areas of focus as a result of our study are as follows:

The contribution of the global pharmaceutical companies as a manufacturing industry.

In the global scenario we included the list of 10 largest pharmaceutical companies

ranked by revenue as of 2009.

Discussed about the growth trend and market size of the top five pharmaceutical

company of India

Discussed both the quantitative and qualitative aspects of the top performing companies

in India.

We are addressing the forecasting of Indian Pharmaceutical Industry through the future

opportunities and the impact of 2010 budget.

In the past few years, the domestic Pharmaceutical industry has witnessed a fast mount in

demand for medicines.

The report discusses about the advent of Indian pharmaceutical industry, the current

scenario, major players in the market, role of pharmaceutical industry in India, recent alliances,

mergers & acquisitions of Indian and foreign companies and finally about CSR activities of the

companies.

We analyzed the future forecast of the industry. Over the next five to ten years, India is

likely to grown-up further as a provider of services across the drug-development spectrum. Thus

Indian pharmaceutical market will undergo a major transformation in the next decade and it will

become one of the top ten markets in the world. There is a need for regulatory reform in India to

encourage leading global players to continue and accelerate the outsourcing of their R&D

activities-beginning with discovery research-to the subcontinent. This is particularly urgent in the

face of the strong competition from China, where the government has been particularly proactive

in encouraging foreign investments in pharmaceuticals and biotechnology.


Chapter 1

Global Pharmaceuticals


1.1 GLOBAL INTRODUCTION

In late 2003, Britain’s Guardian newspaper commented that, on the face of it, the global

pharmaceutical industry “looks like the epitome of a modern, mature industry that has found a

comfortable way to make profits by the billion: it's global, hi-tech, and has the ultimate

customer, the healthcare budgets of the world's richest countries.”The modern pharmaceutical

industry is a highly competitive non-assembled1 global industry. Its origins can be traced back to

the nascent chemical industry of the late nineteenth century in the Upper Rhine Valley near

Basel, Switzerland when dyestuffs were found to have antiseptic Properties.

Manufacturing industries are important for an economy as they employ a huge share of

the labor force and produce materials required by sectors of strategic importance such as national

infrastructure and defense. Manufacturing industries came into being with the occurrence of

technological and socio-economic transformations in the Western countries in the 18th-19th

century. This was widely known as industrial revolution. Manufacturing industries came into


being with the occurrence of technological and socio-economic transformations in the Western

countries in the 18th-19th century. This was widely known as industrial revolution.

Rank Company Country Revenue(USD)

1 Johnson & Johnson US 61897

2 Pfizer US 50009

3 Roche Switzerland 45304

4 GSK UK 44421

5 Novartis Switzerland 44267

6 Sanofi Aventis France 40870

7 Astra Zeneca UK 32804

8 Abbott Labs US 30800

9 Merck & Co US 27428

10 Bayer Healthcare Germany 22297

Table 1.1 Top 12 Global pharmaceutical companies (As per 2009 Annual report)

The pharmaceutical industry is an important sector in the worldwide economy. Around

70% of pharmaceutical drugs are consumed as the solid oral dosage type, that is tablets and

capsules and the majority of the constituents of a dosage form are particulate in nature. These

constituents are the Active Pharmaceutical Ingredients (APIs) and the excipients. The particle

size properties of pharmaceutical APIs and excipients are very important characteristics for these

solid oral dosage formulations. During formulation development stages, in vitro tests are used to

determine the profiles of solid dosage forms. This allows assessment of the interactive effects of

these properties on the bioavailability of the API in the human body, and helps predict

therapeutic efficiency. In general, while large particle size helps optimize flow during the


granulation process of solid dose forms, a smaller particle size of APIs contained in tablets or

capsules is known to enhance dissolution and absorption.

Source: www.imshealth.com

Fig 1.1 Global pharmaceutical sale as of 2009.

YearsTotal World Market(US$ in

Billions)2001 3932002 4292003 4992004 5602005 6052006 6482007 7152008 7732009 825

Table 1.2 Top 12 Global pharmaceutical Sales

Some facts

50 billion aspirin tablets are consumed worldwide each year.


70% of pharmaceutical drugs are consumed as powders in the form of tablets or capsules.

Per capita drug expenditure Rs. 220 per annum

Number of units - 10,000 out of which approximately 300 in organized sector

Share of World Pharmaceutical market 1.0% in value 8% in volume terms

As of 2008, Employment due to PI in India: 5 million direct, 24 million indirect

As of 2008, pharmaceutical sales comprised 1.22% of GDP

1.2 GLOBAL SCENERIO

1.2.1 Manufacturing and employment:

Manufacturing industry trends suggest that a tendency for self employment is gradually

catching up in the manufacturing industry scenario. There is a wide disparity between the

ownership rates in the rural areas and the other parts of the country. Records reveal that there

was growth in employment opportunities in the manufacturing industries by 14% between 1994

through 2005. 18% of GDP or gross domestic product in the year 1993 was due to revenues

generated by the manufacturing industry, established according to reports of manufacturing

industry analysis.

There are four broad types of industry player:

Ethical

OTC

Generic and biotech.

Each requires very different strategic capabilities. Producers of branded prescription

drugs require strong R&D and global sales and marketing infrastructure. Branded OTC drugs

demand direct-to-consumer marketing capability. Generics companies focus on supply chain

management and manufacturing cost leadership. Biotechs must create and defend intellectual

property in specialized research fields. Because of the different attributes and cost structures

involved, multinationals which own OTC and generics businesses generally operate them

separately, frequently using another company name. Similarly, those that have acquired biotechs

normally leave them to operate fairly autonomously.


1.2.2 Sales and marketing capability

It became an increasingly important stheirce of competitive advantage. A company that

developed a strong global franchise with its customers could maximise return on its inhouse

products and was in a good position to attract the best in-licensing candidates

There are three regular channels to distribute and sell medications:

Direct sale by pharmaceutical manufacturers;

State-owned nationwide sales network; and

Specialized medication wholesalers and retailers.

1.2.3 Corporate Social Responsibility:

During the 20th century average life expectancy in developed countries increased by over

20 years. A significant part of this improvement can be attributed to pharmaceutical innovation

the pharmaceutical industry needs to be very good at explaining the nature of its business and

balancing societal and shareholder expectations. Lacking adequate sanitation, nutrition and

primary health care facilities for much of their population, developing countries relied on

pharmaceuticals as the first line of defense against a wide range of infectious and parasitic

diseases. Diflucan free of charge and without time limits to people in the least developed

countries living with HIV/AIDS and with cryptococcal meningitis and/or oesophageal

candidiasis. It was argued that leading pharmaceutical companies could make a significant

contribution such as reallocation of R&D efforts in favtheir of major tropical diseases, the sale of

low-priced essential drugs and technology transfer.


Among all the industries, Pharmaceutical Industry is suited best for the Foreign

investors. Foreigners are enctheiraged to participate in the following areas:

Antichloristic and Antipyretics

Vitamins: Vitamin D3 and Nicotinic Acid

New anti-cancer drugs

New cardiovascular and encephalovascular drugs

pharmaceutical dosage forms, including sustained-release, controlled-release, target-

delivery and transdermal-delivery

New and efficient contraceptive drugs and instruments

New biopharmaceutics.

Global pharmaceutical industry is projected to grow at a CAGR of around 6% during 2010-

2012. The growth will be driven by low cost factor, increasing prevalence of diseases worldwide

and rising per capita income of consumers. The regional level analysis finds that the

pharmaceutical industry is growing at a rapid rate in the emerging countries like India, China,

Brazil, Russia, among others, while a slowdown in the growth has been encountered in the US

and Western European countries.


Chapter 2


Indian Pharmaceutical

Industry

2.1 OVERVIEW

The pharmaceutical industry is one of the fastest growing sectors in India. The market

has maintained a steady growth for the past decade and the production capacity has increased at

the same pace. Import and export trade expected to be active and growing at a double-digit rate.

Foreign investors are flocking into India for a slice of the market. The industry will continue its

growing trend. Like many other sectors in India, the government plays a crucial role. Several

recent changes in policy will reshape the industry and the market. The introduction and success

of penicillin in the early forties and the relative success of other innovative drugs,

institutionalized research and development (R&D) are the successful initiatives of the industry.

The industry witnessed major developments in the seventies with the introduction of

tighter regulatory controls, especially with the introduction of regulations governing the


manufacture of ‘generics’. The industry expanded rapidly in the 1960s, benefiting from

significant new discoveries with permanent patent protection. Regulatory controls on clinical

development and marketing were light and healthcare spending boomed as economies prospered.

There were two important developments in the 1970s. Firstly, the Thalidomide

tragedy (where an antiemetic given for morning sickness caused birth defects) led to much

tighter regulatory controls on clinical trials, greatly increasing development costs. Secondly,

enactment of legislation to set a fixed period on patent protection (typically 20 years from initial

filing as a research discovery) led to the appearance of “generic” medicines. Generics have

exactly the same active ingredients as the original brand, and compete on price.

Pharmaceutical drugs are used for the benefit of human and animal health. Innovators in

pharmaceutical R&D of new drugs have not only controlled life threatening diseases and

improved the quality of life and productivity, but have also increased the average life expectancy

during the past few decades.

Pharmaceuticals are essential in every health care system. The objective of

pharmaceutical policy is to make sure that there is a reliable supply of good quality. The sector is

pegged to be worth US$ 7.3 billion. The annual growth rate is estimated to be around 13%.

Reports suggest that the domestic retail market would be worth around US$ 12 billion by 2012.

India ranks 4th globally in terms of volume and 13th in terms of value. It has 8% share in global

sales & 20%-24% share in production of generic drugs. The domestic players satisfy almost all

of the country’s demand for formulations and bulk drugs.

The “organized” sector of India's pharmaceutical industry consists of 250 to 300

companies, which account for 70 percent of products on the market, with the top 10 firms

representing 30 percent. However, the total sector is estimated at nearly 20,000 businesses, some

of which are extremely small. Approximately 75 percent of India's demand for medicines in met

by local manufacturing. India's long-established manufacturing base also offers a large, well-

educated, English-speaking workforce, with 700,000 scientists and engineers graduating every

year, including 122,000 chemists and chemical engineers, with 1,500 PhDs. With the increase in


the medical infrastructure, the health services would be transformed and it would help the growth

of the Pharmaceutical industry further.

Accounting for two percent of the world's pharmaceutical market, the Indian

pharmaceutical sector has an estimated market value of about US $8 billion. It's at 4th rank in

terms of total pharmaceutical production and 13th in terms of value. The total employment is

about 340,000 in the sector and an estimated 400,000 doctors and 300,000 chemists are serving

over 1 billion customers market

It is growing at an average rate of 7.2 % and is expected to grow to US $ 12 billion by

2010. India is the preferred nation for pharmaceutical generation, with low charges for research

and development as well as production of drugs. And the pharmaceutical companies in India

have made full use of the favtheirable environment offered by the country to make it big. The

competition in the Indian pharmaceutical market is cutthroat and the market is divided among the

top 10 pharmaceutical companies accounting for 36.1% of the overall R&H sales in the fiscal

year 2008.

2.2 REASONS FOR PREFERING INDIA

Global companies prefer and feel that India is the best place for outstheircing. The reasons are:

Competent workforce: India has a pool of personnel with high managerial and technical

competence as also skilled workforce. It has an educated work force and English is commonly

used. Professional services are easily available.

Cost-effective chemical synthesis: Its track record of development, particularly in the area of

improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides

a wide variety of bulk drugs and exports sophisticated bulk drugs.

Legal & Financial Framework: India has a 53 year old democracy and hence has a solid legal

framework and strong financial markets. There is already an established international industry

and business community.


Information & Technology: It has a good network of world-class educational institutions and

established strengths in Information Technology.

Globalisation: The country is committed to a free market economy and globalization. Above all,

it has a 70 million middle class market, which is continuously growing.

Consolidation: For the first time in many years, the international pharmaceutical industry is

finding great opportunities in India. The process of consolidation, which has become a

generalized phenomenon in the world pharmaceutical industry, has started taking place in India.


CHAPTER 3

Industry Analysis


3.1 SWOT ANALYSIS

3.1.1 Strengths

1. Low cost of production.

2. Large pool of installed capacities

3. Efficient technologies for large number of Generics.

4. Large pool of skilled technical manpower.

5. Increasing liberalization of government policies.

6. Massive pharmaceutical market growth potential, highly reliant on modernization and reform.

7. Strong local manufacturing sector with leading domestic players establishing a notable

international presence.

3.1.2 Weakness

1. Fragmentation of installed capacities.

2. Low technology level of Capital Goods of this section.

3. Non-availability of major intermediaries for bulk drugs.

4. Lack of experience to exploit efficiently the new patent regime.

5. Very low investment in R&D.

6. Low share of India in World Pharmaceutical Production (1.2% of world production but having

16.1% of world''s population).

7. Very low level of Biotechnology in India and also for New Drug Discovery Systems.

8. Lack of experience in International Trade.

9. Low level of strategic planning for future and also for technology forecasting.

10.Low expenditure for the health care.

11.Production of duplicate drugs, which is one of the major weakness of the pharma industry.

12.Absence of association between the various pharma institutes and institutions.


3.1.3 Opportunities

1. Aging of the world population.

2. Growing incomes.

3. Growing attention for health among the people.

4. New diagnoses and new social diseases.

5. Spreading prophylactic approaches.

6. Saturation point of market is far away.

7. New therapy approaches.

8. New delivery systems.

9. Spreading attitude for soft medication (OTC drugs).

10. Spreading use of Generic Drugs leads to the increase in production of that.

11. Globalization

12. Easier international trading.

13. New markets are opening.

14. New innovative therapeutic products.

15. Manufaturing the drugs on contract.

16. Incredible in the export potential for drugs.

3.1.4 Threats

1. Containment of rising health-care cost.

2. High Cost of discovering new products and fewer discoveries.

4. Stricter registration procedures.

5. High entry cost in newer markets.

6. High cost of sales and marketing.

7. Competition, particularly from generic products.

8. Competition from the MNCs

9. More potential new drugs and more efficient therapies.

10. Switching over form process patent to product patent.

11. Small number of discoveries in the products.

12. Outdated method of sales and marketing used in the industry.

13.Non-traiff imposed by developed countries.


3.2 PEST ANALYSIS

In order to know about the effects of various environment factors on any industry it is

necessary to study the four cardinal influencers on the industry namely Political, Economic,

Social and Technological factors. But unfortunate in India these factors have a rather

disproportionate influence on the functioning of a commercial organization. From the days of

independence the business environment has been overly regulated by a handful of bureaucrats,

middlemen, businessmen and politicians. Its only a decade since the country has seen an

emergence of a political thought that encourages free enterprise.

3.2.1 Political Factors

1. Today there is political uncertainty in the air. A combination of diverse political thought

have got together to cobble together a rag-tag coalition, that is riddle with ideological

contradictions. Therefore, any consistent political or economic policy cannot be

expected. This muddies the investment field.

2. The Minister in charge of the industry has been threatening to impose even more

stringent Price Control on the industry than before. This is throwing many an investment

plan into the doldrums.

3. DPCO which is the bible for the industry has in effect worked contrary to the stated

objectives. DPCO nullifies the market forces from encouraging competitive pricing of

goods dictated by the market. Now the pricing is determined by the Government based on

the approved costs irrespective of the real costs.

4. Effective January, 2005 the country goes in for the IPR (Intellectual Property Rights)

regime, popularly known as the Patent Act. This Act will impact the Pharmaceutical

Industry the most. Thus far an Indian company could escape paying a patent fee to the

inventor of a drug by manufacturing it using a different chemical route. Indian

companies exploited this law and used the reverse-engineering route to invent a lot of

alternate manufacturing methods. A lot of money was saved this way. This also

encouraged competing company to market their versions of the same drug. That meant

that the impurities and trace elements found in different brands of the same substance

were different both in qualification as well as in quantum.


Therefore different brands of the same medicine were truly different. Here Branding

actually meant quality and a purer brand actually had purer active ingredient and lesser or

less toxic impurities.

Product patent regime will eliminate all this. Now, a patented drug would be

manufactured using the same chemical route and would be manufactured by the inventor

or his licentiates using the chemicals with same specifications. Therefore, all the brands

of the same active ingredient would not have any difference in purity and impurities. The

different brands would have to compete on the basis of non input-related innovations

such as packaging, color, flavors, Excipients etc.

This is the biggest change the environment is going to impose on the industry. The

marketing effort would be now focused on logistics, communications, economy of

operation, extra-ingredient innovations and of course pricing.

5. In Pharma industry there is a huge PSU segment which is chronically sick and highly

inefficient. The Government puts the surpluses generated by efficient units into the price

equalization account of inefficient units thereby unduly subsidizing them. On a long term

basis this has made practically everybody inefficient.

6. Effective the January, 2005 the Government has shifted from charging the Excise Duty

on the cost of manufacturing to the MRP thereby making the finished products more

costly. Just for a few extra bucks the current government has made many a life saving

drugs unaffordable to the poor.

7. The Government provides extra drawbacks to some units located in specified area,

providing them with subsidies that are unfair to the rest of the industry, bringing in a

skewed development of the industry. As a results Pharma units have come up at place

unsuitable for a best cost manufacturing activity.


3.2.2 Economic Factors

1. India spends a very small proportion of its GDP on healthcare ( A mere 1% ). This has

stunted the demand and therefore the growth of the industry.

2. Per capita income of an average Indian is low ( Rs. 12,890 ), therefore, spending on the

healthcare takes a low priority. An Indian would visit a doctor only when there is an

emergency. This has led to a mushrooming of unqualified doctors and spread of non-

standardized medication.

3. The incidence of Taxes are very high. There is Excise Duty ( State & Central), Custom

Duty, Service Tax, Profession Tax, License Fees, Royalty, Pollution Clearance Tax,

Hazardous substance (Storage & Handling) license, income tax, Stamp Duty and a host

of other levies and charges to be paid. On an average it amounts to no less than 40-45%

of the costs.

4. The number of Registered Medical practitioners is low. As a result the reach of

Pharmaceuticals is affected adversely.

5. There are only 50,00,000 Medical shops. Again this affects adversely the distribution of

medicines and also adds to the distribution costs.

6. India is a high interest rate regime. Therefore the cost of funds is double that in America.

This adds to the cost of goods.

7. Adequate storage and transportation facilities for special drugs is lacking. A study had

indicated that nearly 60% of the Retail Chemists do not have adequate refrigeration

facilities and store drugs under sub-optimal conditions. This affects the quality of the

drugs administered and of course adds to the costs.

8. India has poor roads and rail network. Therefore, the transportation time is higher. This

calls for higher inventory carrying costs and longer delivery time. All this adds to the

invisible costs. Its only during the last couple of years that good quality highways have

been constructed.


3.2.3 Socio-cultural Factors

1. Poverty and associated malnutrition dramatically exacerbate the incidence of Malaria and

TB, preventable diseases that continue to play havoc in India decades after they were

eradicated in other countries.

2. Poor Sanitation and polluted water sources prematurely end the life of about 1 million

children under the age of five every year.

3. In India people prefer using household treatments handed down for generations for

common ailments.

4. The use of magic/tantrics/ozhas/hakims is prevalent in India.

5. Increasing pollution is adding to the healthcare problem.

6. Smoking, gutka, drinking and poor oral hygiene is adding to the healthcare problem.

7. Large joint families transmit communicable diseases amongst the members.

8. Cattle-rearing encourage diseases communicated by animals.

9. Early child bearing affects the health standards of women and children.

10. Ignorance of inoculation and vaccination has prevented the eradication of diseases like

polio, chicken-pox, small-pox, mumps and measles.

11. People don’t go in for vaccination due superstitious beliefs and any sort of ailment is

considered as a curse from God for sins committed.


3.2.4 Technological Factors

1. Advanced automated machines have increased the output and reduced the cost.

2. Computerization has increased the efficiency of the Pharma Industry.

3. Newer medication, molecules and active ingredients are being discovered. As of January

2005, the Government of India has more than 10,000 substances for patenting.

4. Ayurveda is a well recognized science and it is providing the industry with a cutting

edge.

5. Advances in Bio-technology, Stem-cell research have given India a step forward.

6. Humano-Insulin, Hepatitis B vaccines, AIDS drugs and many such molecules have given

the industry a pioneering status.

7. Newer drug delivery systems are the innovations of the day.

8. The huge unemployment in India prevents industries from going fully automatic as the

Government as well as the Labor Unions voice complains against such establishments.


3.3 PORTER’S FIVE FORCES ANALYSIS

In today’s competitive world, where a perfect competition is going on in the business, the

profit of the company operate in that particular industry may go zero. But it is not possible;

because no company will be a price taker. Secondly, they strive to create a competitive

advantage to thrive in the competitive scenario. Michael Porter, considered to be one of the

foremost gurus' of management, developed the famous five-force model, which influences an

industry.

Fig 3.1 Porter’s five forces of pharmaceutical industry

In Short;

Barriers to entry : LOW

Thread of Substitutes: LOW

Power of Suppliers : LOW

Power of Buyers : LOW

Industry Competition: Highly competitive


3.3.1 Industry competition

Pharma industry is one of the most competitive industries in the country with as many as

10,000 different players fighting for the same pie. The rivalry in the industry can be gauged from

the fact that the top player in the country has only 6% market share, and the top five players

together have about 18% market share. Thus, the concentration ratio for this industry is very low.

High growth prospects make it attractive for new players to enter in the industry.

Another important factor for the industry rivalry is the fact that the entry barriers to

pharma industry are very low. The fixed cost requirement is low but the need for working capital

is high. The fixed asset turnover, which is one of the gauges of fixed cost requirements, tells us

that in bigger companies this ratio is in the range of 3.5 to 4 times. For smaller companies, it

would be even higher.

Many smaller players that are focused on a particular region, have a better hang of the

distribution channel, making it easier to succeed, albeit in a limited way.

An important fact is that pharma is a stable market and its growth rate generally tracks

the economic growth of the country with some multiple (1.2 times average in India). Though

volume growth has been consistent over a period of time, value growth has not followed in

tandem.

The product differentiation is one key factor, which gives competitive advantage to the

firms in any industry. However, in pharma industry product differentiation is not possible since

India has followed process patents till date, with laws favoring imitators. Consequently, product

differentiation is not the driver, cost competitiveness is.

Going forward, we foresee increasing competition in the industry but the form of

competition will be different. It will be between large players (with economies of scale) and it

may be possible that some kind of oligopoly or cartels come into play. This is owing to the fact

that the industry will move towards consolidation. The larger players in the industry will survive

with their proprietary products and strong franchisee.


3.3.2 Bargaining power of Buyers

The unique feature of pharma industry is that the end user of the product is different from

the influencer (read doctor). The consumer has no choice but to buy what doctor says. However,

when we look at the buyer's power, we look at the influence they have on the prices of the

product.

In pharma industry, the buyers are scattered and they as such does not wield much power

in the pricing of the products. However, government with its policies plays an important role in

regulating pricing through the NPPA (National Pharmaceutical Pricing Authority).

3.3.3 Bargaining power of Suppliers

The pharma industry depends upon several organic chemicals. Like the Pharma industry

the chemical industry is also very competitive and fragmented. The chemicals used in the

pharma industry are largely a commodity.

So the suppliers have very low bargaining power and the companies in the pharma

industry can switch from their suppliers without incurring a very high cost.

However, what can happen is that the supplier can go for forward integration to become a

pharma company. Companies like Orchid Chemicals and Sashun Chemicals were basically

chemical companies, who turned themselves into pharmaceutical companies.

3.3.4 Barriers to entry

Pharma industry is one of the most easily accessible industries for an entrepreneur in India.

The capital requirement for the industry is very low, creating a regional distribution network is

easy, since the point of sales is restricted in this industry in India.

However, creating brand awareness and franchisee amongst doctors is the key for long-

term survival. Also, quality regulations by the government may put some hindrance for

establishing new manufacturing operations.


Going forward, the impending new patent regime will raise the barriers to entry. But it is

unlikely to discourage new entrants, as market for generics will be as huge.

The barriers to entry will increase in the future. The change in the patent regime, will see

new proprietary products coming up, making imitation difficult. The players with huge capacity

will be able to influence substantial power on the fringe players by their aggressive pricing

which will create hindrance for the smaller players.

3.3.5 Threat of substitutes

This is one of the great advantages of the pharma industry. Whatever happens, demand for

pharma products continues and the industry thrives. One of the key reasons for high

competitiveness in the industry is that as an on going concern, pharma industry seems to have an

infinite future.

However, in recent times, the advances made in the field of biotechnology, can prove to

be a threat to the synthetic pharma industry.

3.4 TREND ANALYSIS

Industry Trends

Structural changes causing significant transformations, major factors leading to strong

future sales growth, and point out the industry’s strong reliance on research and development are

discussed here.

3.4.1 Structural changes

The pharmaceutical industry is currently undergoing a period of very significant

transformation. The majority of “Big Pharma” companies generate high returns, thus providing

them with excess cash for further rapid growth – whether organic, or through mergers and

acquisitions. Although size of the company on its own does not guarantee success, it gives a

significant advantage, especially in pharmaceutical industry. Besides economies of scale in


manufacturing, clinical trials and marketing, bigger companies can allow investments in more

research and development (R&D) projects that diversify their future drugs portfolio and make

them much more stable in the long term. As the result, top-companies in the industry were active

participants of mergers and acquisitions (M&A), new joint ventures and spin-offs of non-core

businesses.

The largest acquisitions in the industry during last years were the acquisition of

Pharmacia by Pfizer (purchase price $58 billion), and acquisition of Guidant by Johnson &

Johnson (purchase price $25 billion). Both acquisitions allowed these two U.S.-based companies

to solidify their places among the elite of the pharmaceutical industry. European companies were

even more aggressive in M&A activity than their American competitors – 3 out of 6 major

European companies underwent mergers during the last several years: GlaxoSmithKline (merger

of Glaxo Wellcome and SmithKline Beecham), AstraZeneca (merger of Astra and Zeneca) and

Sanofi-Aventis (merger of Sanofi-Synthelabo and Aventis).

Another form of structural change in the industry was establishing of new strategic

alliances and joint ventures. So far as the research and development process for each drug take

many years and requires significant investments, and the outcome of these investments of time

and financial resources remains unclear until the final approval of the drug, “Big Pharma”

companies are constantly looking for synergies that they can get from cooperation with their

competitors. Last years gave multiple examples of such initiatives. For example, cooperation of

Sanofi-Aventis and Bristol-Myers Squibb resulted in production of Plavix, which is currently

one of the top-selling products for each of these companies.

Finally, “Big Pharma” companies in order to maintain strong sales growth and meet

profitability expectations of their shareholders were actively selling low-profitability or non-core

businesses. For example, in 2003 Merck sold its low-profitability Medco Health Solutions that

helped to increase its profitability margin. Massive sales of non-pharmaceutical businesses by

Takeda also were compatible with its strategy to concentrate its financial resources on its core

pharmaceutical business.


3.4.2 Major factors of future growth

The pharmaceutical industry showed high sales growth rates in the recent past, and a

number of factors suggest that this trend will continue in the future.

First, due to numerous advancements in science and technology, including those in the

health care industry, life expectancy in the developed countries has been steadily growing. As the

result, growing proportion of elderly people promises further growth of demand for healthcare

products. Also, according to various studies, a significant portion of elderly population in the

United States and other countries does not receive proper treatment. For example, only about one

third of the U.S. population who requires medical therapy for high cholesterol is actually

receiving adequate treatment. As it is expected, the Medicare Prescription Drug Improvement

and Modernization Act starting from the beginning of 2006 will increase access of senior citizens

to the prescription drug coverage, thus increasing pharmaceutical sales.

Although developing countries at the moment have a small portion of world

pharmaceutical sales, these countries also have a significant potential for the pharmaceutical

industry in the future. Fast growing economies in Asia, South America and Central & Eastern

Europe suggest an increasing solvency of population and make these markets more and more

attractive for “Big Pharma” companies. Further reforms of legislation systems in the countries of

these regions, especially regarding patent protection issues, will inevitably result in growing

pharmaceutical sales.

3.4.3 Strong emphasis on R&D

One of the distinctive characteristics of the “Big Pharma” companies is a very high level of

investments in research and development. On average, it takes about 10-15 years, and millions of

dollars to develop a new medicine. According to industry statistics, only about one in ten

thousand chemical compounds discovered by pharmaceutical industry researchers proves to be

both medically effective and safe enough to become an approved medicine, and about half of all

new medicines fail in the late stages of clinical trials. Not surprisingly, according to “Research

and Development in Industry: 2001” report of the National Science Foundation, in 2001 the

pharmaceutical industry had one of the highest R&D expenditures as percentage of net sales.


Chapter 4

Objective of the Study

4.1 OBJECTIVES OF THE STUDY

To have a glimpse of the global pharmaceutical industry.

To explore the current functioning of Indian pharmaceutical industry.

To determine the opportunities and threats those exist for firms within a competitive

environment.


To study the policies, regulations, patent acts and its impact on Indian Pharmaceutical

industry.

To make a comparative study of growing Indian pharmaceutical companies.

To analyze both the quantitative and qualitative aspects of the top performing companies

in India.

To analyze the future prospects for Indian pharmaceutical Industry.

4.2 SELECTION CRITERIA

The companies are selected it’s based on the Turnover. The Top 5 players based on the 2008

Turnover are selected and listed here:

Ranbaxy (4589.14 Cr.)

Dr. Reddy Laboratories (4239.8 Cr.)

Cipla (4088.56 Cr.)


Sun pharma Industries (3210.76 Cr.)

Lupin labs (2609.86 Cr.)

Fig 3.1 Turnover of the selected companies


Chapter 5

Company Profile

5. COMPANY PROFILE

5.1 RANBAXY

Mission

To become a research based International Pharma Company

Vision

Achieve Significant Business in proprietary prescription products by2012 with a strong presence

in developed markets.

Overview


Ranbaxy was incorporated in 1961 and went public in 1973. Ranbaxy Laboratories

Limited (Ranbaxy), India's largest pharmaceutical company, is an integrated, research based,

international pharmaceutical company, producing a wide range of quality, affordable generic

medicines, trusted by healthcare professionals and patients across geographies.

In June 2008, Ranbaxy entered into an alliance with one of the largest Japanese innovator

companies, Daiichi Sankyo Company Ltd., to create an innovator and generic pharmaceutical

powerhouse. The combined entity now ranks among the top 20 pharmaceutical companies,

globally. The Company’s business philosophy based on delivering value to its stakeholders

constantly inspires its people to innovate, achieve excellence and set new global benchmarks.

Driven by the passion of its over 12,000 strong multicultural workforce comprising 50

nationalities, Ranbaxy continues to aggressively pursue its mission to become a Research-based

International Pharmaceutical Company.

RANBAXY possesses the manufacturing strengths that have established it as a producer

of world-class generics, branded generics and a major supplier of its range of Active

Pharmaceutical Ingredients for pharmaceutical products of companies worldwide. Using the

finest R&D and Manufacturing facilities, Ranbaxy Laboratories Limited manufacture and

markets generic pharmaceuticals, value added generic pharmaceuticals, branded generics, active

Pharmaceuticals (API) and intermediates.

Business Performance

Amidst a challenging business environment, Ranbaxy has achieved a growth of 4% on its

top line. This was supported by the Company's focus on emerging markets, that contributed 54%

to the business; consolidation in the business in developed markets and continued investment in

building a high-value new product pipeline. Russia, Ukraine, Brazil and India led the growth in

the emerging markets. The Company recorded a strong performance in these markets that was

higher than the industry averages. Amongst the developed markets, Canada and Japan

outperformed while Germany and France delivered good results. For the first time, Ranbaxy

launched Authorised Generics, Omeprazole and Felodipine, in USA. On both these products, the

company performed well and garnered good market positions.


The business in both emerging and developed markets was supported by increased

number of new product launches and continuous focus on key emerging therapies. On the

innovation front, R&D saw a series of positive developments during the year. The company

expanded their Drug Discovery & Development collaboration model by successfully entering

into a new collaboration with Merck in the field of anti-infectives. In their GSK alliance, the

company maintained steady progress during the year, filing an IND (Investigational New Drug)

application in India for Phase I trials on the Respiratory molecule. Their Anti-Malaria

combination molecule, Arterolane, progressed well, having successfully completed Phase II

studies and obtained approval for Phase III studies in India. On the generics side, the company

continue to drive a high value pipeline of differentiated and niche products to achieve greater

productivity at the business end.

The year 2008 witnessed an unprecedented economic downturn across all markets

globally. The volatility and uncertainty in the financial environment was exceptionally high and

led to sharp fluctuation in foreign currency rates. Since their business is spread widely across

multiple geographies and foreign currencies, the weakened and fluctuating financial and Forex

environment created a substantial negative impact on their profitability for the year inspite of

sustained performance, at an operating level.

Corporate Governance

Ranbaxy, in 2008, proactively adopted the latest financial guidelines (AS-30) related with

foreign currency instruments and harmonised its financial reporting accordingly. The company

were amongst the earliest companies in India to adopt these guidelines, ahead of time, thus

aligning their Company with the global reporting norms while maintaining high standards of

disclosure and complete transparency. For the year 2009, Ranbaxy has a clear strategy to

harness its growth potential in emerging markets, rebuild the US business through a series of

actions on products and facilities; actualise significant revenue upsides through First-to-File and

Day-1 launches; strengthen the product / therapeutic pipeline and look for M&A opportunities,


complementing their geographic and therapeutic basket. Their focus will be to resolve regulatory

compliance issues and continue to strengthen GMP across all locations. Besides this, Ranbaxy

and Daiichi Sankyo will identify key projects to realise synergies at both the front and back ends

of the business, although, there will be much to contend with, considering that the industry is

projected to grow at around 5% in 2009.

Ranbaxy Global Consumer Healthcare (RGCH) has achieved a distinction for its

Revital brand being in the top 15 pharmaceutical brands in India. This is now a US $ 44 Mn

business, growing well consistently. During 2008, RGCH also launched Volini SR 100 in the

Analgesics category and Chyawan Active, a sugar free Chyawanprash. Finally, the API

Business is a global US $ 120 Mn business, with good support from Ranbaxy Chemical

Research. The Company's Global ARV business continues to perform well, with sales of US

$53 Mn during the year. In this period ARVs were supplied for treatment programs in various

countries across the developing world. Further, the World Health Organization (WHO), Geneva,

included three additional ARV products of the company in its pre-qualification list - Abacavir

tablets, Fixed Dose Combination (FDC) tablets of Abacavir, Lamivudine and Zidovudine and

FDC tablets of Lamivudine, Zidovudine and Nevirapine. This has taken the total number of ARV

products on the pre-qualification list to 18. The opportunity of Biosimilars at Zenotech

Laboratories Ltd. Has been postponed a while, due to the on-going open offer.

Countries served by Ranbaxy

North America

USA

Canada

European Union

United Kingdom

Germany

France

Romania

Rest of Europe


Asia Pacific (excluding India)

Russia & Ukraine

Africa

Latin America

Corporate Social Responsibility (CSR)

Reaching out to the underserved rural communities and helping them overcome their

challenges is central to Ranbaxy's CSR philosophy. The companies always strive to make a

meaningful impact on the quality of their lives by bringing preventive, promotive and curative

healthcare services to their doorstep. Nearly three decades ago in 1979, Ranbaxy started its

health care initiatives in certain identified rural areas of Punjab. As the reach of the program

grew, the Ranbaxy Community Health Care Society (RCHS) was established in 1994. A novel

idea of providing mobile health care outreach service for the poor and underprivileged was

initiated. The program today benefits nearly 2 lakh people in 77 rural and urban slum areas in

Punjab, Haryana, Himachal Pradesh, Madhya Pradesh and Delhi. Today, six well equipped

mobile health care vans with teams of medics and paramedics are actively engaged in the

delivery of health care to their target population in these states. The issues addressed include

maternal-child health, family planning, reproductive health, adolescent health, health education

and AIDS awareness. As usual, the systematic efforts by RCHS during the year have delivered

the desired positive results.

A significant reduction in the infant mortality rate has been achieved in the old as well as

new service areas. No infant death occurred due to diarrhea, a major killer disease in the past.

The birth rate also continued to show a decline and no maternal death was reported. The

company believe this achievement is significant especially in a country like India where deaths

during pregnancy and childbirth are much higher than elsewhere in the world. These positive

results are an outcome of the scientific and strategic approach being followed by RCHS in

tackling issues like low birth weight, pneumonia, diarrhoea, lack of new born care and

management of obstetrical emergencies. Additionally, the company are working hand in hand

with the Government and other voluntary agencies to step up their medical and social

interventions to deal with critical issues like HIV/AIDS, tuberculosis, malaria and female

foeticide. The Company also actively participated in various national health campaigns,


especially the pulse polio immunisation. The year saw Ranbaxy building partnerships with

reputed national organisations like the Rajiv Gandhi Foundation, Voluntary Health Association

of Punjab and the Society for Service to Voluntary Agencies for important projects on

Reproductive Child Health and HIV/AIDS.

EHS Management System (EHSMS)

Ranbaxy firmly believes that quality in EHS is congruent with the quality of the

Company's products and services. As a step in this direction, the company introduced a

centralized and comprehensive Incident Tracking System to further streamline their EHSMS.

Branded 'N'Vizion, the new state-of-the-art centralize tracking system provides a detailed

analysis of the root cause of each incident, followed by the corrective and preventive actions

taken and its impacts. This technology provides considerable support in reducing the number of

incidents and their recurrence, making their workplaces a lot safer. The system is being rolled

out in a phased manner across all their locations, worldwide. Their Corporate EHS Team also

conducted audits at the Company's operating sites in the US and South Africa. These audits were

undertaken to substantially verify the implementation of the EHSMS. Additionally,

comprehensive EHS audits of their key Active Pharmaceutical Ingredient (API) manufacturing

facility at Toansa, in Punjab, were also concluded by one of their major business partners.

Occupational Health and Safety

It is their constant endeavtheir to scale up and better their Occupational Health and Safety

practices. A number of initiatives were undertaken during the year to enhance workplace safety.

The emergency preparedness was ensured through regular tabletop exercises and mock drills at

all thier manufacturing facilities and R&D centre’s. At their Toansa manufacturing facility, the

'Fire and Safety Risk Assessment' and the 'Hazardous Area Classification' was reviewed by third

party specialists. The National Safety Council also conducted external safety audits at Toansa

and Mohali. A cross functional team of Corporate EHS, Engineering and Facility professionals

along with an external specialist further undertook external safety audits at the Corporate Office.

Extensive safety training programs were also conducted by internal and external specialists at all


their manufacturing facilities, including those managed by their contract manufacturing business

partners. These diligent steps have led to the development of an extremely positive atmosphere at

all their locations with Environment, Health and Safety being given due importance. These best

practices are now a part of the system and are deeply ingrained into the very fabric of their

operations.

Outlook on Threats, Risks and Concerns

The global generics business has become more competitive with entry of new players in

emerging countries and government led healthcare reforms in several countries. In developed

economies Innovator pharmaceutical companies continuously evolve ways to enhance lifecycle

of patented drugs which could delay entry of generic versions. The generic segment has inherent

risks of patent litigations, product liability, increasing regulations and compliance related issues.

The manufacture of generic pharmaceuticals is heavily regulated by governmental

authorities around the world, including the US FDA. If the company or their third party suppliers

fail to fully comply with such regulations, there could be a government-enforced shutdown of

concerned production facilities, revocation of drug approvals previously granted, failure or delay

in obtaining approvals for new products, product recalls of existing drugs sold in the market,

prohibition on the sale or import of non-complying products and criminal proceedings against

non-complying manufacturers.

The Company received two warning letters from the United States Food & Drug

Administration (US FDA) on September 16, 2008 for two of its manufacturing sites located at

Paonta Sahib and Dewas in India. Simultaneously US FDA also issued an import alert for

products manufactured at these two plants. Further, on February 25, 2009, the Company received

a letter from the US FDA indicating that the Agency has invoked its Application Integrity Policy

(“AIP”) against Paonta Sahib facility (the “facility”). The US FDA has tested and analysed many

products of the Company and has found them meeting applicable specification. US FDA has

consistently maintained after above letters that the Company’s products meet their quality

specifications, and there are no health risks associated with the Company’s products.

Importantly, no other Ranbaxy plants, in India, or anywhere globally, are covered by this latest


action. The Company continues to fully co-operate with the concerned authorities for their final

clearance, pending which the company could continue to face delays for new product approvals

and sales of existing products to the US.

5.2 CIPLA

Mission

To contribute to continued medical education and research into new drug delivery

systems in the belief that this contribution will improve technical know-how and

ultimately benefits all patients in South Africa.

To be the employer of choice in the pharmaceutical sector developing our most valuable

asset, human capital, irrespective of race, colour or creed so that they may realise their

full potential and ambitions. We pledge personal respect, fair compensation and a clean

and safe working environment.

To be recognised as innovators in the field of pharmaceutical marketing rather than just

followers, be the investors pick and achieve sustainable above average returns to the

investor.

To be recognised as the preferred partner in medicine.

Vision

To heal South Africa and to become the biggest and the most admired

pharmaceutical company in South Africa.

Overview

Cipla was established in 1935. Cipla exports raw material, intermediates, prescription

drugs, OTC products and veterinary products. Cipla products are bought by over 180 countries in

the world. The range of services include consulting, project appraisal, engineering, plant supply,

commissioning, training, operation management support, and quality control. Cipla makes drugs

to treat cardiovascular disease, arthritis, diabetes, the companyight control, depression and many

other health conditions, and its products are distributed in more than 180 countries worldwide.

Cipla has recently launched i-Pill which is a single dose emergency contraceptive and has


acquired a great deal of popularity in a short span of time. Other latest launches of Cipla include

products such as Nova, Moxicip, Flomex, Fullform, Montair LC, and Imicrit.

Cipla is the world's largest manufacturer of antiretroviral drugs. Cipla manufactures

generic versions of many of the most commonly prescribed anti-retroviral medication in the

market, and is a highly capable manufacturer in its own right. India is quickly becoming a global

player in the pharmaceutical industry, and many of these companys' (such as Cipla) are evolving

to become R & D companies and competing in the global marketplace. he firm announced the

launch of the drug under brand name: "antiflu" on November 11, 2009 to be sold as a category X

drung, strictly under prescription. The firm has already sold 2 lakh (200,000) doses to Indian

Govt. Cipla is into anti-bacterial and anti-asthmatic segments and is the first player in Asia to

launch non-CFC metered dose inhaler.

The Indian pharmaceutical industry remained less affected compared to other sectors and,

according to ORG-IMS, registered a growth of more than 10 per cent. While exports grew by

more than 30 per cent due to the depreciating rupee (as per figures compiled by Pharmexcil),

there the company challenges like falling liquidity in the global market, adverse currency

fluctuations and increasing competition in various markets, including the USA.


The Company’s turnover recorded a 22 per cent growth and crossed the Rs.5000 crore

milestone. While exports grew by 30 per cent, the domestic sales grew by 15 per cent. Notably,

technical fees fetched Rs.218 crore, marking a significant 42 per cent growth over the previous

year. However, forward contracts entered into to hedge the Company’s foreign exchange

business had an impact on net profit growth. According to ORG-IMS, Cipla remained the leader

in the domestic market, as on 31st March 2009.


http://en.wikipedia.org/wiki/Antiretroviral_drugs

Fig 5.1 Performance Review

Source: Company Sites.

Manufacturing Facilities

Over the last three years, the Company has invested about Rs.1900 crore in fixed assets.

This major expansion programme will help meet the increasing demands of domestic and

international business and to sustain growth. It will also help take advantage of taxation and

other fiscal benefits. The construction work at the Company’s Rs.750 crore Special Economic

Zone (SEZ) project for pharmaceutical formulations, at Indore, Madhya Pradesh, is in full swing.

This project includes facilities for the manufacture of aerosols, respules, liquid orals, pre-filled

syringes (PFS), nasal sprays, large volume parenterals (LVP), eye drops, tablets and capsules.

During the current year, the Company proposes to take validation batches for these dosage forms

and commercial production is expected to commence in the subsequent year. Cipla’s Rs.310

crore project in Sikkim for the manufacture of formulations including capsules, tablets, nasal

sprays, inhalers, eyedrops and respules commenced commercial production during the year.

Work at the Company’s SEZ project at Kerim, Goa remained suspended due to the stop-work

order issued by the State Government. The Company has received a communication dated 11th

July 2008 from the government revoking the stop-work order, consequent to the filing of a

petition by the developer of the SEZ against the order. The petition is currently pending before

the Goa bench of Bombay High Ctheirt.


Fig 5.1 Distribution of Revenue

Regulatory Approvals

Several dosage forms and APIs manufactured in the Company’s plants continue to enjoy

the approval of major international regulatory agencies. These agencies include the US FDA,

MHRA (UK), PIC (Germany), MCC (South Africa), TGA (Australia), Department of Health

(Canada), ANVISA (Brazil), SIDC (Slovak Republic), Ministry of Health (Kingdom of Saudi

Arabia), the Danish Medical Agency and the WHO.

Safety and Environment Care

Various health, safety and environment awareness programmes were organised for

villagers and school children living around the Company’s units at Baddi (Himachal Pradesh),

Patalganga (Maharashtra), Kurkumbh (Maharashtra), Verna (Goa) and Bengaluru (Karnataka).

As always, the Company kept up high standards of occupational health, safety and environment

preservation practices at all its manufacturing units. The Company continued to maintain


modern, well-designed effluent treatment plants at its factories. Treated water from these “zero

discharge” facilities is used for maintaining a green belt at all the locations.

Internal Control Systems

The Company’s internal control procedures are tailored to match the organisation’s pace

of growth and increasing complexity of operations. These ensure compliance with various

policies, practices and statutes. Cipla’s internal audit team carries out extensive audits throughout

the year, across all functional areas and submits its reports to the Audit Committee of the Board

of Directors.

Threads, Risks and Concerns

Patents

Following the change in the patent laws in March 2005, product patents have been

brought into force with effect from January 1995. As expected, this has triggered a series of

litigations. Cipla too has challenged some of these cases involving both pre-grant and post-grant

patents, as it believes that these patents have no merit. The recent global outbreak of swine flu

and the subsequent concerns about availability of medicines to combat the epidemic has

vindicated their oft-repeated stand on intellectual property laws. When it comes to saving lives,

the destiny of the world cannot be left to one or two companies. It is necessary for all countries

to modify their intellectual property laws to ensure availability of essential and life-saving drugs.

This is possible only by introducing a permanent compulsory licensing system for all drugs,

whereby a suitable royalty on net sales should be paid to the inventor and patent holder.

Cipla has always been appealing to the Indian government to modify its intellectual

property laws to safeguard Indian consumers from monopoly. The Indian government should

adopt a pragmatic compulsory licensing system. This is the only possible way to make drugs

available for the healthcare needs of their large population, at affordable prices. Recently, as

reported in the media, pharmaceutical drugs of certain Indian companies were labelled as

counterfeit drugs and some of these products are being detained at international airports for no

valid reason.

Drug Pricing


The drug pricing policy has not been announced for more than five years. It is hoped the present

government will address this issue with some sense of urgency. The government must take the

lead and announce a policy which is fair, transparent and against monopoly. The company have

always maintained that free and open competition is the best way to control drug prices. As

stated earlier, Cipla is willing to share its pharmaceutical technology with the government of

India, free of charge, so that the public sector pharmaceutical undertakings can also manufacture

and market all vital and life-saving drugs at economical prices.

Corporate Social Responsibility

Pursuant to section 217(2AA) of the Companies Act, 1956 it is confirmed that the

Directors have:

i. followed applicable accounting standards in the preparation of the annual accounts; .

ii. selected such accounting policies and applied them consistently and made judgements

and estimates that are reasonable and prudent so as to give a true and fair view of the

state of the affairs of the Company at the end of the financial year ended 31st March

2009 and of the profit or loss of the Company for that period;

iii. Taken proper and sufficient care for maintenance of adequate accounting records in

accordance with the provisions of the Companies Act, 1956 for safeguarding the assets

of the Company and for preventing and detecting fraud and other irregularities; and

iv. Prepared the annual accounts on a going concern basis.

5.3 SUN PHARMACEUTICALS

Vision

To be a leading pharmaceutical company in India and to become a significant global

player by providing high quality, affordable and innovative solutions in medicine and treatment.

Overview


Sun Pharma came into existence as a start-up in 1983. They make speciality

pharmaceuticals and active pharmaceutical ingredients. With world-class technology and a team

of strong professionals, the company have built sites and systems that meet the most stringent

international manufacturing standards. Expert quality teams ensure that systems and processes

remain in compliance with the latest standards. In 1996, a mixture of acquisitions like Chattem

limited, Taro pharma, Able labs etc.

The company tries to work by these principles in all its interactions with stakeholders,

including shareholders, employees, customers, suppliers and statutory authorities.

Important mergers were those of the US, Detroit based Caraco Pharm Labs.

The tally at the end of 2008:

17 manufacturing plants in 3 continents

8000 employees

2 World class research centers

Brand selling in markets worldwide

A growing presence in the US generic market

Increasing research investments

60% of sales from international markets

Recapping their 2008-09 results:

The company recorded sales of Rs. 42,723 million, a growth of 27% over the previous

year Between Sun Pharma and Caraco, 38 ANDAs were filed covering 37 products 42 products

were launched in India and ANDAs for 18 products were approved for the US The company


received the first approval for a controlled substance ANDA from their Cranbury, New Jersey

facility Their expansion plans at Dadra, Halol and Detroit are being completed as per Schedule

Sun Pharma's annual sales for 2008-09 was Rs. 42,723 million, a growth of 27% over the

previous year. The cumulative spend onR&Dover the years now amounts to Rs. 15 billion. In

line with their intent of becoming an international generic pharma company, sales from

international markets grew to 53% of their total turnover. Sales at Caraco were

down4%toUSD337 million.

Products

Sun Pharma's product portfolio consists of 4 main categories of products:

1. India Branded Generics

2. US Generics

3. International Branded Generics

4. Active Pharmaceutical Ingredients (API)

Fig 5.2 Products of Sun Pharma

Domestic formulations or India Branded Generics has shown rapid growth, contributing

45% to their total revenue during 2008-09. Their market share has grown from 2.6% in March

2001 to 3.5% during March 2009. The top 10 brands of the Company now contribute 21% of the

sales in this segment. (Stheirce: IMS -ORGStockist Data) During 2008-09, the company

demonstrated a 32% growth, with chronic therapy largely driving the growth. Fast-growing

chronic therapies like Psychiatry, Neurology, Gastroenterology, Cardiology constitute more than


70% of their portfolio. The company continue to demonstrate market leadership in the chronic

segments. The company rank amongst the top 3 in more than 50% of the brands from a portfolio

of over 500 brands. A 2,500- representative strong field force across 18 marketing divisions

helps build strong brand loyalty


Sales of branded prescription formulations in India were at Rs. 4,473 million for the

second quarter, a growth of 20% over the same quarter last year, contributing 37% of total sales.

For the first half, domestic formulation sales were at Rs. 8,769 million, an increase of 19% over

first half last year. Sun Pharma holds 3.4% market share in the highly competitive pharma

market, as per latest IMS ORG report. 9 key products were launched during the quarter, taking

the total for H1 to 16. Sun Pharma continues to sell generic Protonix and Ethyol, products that

were Company’s “at-risk” launches. This quarter and half year too, these launches had a one-off

effect on the US generic sales and profits. Sun Pharma subsidiary, Caraco Pharmaceutical

Industries, Ltd (Amex: CPD), recently announced Q2 FY09 sales of USD 122 million, up 195%

from USD 41 million for Q2 FY08. Caraco recorded a net income of USD 8.4 million for Q2

FY09. For the first half, Caraco reported sales of USD 230 million and net income of USD 18

million. Between Sun Pharma and Caraco, ANDAs for 61 products are now approved. In the

second quarter, ANDAs for 10 products have been filed, of which 7 are from Sun Pharma, and 3

from Caraco. With this, in the first half ANDAs for a total of 15 products have been filed.

During the second quarter, ANDAs for 3 products from Sun Pharma have been approved.

Counting this, ANDAs for 96 products now await USFDA approval, including 7 tentative

approvals. This pipeline is expected to build revenues for our US generic business in the years

ahead. Consolidated R&D expense for Q2 FY09 is Rs 884 million, or 7.5% of net sales. For the

first half, the consolidated R&D expense is Rs. 1,626 million, or 7.3% of net sales. A cumulative

of 117 DMF / CEP applications have been made, with 61 approved so far. The total number of

patent applications submitted for Sun Pharma now stands at 228 with 72 patents granted so far.

Sun Pharma has been successful in its defense of the litigation brought against it in the Tel-Aviv

District Court by Taro and certain of its directors.


Highlights Of The Year 2009

42 products have been brought to the market in India in FY09, across 18 marketing

divisions. 9 products used a technology-based differentiation or were complex, 12 were

integrated to API. Pantocid group, Aztor, Strocit and Gemer continue to grow at double-digit

growth rates in extremely competitive markets. The company brought to the market hi-tech

Octride Depot 20 mg and 10 mg once a month injections, a one-of-its-kind product for the

treatment of serious and difficult to treat indications such as Neuroendocrine Tumors (NETs) and

Acromegaly. The company introduced a number of complex products such as Tamlet (modified

release Tamsulosin Hydrochloride & Extended Release Tolterodine Tartarate Capsules), Tyrogef

(Gertifinib), Cernos Depot (Testosterone Undecanoate).

Market scenario

The generics market remains a major growth area in the global healthcare arena. It

continues to grow at a faster pace than the global pharma market, largely due to regular patent

expirations of blockbuster drugs. Rising healthcare expenditure also contributes to industry

expansion, with governments seeking cost-containment in several national healthcare sectors, by

promoting the use of generic products over higher-priced originator products. However, the year

2008 witnessed significant reduction in sales growth, despite robust volume increases. This was

largely on account of manufacturers increasingly competing in price battles within most of the

world's major markets. Global generic products generated USD 78 billion in audited sales in the

twelve months through September.

The top eight global markets - the US, Germany, France, the UK, Canada, Italy, Spain

and Japan - today account for 84% of total generics sales. (Stheirce: IMS 2008 Global

Pharmaceutical Market and Therapy Forecast) US, the world's largest generics market with 42%

of global sales, experienced a 2.7% sales decline in the twelve months ending September 2008

while volume increased 5.4 % during the same period. The market is currently valued at USD 33

billion, compared with USD 34 billion last year, reflecting declining prices and fewer

blockbusters losing patent protection in 2008. (Stheirce: IMS 2008 Global Pharmaceutical

Market and Therapy Forecast) Generic products now account for 71.5% of the total US

pharmaceutical market volume, however accounting for only 21.6% of all dollars spent on

prescription. (Stheirce: Generic PharmaceuticalAssociation 2009 Report) The return of


Democrats to power in the White House and US Congress should further improve the prospects

of generic companies in the US pharmaceutical market. In all likelihood, the new Democrat

regime in the US will be additionally pro-generic, given thesignificant cost benefits associated

with generics. According to the Generic Pharmaceutical Association (GPhA), while brand

prescription drug prices rose by nearly 9%, generic drug prices decreased by an average of

10.6% in 2008. The new administration also has the eminent task of a comprehensive health care

reform to rein in the skyrocketing health care costs that are driving Medicare closer to the

financial brink.

According to the Trustees' 2009 report on Medicare, the program will be insolvent by

2017, two years sooner than projected in last year's report. Perhaps the most important stimulus

to the generics market will come from implementation of health insurance coverage for all

Americans. This would mean that about 47 million Americans that are currently out of any

health insurance will come under coverage, expanding the market for cost-effective therapeutics,

including generics. Initial reports indicate that President Obama has already begun to take steps

in this direction. In his first budget, he is expected to seek USD 634 billion over 10 years as a

down payment on health care reforms- more than half of the estimated total cost of bringing 47

million Americans under coverage.

Europe is a region where the company intend to increase their generic focus in the years

to come. According to European Generic medicines Association's (EGA) Market Review 2007,

the EU generic medicines market was aboutUSD31 billion.The company continue with their

efforts to enter key markets with a limited number of complex generic products viz. injectables

initially. The company will then offer more products and selectively build up a portfolio in this

market.

India is on its way to become a global leader in API production The Indian API manufacturing

industry is projected to make sales of USD 4.8 billion by 2010, exhibiting an average yearly

growth rate of over 19%. Though, there was a global slowdown in the API market in 2008 due to

the recession, long term prospects continue to be promising. With their rational costs, rapid

speed to market and strong regulatory capability (133 DMF/CEP have been approved or are

awaiting approval), Sun Pharma is well placed to capitalize on this opportunity.


Around 160 specialty APIs are produced across 8 world-class locations, all of which are

ISO 14001 and ISO 9002 approved, besides being approved by the respective foreign regulatory

authorities. 6 of these are in India while the company have one plant each in Hungary and USA

for the manufacture of APIs for controlled substances.The company also have standalone units in

their plants in India for the manufacture of peptides, anticancers, steroids and sex hormones.

A large part of their API capacity is used for in-house consumption. During 2008-09,

their API sales grew to Rs. 4,846 million, contributing 11% to their total turnover. This segment

has been growing at a 3 yearCAGRof 21%. 78% of API sales come from international markets.

The European market has performed well for us this year with older products like 5ASA,

Pentoxifylline and Clomipramine in which the company have good market shares. Their

integration into API manufacturing is an important part of their business. It strengthens their

Indian and developing markets business, and their ability to take on challenges in the US generic

market. This year, the company scaled up 30APIs. This brings their total regulated market

approvedAPI to 81 of 133 filings made forDMFandCEP.

CSR (Corporate Social Responsibility)

Their organization has identified health, education, disaster relief and civic utilities

around the plants and research centers as areas where assistance is provided on a

need-based and case to case basis.

5.4 LUPIN PHARMA

Mission

To become a transnational pharmaceutical company through the development and

introduction of a wide portfolio of branded and generic products in key markets.

Vision


To bring innovative products for the healthcare professional to improve the health and

well being of individuals.

Lupin Pharmaceuticals, Inc. is well positioned for growth in the US market. We can capitalize on

the strengths of our parent company, Lupin Limited:

Scientific expertise to develop new and improved products and product line extensions;

Manufacturing technology, expertise and infrastructure;

Financial resources.

Overview

Lupin Pharmaceuticals, Inc. is the U.S. wholly owned subsidiary of Lupin

Limited, which is among the top six pharmaceutical companies in India. Because

of the advantage of having their sales and marketing headquarters in Baltimore,

MD, Lupin Pharmaceuticals, Inc. is dedicated to delivering high-quality, branded

and generic medications trusted by healthcare professionals and patients across

geographies.

Lupin Limited, headquartered in Mumbai, India, is strongly research

focused. It has a program for developing New Chemical Entities. The company

has a state-of-the-art R&D center in Pune and is a leading global player in Anti-

TB, Cephalosporins (anti-infectives) and Cardiovascular drugs (ACE-inhibitors

and cholestrol reducing agents) and has a notable presence in the areas of diabetes,

anti-inflammatory and respiratory therapy.

They build their parent company’s strengths of vertical integration in

discovery research, process chemistry, active pharmaceutical ingredient


production, formulation development and regulatory filings. Lupin

Pharmaceuticals, Inc. is committed to achieving its vision and mission of

becoming an innovation led transnational pharmaceutical company.

For the financial year ended March 2008, Lupin Limited's Revenues and

Profit after Tax were Rs.27, 730 million (US$ 694 million) and Rs.4, 083 million

(US$ 102 million) respectively.

Guided by its mission to become an Innovation led, Transnational

Pharmaceutical Company, Lupin’s scientific pool of close to 600 researchers

constantly strive to develop new technologies and products.

Lupin Research Park (LRP) at Pune, spread across 19 acres is the hub of the

Company’s global research activity. The Centre harbours a culture that fosters

innovation and helps shape inventions into innovative commercial products. The

Company also has an advanced Research & Development facility - Kyowa

Pharmaceutical Industry Co. Ltd, located at Osaka, Japan.

Today, the Company has the proficiency to develop a wide range of

pharmaceuticals, across the value chain encompassing complex APIs to value-

added difficult-to-develop formulations. During 2008-09, the total investment of

the Company in R&D (excluding depreciation) was over Rs.2,669 mn, 7.1% of

consolidated net sales.

Lupin's research and development initiatives are spread across:

Generics Research

o Formulations Research


o Process Research

Advanced Drug Delivery Systems (ADDS)

Lupin BioResearch Centre

Intellectual Property Management

Novel Drug Discovery & Development

Biotechnology Research

Products

a) Generics

Lupin Pharmaceuticals, Inc. entered the U.S. generic pharmaceutical market

in 2003 with the ANDA approval for cefuroxime axetil. Since then we have

received more than a dozen FDA approvals. Six of Lupin's 14 ANDA approvals

were the first granted by the US FDA, reinforcing our ability to submit high

quality dossiers and gain on time approvals. They vertically integrated, from

process development of the API to the submission of dossiers for finished dosages.

Expanding the product portfolio, Lupin Pharmaceuticals, Inc. is geared to file 15 or

more ANDA’s per year in some of the following areas:

Oral and injectable cephalosporins;

Cardiovascular;

Controlled release ANDA’s;

Paragraph IV’s.

b) Specialty


A commitment To Caring For Kids

Lupin Pharmaceuticals, Inc. is committed to developing a branded

pharmaceutical presence for pediatric practice in the US market. It committed to

identifying, developing and marketing prescription drugs for children of all ages.

Lupin has created a dedicated national sales force to call upon pediatricians.

Lupin Pharmaceuticals, Inc., is very pleased to offer Suprax®, an important anti-

infective product in pediatric and other physician practices within the United

States. Suprax® is now available in tablets and suspension formulations. They

plan to expand our family of pediatric products to help meet needs of children.

c)API

Lupin is recognized as a leading manufacturer of cephalosporin API’s, with

FDA approval to manufacture complex oral and injectable cephalosporins.

Lupin is fast gaining share in the cardiovascular segment manufacturing a

wide range of ACE-inhibitors and cholesterol reducing agents.

Lupin’s capabilities in sterile processing, synthetic process development and

fermentation skills coupled with its intellectual property strengths, puts the

company in a very strong position to offer a diverse portfolio of niche API’s

to its customers.


Successfully achieved and closed Strategic Acquisitions & Equity

Partnerships in Germany, Australia and South Africa – Hormosan

(Germany), Pharma Dynamics – South Africa, Equity Partnership with

Generic Health – Australia.


Successfully launched Divalproex Sodium Delayed-Release Tablets, 125

mg, 250 mg and 500 mg in the US following USFDA Aproovals

Forged Strategic Alliance in the US with Forest Laboratories, Inc. for

Marketing and promoting AeroChamber Plus® thereby extending Lupin’s

presence in the respiratory segment and our franchise with Pediatricians

Awarded the Wal-Mart Supplier Award of Excellence for the 2nd Quarter

2008 – for overall commitment, performance, on-time shipping, innovative

programs and overall partnership

Domestic Formulations Business Growth at net sales level at 23.8% -

outpaces and outperforms market growth rate of 12.8 %, (ORG MAT

September 08)

Business in Japan contributes 11% to overall revenues

CSR activities:

.Lupin Human Welfare & Research Foundation was set up on October 2, 1998

with the objective of providing an alternative model of rural development in the

country, which is sustainable, replicable and ever evolving.

LHWRF Foundation has been successful in making a big difference in the

development of poverty-ridden villages, and especially in the life of the poorest of

the poor and empowerment of large number of women in these areas. Today

LHWRF on its part is a catalyst, and an observer of a self-evolving, self-

sustaining spectacular transformation.

Lupin HWRF has taken following innovative and new initiatives under its CSR

activities:

· Building local level institutions - LGVP


· Convergence for scalability

· Identification of potential areas for futuristic development

· Conversion of problems into potentials

Lupin Gram Vikas Panchayat (LGVP) (Village Development Committee)

consists of representatives from different village communities, who are dedicated

to the cause of service and village development.

The contribution in the form of man, material and cash is must for any

developmental work. Villagers were motivated to contribute certain percentage of

estimated cost of the work, rest of the money come from Lupin and Government.

This work of infrastructure was executed by the committee of villagers namely

LGVP.

Impact of Lupin programs

Economic upgradation of BPL families: 55,708 families economically upgraded through

agriculture, animal husbandry & rural industry activities of organizations operational area.

Reduction of poverty in district: Lupin Foundation has selected entire Bharatpur

district for holistic Rural Development. In 1988 they started their program the incidence

of poverty was 34%. The multifaceted activities of economic and social development

were under taken in close collaboration with District and State Government departments.

At present, the incidence of poverty is around 12% and hope to bring it down to nearly

6% by 2015.

The World Bank has replicated Lupin’s model under the program of District Poverty

Initiative Program (DPIP) by forming Common Interest Groups of the pattern of the

LGVP.

Government has announced a policy intervention in the name of Apna Gaon Apna Kam.

Lupin’s pattern of working with community’s contribution has impressed the State

Government to announce policy intervention which became applicable to the entire state

of Rajasthan i.e. 38,000 villages.


5.5 Dr.REDDY’S LAB

Overview

Dr. Reddy's Laboratories is India's leading pharmaceutical company with presence in over

100 countries. Dr Reddy's manufactures a range of products such as Active Pharmaceutical

Ingredients, Generic & Branded Finished Dosages, Specialty Pharmaceuticals, and

Biopharmaceuticals.

Dr. Reddy's Laboratories was founded in 1984 by Dr Anji Reddy. In 1986, Dr. Reddy's went

public and entered international markets with exports of Methyldopa. In 1987, Dr. Reddy's

obtained its first USFDA approval for Ibuprofen API and started its formulations operations. In

1988, Dr. Reddy's acquired Benzex Laboratories Pvt. Limited to expand its Bulk Actives

business. In 1990, Dr. Reddy's, entered a new territory when it, for the first time in India,

exported Norfloxacin and Ciprofloxacin to Europe and Far East. In 1993, Dr. Reddy's Research

Foundation was established and the company started its drug discovery programme. In 1994, Dr.

Reddy launched a GDR issue of US$ 48 million. In 1995, the company set up a joint venture in

Russia. In 1997, Dr. Reddy's became the first Indian pharmaceutical company to out-license an

original molecule when it licensed anti-diabetic molecule, DRF 2593 (Balaglitazone), to Novo

Nordisk. In 1998, Dr. Reddy's licensed anti-diabetic molecule, DRF 2725 (Ragaglitazar), to

Novo Nordisk. In 1999, the company acquired American Remedies Limited, a pharmaceutical

company based in India. In the year 2000, became the first Asia Pacific pharmaceutical

company, outside Japan, to be listed on the New York Stock Exchange. In 2001, Dr. Reddy's

Laboratories became India's third largest pharmaceutical company with the merger of Cheminor

Drugs Limited, a group company. In 2002, Dr. Reddy's made its first overseas acquisition - BMS


Laboratories Limited and Meridian Healthcare in UK. In 2003, Dr. Reddy's launched Ibuprofen,

first generic product to be marketed under the "Dr. Reddy's" label in the US. In 2006, Dr.

Reddy's achieved a revenue of US$ 1 Billion. In the same year, Dr. Reddy's acquired Betapharm-

the fourth-largest generics company in Germany. Today, Dr. Reddy's Laboratories is leading

pharmaceutical company in India in terms of turnover and profitability.

Products of Dr. Reddy's Laboratories

Active Pharmaceutical Ingredients (API): Dr. Reddy's Laboratories product list span 24 major

chemistries including stereo-selective synthesis, cryogenics, hydrogenations and cyanations. It

has filed 84 US DMFs, the highest in India and second highest in the world.

Custom Pharmaceutical Services: Dr. Reddy's executes cost-effective and time-bound projects

for its customers, and provides them cGMP-compliant products manufactured in FDA-inspected,

ISO-certified facilities.

Generic Dosages: Dr. Reddy's Lab is a leading generic drugs manufacturer. It is the fourth

largest player in Germany after the acquisition of betapharm. The company has expertise in

customer-specific packaging, compliance packaging, anti-counterfeit packaging, and has won

several awards globally for its packaging efforts, including the Asia Star, AmeriStar and

WorldStar awards.

Branded Dosages: Dr. Reddy's brands such as Omez (Omeprazole), Nise (Nimesulide), Stamlo

(Amlodipine), Ciprolet (Ciprofloxacin), Enam (Enalapril) and Ketorol (Ketorolac) are leaders in

their category in several countries.

Discovery Research: Dr. Reddy's is actively involved in drug-discovery and clinical

development programs.

Specialty Pharmaceuticals: In the field of speciality pharmaceuticals, Dr. Reddy's deals in


deals acquired proprietary technologies, internally developed proprietary drug-delivery

platforms, and current internal compounds under pre-clinical and clinical development.

Biopharmaceuticals: Grafeel (Filgrastim) was the first biologics product by Dr. Reddy's to enter

the market. The company's second product Reditux (Rituximab) is the first biosimilar

monoclonal antibody to be developed and launched anywhere in the world.

Major Achievements of Dr. Reddy's Laboratories:

Dr. Reddy's is the 1st Asia Pacific pharmaceutical company, outside Japan to be listed on

the New York Stock Exchange.

Dr. Reddy's biologics product Reditux (Rituximab) is the first biosimilar monoclonal

antibody to be developed and launched anywhere in the world.

CSR activities:

They focus on the Foundation of Education & Livelihood creation through its various

Livelihood Advancement Business Schools (LABS) and through its many innovative initiatives

in the School Education space.

Michael & Susan Dell Foundation In partnership with this Foundation, DRF has

undertaken to provide sustainable livelihood training to 6000 youth from slum

pockets.

Under the ‘Aarogya’ program, over 75 mobile food vendors in Karimnagar (AP)

have been assisted in developing their businesses.

Under the ‘Sayodya’ program, 25 partially disabled youth in RR District (AP)

have been assisted in earning their livelihoods through corn vending in specially

designed kiosks.

DRF signed an MoU with Rashtra Chenetha Jana Samakhya, a handloom

weavers’ union based at Chirala (AP), under which DRF will provide funding for

the development of a loom that will reduce the strain on a weaver.


DRF has set up eight Yuva Youth Learning Centers in Hyderabad and RR

Districts, which run two bridge programs for disadvantaged youth, to enable them

to obtain lateral entry into the mainstream education system.

Under the government-supported Sarva Siksha Abhiyan, DRF also conducted a

Residential Bridge Course for outof- school children and those engaged in child

labour.

Tribal School Program: In VR Puram Mandal (Khammam District, AP), DRF is

working with 33 government schools in areas inhabited by Koya and Konda

tribes.

Education Resource Centre: In partnership with government, civil society

agencies and individuals working in the field of education and child rights, the

ERC generates and shares resources among partners.

DRF has introduced ALTIUS, an advancement school that serves as a platform

for graduates, post-graduates and diploma holders to access various career

advancement opportunities by providing them with requisite employability skills.

Dr. Reddy’s Foundation for Health Education, DRFHE addresses the gap in

patient education, enabling them with self-care capability and improving the cost.

Helping Doctors: At the level of Doctors, the Inner Circle program, assists young

doctors to develop extra-medical soft skills and business competencies to be more

effective in their professional careers.

Life at your Doorstep: It is focused on providing relief to chronically and

terminally ill patients through pain and symptom management and by counseling

the family.

DRFHE and Art of Living Foundation: DRFHE, in conjunction with Art of

Living Foundation (AOL), launched a pilot lifestyle management program. This


program encourages and helps patients suffering from chronic illnesses to adopt

lifestyle changes to reduce risk factors and to self-manage their conditions.

Sparsh: Sparsh, Dr. Reddy’s Patient Assistance Program, continues to improve

the accessibility of Oncology drugs to patients in need. Over the past year, Sparsh

has provided quality and affordable anti-cancer drugs to over 500 patients,

through their doctors.


Chapter 6

Comparative Analysis


6. COMPARITIVE ANALYSIS

6.1 FINANCIAL ANALYSIS

6.1.1 CURRENT RATIO

COMPANIES 2009 2008 2007 2006

CIPLA 3.146587 2.907291 3.011580222 2.523965

SUN 2.991543 2.836508 4.787756 7.819835

LUPIN 1.972195 3.160981 3.495937 3.875236

DR. REDDY 3.25057 3.848898 3.911368 3.72959

RANBAXY Na 1.205009 1.801153 1.247255

AVERAGE 2.840224 2.791737 3.401558844 3.839176

Table 6.1.1 Current Ratio

Fig 6.1.1 Current Ratio


Interpretation

On the basis of industry average from the above graph we can see that for the year 2009

Lupin Ltd. has a very low current ratio which is due to the fact that the other liabilities has

shown a 881% increase. From the year 2006-07 current ratio for Ranbaxy has increased though

it is low as compared to industry average.It is due to the fact that deposits with government

and advance tax has increased significantly during the period which contributed to an increase

in current assets. However Ranbaxy has maintained a very low current ratio which is a cause of

concern for the company and its new owner Daiichi Sankyo must take concrete steps to bring

back investors faith in the company to compensate its current liabilities. Sun Pharma has

managed to bring down its very high current ratio to manageable levels owing to an increase of

388.52% in its sundry creditors which brought its current ratio close to industry average.

6.1.2 QUICK RATIO

COMPANIES 2009 2008 2007 2006

CIPLA 1.345724 1.143968 1.232677 1.013466

SUN 2.125788 2.050662 3.436406 5.152591

LUPIN 0.788556 1.550059 1.971427 2.371402

DR. REDDY 1.524119 1.860441 2.464355 1.93006

RANBAXY NA 0.924496 1.179951 1.247255

AVERAGE 1.446047 1.505925 2.056963 2.342955

Table 6.1.2 Quick Ratio


Fig 6.1.2 Quick Ratio

Interpretation

Cipla has maintained very high inventory levels which is the reason for their appreciable

difference between their current ratio and quick ratio and thus they must take steps to bring

down their inventory level to improve their cash position.Sun pharma has maintained a very

high quick ratio which is very high as compared to industry averages and it also had very high

inventory levels which was taken care during the period 2007-08 and 2008-09.Although their

inventory levels didn’t change much but there was an increase in the amount of sundry

debtors which helped them to perform in sync with industry averages. For Ranbaxy the quick

ratio is very low owing to the number of acquisitions taken up by the company which

deteriorated their cash position. Increasing inventory levels are also a cause of concern for Dr.

Reddys but they have been most effective among all the companies to maintain their quick ratio

close to industry averages.


6.1.3 AVERAGE COLLECTION PERIOD

COMPANIES 2009 2008 2007 2006

CIPLA 118.8704 110.5933 101.1026 92.3609

SUN 81.91578 93.81972 66.82235 53.37479

LUPIN 84.4354 80.38409 76.95186 66.73171

DR.REDDYS 101.6917 105.9359 75.52217 90.87924

RANBAXY NA 76.25648 81.94186 82.08678

AVERAGE 96.72832 93.3979 80.46817 77.08668

Table 6.1.3 Average Collection Period

Fig 6.1.3 Average Collection Period


Interpretation

Cipla has a very high value of the ratio as compared to industry average shows that the

company takes a lot of time to convert its credit sales to cash. Sun pharma has a very low value

of the ratio which is not a desirable situation as it shows that the company gives a very low credit

period which discourages its clients. Ranbaxy is the most efficient company ion this respect as it

has its value closest to industry average. Lupin and Dr. Reddy have been able to keep their

ratios close to industry average throughout the considered period.

6.1.4 INTREST COVERAGE RATIO

COMPANIES 2009 2008 2007 2006

CIPLA 21.16274 55.51856 82.66219 50.16117

SUN 489.9061 220.0336 79.04659 48.14248

LUPIN 13.95111 18.84676 12.94716 9.929043

DR. REDDYS 34.68978 51.6719 29.85585 16.23517

RANBAXY NA -9.35583 10.39109 10.15038

AVERAGE 139.9274 67.343 42.98058 26.92365

Table 6.1.4 Interest Coverage Ratio


Fig 6.1.4 Interest Coverage Ratio

Interpretation

Sun pharma has been able to increase its interest coverage ratio to inflationary levels as

it has reduced its debt to nil by the year 2009 which has resulted in no interest obligations thus

no part of their profit is required to cover the interest on the debt. Ranbaxy has performed

abysmally poor as it has invested its funds for acquisition which means that it has been unable to

cover its debts. In 2008 the ratio went negative which is an alarming situation and was followed

by acquisition of the company by Daiichi Sankyo. Lupin is also not performing well and must

bring down its debts because the margin of interest covered by net profits is very poor. Cipla

again has emerged as the best performer as it has performed as per the industry averages.


6.1.5 EPS(EARNINGS PER SHARE)

COMPANIES 2009 2008 2007 2006

CIPLA 9.65 8.68 8.25 19.54

SUN 58.75 47.16 31.57 24.06

LUPIN 48.22 52.31 36.75 44.61

DR. REDDYS 32.25 27.62 69.45 26.82

RANBAXY NA 0 15.11 9.02

AVERAGE 37.2175 27.154 32.226 24.81

Table 6.1.5 Earnings Per Share

Fig 6.1.5 Earnings Per Share


Interpretation

Cipla which has been the market leader and an efficient performer has low values of EPS

owing to plans of its expansion in centers like Goa, Sikkim and Indore which is funded by a

mix of debt and equity and thus it is an attractive bet for long term investors. Ranbaxy has

showen a remarkable dip in EPS values which became zero in 2008 as it was not able to pay any

dividends as its profits went negative. All the other players have been efficient in maintaining a

high value of EPS.

6.1.6 FIXED ASSET TURNOVER

COMPANIES 2009 2008 2007 2006

CIPLA 2.715273 2.622064 2.812834 3.220638

SUN 5.817272 5.169921 3.986175 3.437192

LUPIN 3.153495 3.200789 2.894773 2.657932

DR. REDDYS 3.783914 4.031532 6.360349 3.568017

RANBAXY NA 3.12006 2.909693 2.073007

AVERAGE 3.867488 3.628873 3.792765 2.991357

Table 6.1.6 Fixed Asset Turnover


Fig 6.1.6 Fixed Asset Turnover

Interpretation

Cipla has a low ratio compared to industry as although there was an increase in its net

sales but at the same time its fixed assets have also grown in value and the proportional change

in the value of the assets is more than the change in the sales volume. The high value for Sun

pharma over the considered period is because the sales showed a tremendous growth and the

change in the value of net stock was not appreciable. Dr. Reddy has a very impressive value of

the ratios because of a significant increase in its net sales and thus has been successful in

converting its fixed assets to sales.


6.1.7 INVENTORY TURNOVER

COMPANIES 2009 2008 2007 2006

CIPLA 3.223181 3.01039 2.717772 2.562454

SUN 5.867476 5.808274 5.370867 5.295914

LUPIN 3.618865 3.825181 4.397243 4.894031

DR. REDDYS 4.98 4.93 5.57 4.66

RANBAXY NA 5.687546 3.573118 3.905192

AVERAGE 4.42238 4.652278 4.3258 4.263518

Table 6.1.7 Inventory Turnover

Fig 6.1.7 Inventory Turnover


Interpretation

This ratio tells us that how quickly a company completes its working capital cycle to

convert its working capital back to cash at just enough inventory levels. Cipla has been very

effective in keeping its ratio way below the industry average while Sun pharma and Dr. Reddy

have never been able to achieve a performance at par with the industry because of their

increasing inventory. Lupin is a significant improver in this contrast as it has managed to bring

down its ratios for thye year 2008 and 2009. Ranbaxy on the other hand was doing well till the

year 2007.

6.1.8 RETURN ON ASSET (ROA)

COMPANIES 2009 2008 2007 2006

CIPLA 0.208908 0.226273 0.27457 0.328724

SUN 0.262229 0.258314 0.197749 0.168375

LUPIN 0.249654 0.283948 0.273942 0.19328

DR. REDDYS 0.161118 0.144271 0.329837 0.125458

RANBAXY NA -0.05151 0.098164 0.068531

AVERAGE 0.220477 0.172259 0.234852 0.176874

Table 6.1.8 ROA


Fig 6.1.8 ROA

Interpretation

Ranbaxy has shown a very poor performance as in other ratios because of their falling

profits which turned negative in the year 2008. All the other companies have been effective in

converting their fixed assets to profits. Dr. Reddy has a low value in the year 2006 because of

low profits that year.


6.1.9 RETURN ON EQUITY (ROE)

COMPANIES 2009 2008 2007 2006

CIPLA 0.179256 0.186508 0.206216 0.310462

SUN 0.240703 0.238047 0.250236 0.307821

LUPIN 0.305213 0.268054 0.240565 0.287352

DR. REDDYS 0.105162 0.098832 0.268176 0.082183

RANBAXY NA -0.10314 0.233631 0.161225

AVERAGE 0.207584 0.13766 0.239765 0.229809

Table 6.1.9 ROE

Fig 6.1.9 ROE

Interpretation

Ranbaxy has consistently shown a decline over the years in its return to the shareholders

as its profits have been low owing to the number of acquisitions taken up by the company. Dr.

Reddy has also a sharp decline from the year 2007 to 2008 as the profits have shown a 60%

decline in this period. All the other companies have been effective in giving the shareholders a

consistent return on their investments.


6.2 NET PROFIT ANALYSIS

COMPANIES 2009 2008 2007 2006

CIPLA 779.9 700.49 667.37 615.73

SUN 1239.96 1001.61 612.95 450.94

LUPIN 419.76 353.04 213.72 185.04

DR. REDDYS 560.9 475.3 1176.86 211.12

RANBAXY NA -383.34 593.05 378.88

AVERAGE 750.13 429.42 652.79 368.342

Table 6.2 Net Profit

Fig 6.2 Net Profit


All Figures in US$ billion

Interpretation

All the other companies have been performing well in a booming sector except

Ranbaxy. Ranbaxy was performing well till 2007 but it faultered with its net profits in 2008

because of the number of acquisitions taken up by the company. Lupin though has low values as

compared to the industry but it has grown consistently over the period. Dr. Reddy has had an

effective growth from the year 2006 to 2007 because of increase in its operating profit.

6.3 LIMITATION OF THE ANALYSIS

The ratios for Ranbaxy for the year 2009 were not available as it has not yet disclosed its annual

report for the year. Thus Ranbaxy has not been considered while interpreting the performance of

the companies in the year 2009.


Chapter 7

Growth Drivers


7.1GROWTH DRIVERS IN INDIA

7.1.1 Boost from population growth

India’s pharmaceutical sector is receiving a major boost from population growth.

According to UN estimates, the population total looks set to rise from 1.1 bn at present to 1.4 bn

in 2020. Up until 2020 India will see as many children being born as there are people living in

Germany, France, the UK and Italy together. By 2025, India will probably have overtaken China

as the world's most populous country. Its population growth results not least from higher life

expectancy. This is attributable, among other things, to improved preventive healthcare. Of

course, though, average life expectancy in India is still markedly lower than in western countries.

The ageing of the population in India offers considerable market opportunities.

According to a UN estimate, the share of people over the age of 65 in the total population will

rise from 5% currently to 8% in 2025. This would mean roughly 55 million more people aged 65

and over than today. As a result, typical age-related illnesses such as cancer and cardio-vascular

diseases will be more wide-spread. The pharmaceutical sector will also receive a boost from the

gradual spreading of civilisation diseases such as obesity and diabetes. According to

PricewaterhouseCoopers (PWC), the number of Indians with diabetes will reach approx. 74 m in

2025 (currently 34 m); this is roughly the population of Turkey today. In the developing

countries as a whole, there could be just under 230 m diabetes patients. This development should

benefit India’s generics manufacturers.

7.1.2 Support from rising household incomes

For the next 15 years we expect average annual growth in India of 6-7%.2 Strong income

growths will broaden the middle class, an important group for foreign drugs manufacturers, as it

has considerably higher incomes at its disposal than average Indians. Already today, nearly 60

millions people in India’s middle class, with disposable incomes of Rs.2, 18,807.23 to Rs.1,

062,777.96 p.a., can afford western- produced medicines. Until 2025 their number looks set to

rise to approx. 580 millions (+12% p.a.).


Over a space of ten years, a four-member middle-class family has seen spending on

pharmaceuticals grow five times over, to approx. Rs.10627.78 p.a. People’s improved income

situation has also led to a growing desire to insure against illness. At this juncture, only 4% of all

Indians have health insurance, but this share should rise strongly over the medium term. This

will have a positive impact on the demand for drugs as people with health insurance are usually

more likely to obtain prescriptions than those without cover. Globalisation has not caused

traditional medicine to be abandoned but with higher education, rising income and a change in

lifestyle, western medical treatment is gaining in importance. At present the population

especially in rural areas still sees western medicine as a stop-gap cure which is unlikely, though,

to provide a lasting solution to health problems. Today, about 70% of the population on the

Indian subcontinent depend entirely or at least in part on traditional Indian medicine which is

cheaper and more easily available than western drugs.

Table 7.1 Income Distribution across households

Source: www.ibef.org


7.1.3 High level of education benefits pharmaceutical sector

The fact that despite the low level of unit labour costs India boasts a highly skilled workforce has

enabled the country's pharmaceutical industry at a relatively early stage to offer quality products

at competitive prices. Each year, roughly 115,000 chemists graduate from Indian universities

with a master’s degree and roughly 12,000 with a PhD. The corresponding figures for Germany

– just under 3,000 and 1,500, respectively – are considerably lower. After many chemists from

India migrated to foreign countries over the last few years, they now consider their chances of

employment in India to have improved. As a result, a smaller number is expected to go abroad in

the coming years; some may even return.

7.2 MAJOR ISSUES CONCERNING PHARMACEUTICALS IN INDIA

Failure of the new patent system: Prerequisites associated with Sec 3(d) of the Patent

(Amendment) Act 2005 restrict the copyright of an existing drug. Moreover, mandatory

licensing permits Indian companies to keep producing generics of copyright products for

overseas selling to underdeveloped nations.

Lack of proper infrastructure: Issues associated with regular power cuts and lack of

suitable transport infrastructure will decelerate the expansion of the sector.

Inadequate funds: Restricted funding from FIs, venture capitalists and the government

may decelerate the expansion of biotechnology sector in India.

Regulatory impediments: Rising of due meticulousness and conformity with product

standards leads to high costs and interruption in the launch of new products.

Severe competition: Low margins and restricted capital to assist R&D is the result of

intense pricing competition among local producers. This rivalry will further deepen from

the joining in of the big drug companies in the Indian market to control the cost benefit

and large reserve sources.


Chapter 8

Future Prospects


8.1 FUTURE SCENERIO OF INDIAN PHARMACEUTICALS

The dream of Indian pharmaceutical companies for marking their presence globally and

competing with the pharmaceutical companies from the developed countries like Europe, Japan,

and United States is now coming true.

The new patent regime has led many multinational pharmaceutical companies to look at

India as an attractive destination not only for R&D but also for contract manufacturing,

conduct of clinical trials and generic drug research. With market value of about US$ 45

billion in 2005, the generic sector is expected to grow to US$ 100billion in the next few years.

The Indian companies are using the revenue generated from generic drug sales to

promote drug discovery projects and new delivery technologies. Contract research in India is

also growing at the rate of 20-25% per year and was valued at US$ 10-120million in 2005. India

is holding a major share in world's contract research business activity and it continues to expand

its presence.

Clinical Research Outsourcing (CRO), a budding industry valued over US$ 118 million

per year in India, is estimated to grow to US$ 380 million by 2010, as MNCs are entering the

market with ambitious plans.

By revising its R&D policies the government is trying to boost R&D in domestic pharma

industry. It is giving tax exemption for a period of ten years and relieving customs and excise

duties of all the drugs and material imported or exported for clinical trials to promote innovative

R&D.


Government Initiative

The government has taken various policy initiatives for the pharmaceutical sector:

The government has offered tax breaks to the pharmaceutical sector. Units are eligible for

weighted tax deduction at 150 per cent for the research and development (R&D)

expenditure incurred.

Steps have been taken to streamline procedures covering development of new drug

molecules and clinical research.

The government has launched two new schemes—New Millennium Indian Technology

Leadership Initiative and the Drugs and Pharmaceuticals Research Programme—

especially targeted at drugs and pharmaceutical research.

According to Mr Ashok Kumar, Pharmaceuticals Secretary, the government is planning to set up

a US$ 439.94 million corpus fund for the pharma industry soon. The fund would be set up with

the help of the government and the industry and will be used for helping the pharma industry in

R&D.

Investment

According to the Ministry of Commerce, domestic investment in the pharmaceutical

sector is estimated at US$ 6.31 billion.

The drugs and pharmaceuticals sector has attracted foreign direct investment (FDI) worth

US$ 1.43 billion between April 2000 and December 2008.


8.2 BUDGET 2009-2010 AND POLICY CHANGE

Budget measures:

Budget 2009–2010 reduced the customs duty from 10 per cent to 5 per cent on imports of

select life saving drugs and their bulk drugs for treating ailments such as breast cancer,

hepatitis, rheumatic arthritis, etc.

Customs duty has been reduced from 7.5 per cent to 5 per cent on two specified life

saving devices used in the treatment of heart conditions. These devices are now fully

exempt from excise duty and countervailing duty (CVD) also.

Policy changes:

The government has approved the Drugs and Cosmetic (Amendment) Bill, 2008, which

inter alia enhances the term for imprisonment from five years to at least 10 years, which

may extend to lifetime, and raises the fine from Rs.10, 000 to Rs. 10, 00,000 or three

times the value of the drug confiscated, for manufacturers of spurious and adulterated

drugs.

The DCGI has directed state drug regulators not to allow companies to sell drugs that

have undergone a composition change under their old brand names. Such drugs will be

treated as new drugs and the companies would have to go through scrutiny before getting

fresh approvals.

The DCGI has made the registration of all clinical trials compulsory for trials initiated

after June 15, 2009. Earlier, the registration of clinical trials by various institutions and

companies was voluntary.

The DCGI has withdrawn the powers given to state-level regulators to issue Certificate of

Pharmaceutical Product (CoPP).


The DCGI has discontinued issuance of the WHO-GMP certificate for both

pharmaceutical products and plant audits.

The future of Indian pharmaceutical sector is very bright because of the

following factors:

Clinical trials in India cost US$ 25 million each, whereas in US they cost between US$

300-350 million each.

Indian pharmaceutical companies are spending 30-50% less on custom synthesis services

as compared to its global costs.

In India investigational new drug stage costs around US$ 10-15 million, which is almost

1/10th of its cost in US (US$ 100-150million).

Contract research —India an emerging hotspot

Indian drug discovery and development outsourcing market is projected to grow at a rate

of 50 per cent to reach US$ 900 million in 2009.

Presently, a major portion of the services are limited to chemistry-based lead

identification/optimisation, pre-clinical and clinical research stages.

Select companies provide biology-based services for target validation; notable examples

are Avesthagen, OcimumBiosolutionsand TCG Life Sciences.


Bioinformatics companies that offer research-enabling

software technologies are also emerging as a valuable segment.

Fig 8.1 Clinical research —leveraging India‘s advantage

Source: www.ibef.org

The clinical trials market in India is currently sized at approximately US$ 250 million to

US$ 275 million and is expected to grow at a robust CAGR of 30 per cent over the next

few years, at almost double the global average.

Clinical trials for NCEs constitute around 60 per cent of the total revenue mix, while 40

per cent is accounted for by bioavailabilty/bioequivalence (BA/BE) studies for generics


http://www.ibef.org/

development. However, by volume, around 70 per cent of the work is directed towards

generic research.

The market for BA/BE studies in India was estimated to be around US$ 60 million to

US$ 70 million in 2006. It is estimated to reach US$ 150 million to US$ 200 million by

2010–11 growing at a CAGR of 18 to 20 per cent.

Fig8.2 Contract manufacturing

Source: “Takings Wings” Ernst & Young 2009

The Indian pharmaceutical manufacturing outsourcing market is valued at US$ 1.1 billion

and the segment is growing at thrice the global market rate.


India‘s share of the outsourcing market is estimated to increase from 2.8 per cent in 2007

to 5.5 per cent in 2010.

APIs /intermediate outsourcing is more prevalent in India than formulation outsourcing;

around 64 per cent of total outsourcing is in the area of APIs/intermediates.

The market is estimated to increase to US$ 1 billion by 2010.

By 2010, the demand for contract manufacturing of formulations is likely to be around

US$ 210 million to US$ 300 million. APIs and intermediate demand is likely to be in the

range of US$ 600 million to US$ 700 million by 2010.

Oncology —Indian players eyeing the global opportunity

Cancer accounts for an estimated 7.6 million annual deaths globally.

Treatment for cancer is estimated to become the largest therapeutic segment by sales at

US$ 55 billion by 2009, from the current US$ 45 billion.

The oncology pipeline is the richest in number, with a large number of pharmaceutical

and biotech companies focussing on oncology drugs.

Over 50 new oncology products are expected to be launched in the next five years with

new players entering the market.

About 30 per cent of all launches by 2010 will be in oncology.

The global oncology drug market is growing at 17 per cent annually.


Presently, the Indian oncology market stands at US$ 18.6 million and it is expected to

treble by 2010.

Ranbaxy Laboratories Ltd has entered into a strategic alliance with ZenotechLaboratories

Ltd Ranbaxy will market Zenotech'soncology cytotoxicinjectibleproducts under the Ranbaxy

label, leveraging its global marketing and distribution network in the key markets of Latin

America, including Brazil and Mexico, Russia and other CIS markets.

8.3 PHARMACEUTICAL RETAIL-EMERGING GROWTH SEGMENT

With revenues of US$ 200 million in 2009, organised pharmaceutical retail constitutes

just 2 per cent of the pharmaceutical retail market in India.

It is expected to grow at a high y-o-y growth of 30 to 40 per cent and is likely to become

a US$ 400 million to US$ 530 million market by 2010.

The government is contemplating the increase of FDI cap to up to 51 per cent in the case

of retail of single-brand products.

New entrants include EmamiGroup (Frank Ross Pharmacies), Dabur(Health and

Wellness chain by the name of NewU), Reliance Wellness (in a joint venture with

Alliance Boots of the UK) and ManipalCure & Care.


Rural market-opportunities at the bottom of the pyramid

65 per cent of the population resides in rural areas with limited or absolutely no access to

medicines and other healthcare facilities.

With a growth rate of 39 per cent in 2006, the rural market has outstripped the growth in

the urban region across most of the therapeutic categories in both value and volume

terms.

General physician-driven segments such as anti-infectives, analgesics, etc., have

registered high growth compared to specialist-driven segments such as CNS.

Non-communicable diseases such as cancer, blindness, mental illness, hypertension,

diabetes, HIV/AIDS, accidents and injuries are also on the rise.

Biopharma-domestic players eying the global biosimilar market

Globally, sales of biological drugs are estimated to reach US$ 52 billion by 2010.

Leading Indian companies are intensifying their focus on the biotech segment.

Moreover, Indian players are also eyeing the huge opportunity presented by

biosimilarsacross the globe.

Biosimilarsare expected to be a US$10 billion market in the US and the EU by 2015.


Further, biologics as a drug class is itself growing rapidly and estimates suggest that by

2014 seven of the top 10 drugs by sales globally would be biologics.

Leading Indian pharmaceutical companies such as Biocon, Dr. Reddy‘s, Wockhardt,

Intasand Zenotech, etc., have invested in manufacturing facilities for biosimilars..

A legal framework for biosimilarshas been established in the EU.

Further, the US is expected to set up an approval framework for biosimilarssoon.

8.4 GENERIC RESEARCH

According to a report by IMS Health, the Indian generic manufacturers will grow to more

than US$ 70 billion as drugs worth approximately US$ 20 billion in annual sales faced

patent expiry in 2008. With nearly US$ 80 billion worth of patent-protected drugs to go

off patent by 2012, Indian generic manufacturers are positioning themselves to offer

generic versions of these drugs.

Indian generic drug makers received half a dozen more approvals from the US Food and

Drug Administration (FDA) in 2009, over the previous year. Dr Reddy's Laboratories

received the highest number of tentative and final approvals in 2009 at 32, followed by

Aurobindo at 26 and Wockhardt at 23.


Chapter 9

Conclusion


9.1 RECOMMENDATIONS

Pharma industry has been facing the challenge of increasing their research inputs to be

able to compete with foreign giants. Till now the companies have been using the profit generated

from their operational activities to fund their research but now Indian companies are looking at a

trend of hiving-off or bee-off i.e., spinning off R&D into a separate company offers a unique

way of de-risking the balance sheet for companies involved in the high-risk high return game of

drugs discovery.

Additionally, it opens up gateways for attracting investments and collaboration

opportunities, such as out-licensing, co-development, commercialization, and more. Further

separating generic and drug discovery business can command high valuation or avoid takeover

altogether. According to various estimates, it is believed that if the country's top 10 pharma firms

hive off their R&D divisions, the collective market capitalization of new research entities is

expected to touch $120 billion in less than a decade. At present, approximately more than $20

billion has been invested in R&D in these firms. On the whole, the industry size is about $150

billion.

The analysis of the company’s accounts tells us that Cipla has been very effective in

performing as per the industry norms with the exception of Inventory management and

Average collection period. Thus it must look into these aspects to consolidate its position.

Sun pharma has had a very high sales and a very low credit period for its clients and

thus had a very high current and quick ratio thus the company must emphasize on these issues to

make use of their idle funds and increase their credit period to encourage client confidence.

Sun pharma has also brought down its debt level to zero which shows that the company is

investing more into research.

Dr. Reddy has also shown an encouraging performance and has given a high earnings

per share. The only factor for concern is the inventory levels of the company which needs

proper management.


555Lupin labs is a new player in this sector and has hence been taking significant steps

to improve its situation as per the industry. The ratio that demands attention is the interest

coverage ratio which is low due to the amount of debts taken by the company.

Ranbaxy was a major player in the industry until 2007 when it ran into losses owing to

the number of acquisitions taken up by the company and the company has been acquired by the

Japanese pharma player Daiichi Sankyo which has been a good strategic move that will benefit

both the players.


9.2 CONCLUSION

By 2020, the context in which Pharma operates will be very different from that which

prevails today. The globalization of the market will also rise as demand for medicine rises in the

developing world, the globalization of R&D will also grow as R&D will migrate to Asia; the

globalization of the regulations governing the development of new medicines, as national and

federal agencies collaborate and the globalization of information, as healthcare payers share data

on the clinical and financial performance of medicines.

If Pharma is to thrive in this new environment, though, it will have to make sweeping

changes throughout the value chain. Moreover, the incumbent management will have to move

fast. The disintegration of the traditional way of making and selling medicines could fuel another

round of mergers and acquisitions very different in nature from those that took place a few years

ago. Private equity houses and hedge funds could also play a significant role in reshaping the

sector.

Yet in some respects it does not matter that holds the reins, for Pharma cannot do

everything itself. It cannot train a new generation of research scientists unless there are scientists

to train. Nor can it make the medicines people need without society’s support. Several relatively

small changes would make a considerable difference. Investing in school science labs and

specialist teachers and giving science a more prominent place on the school curriculum would

encourage more pupils to study the sciences at university, thus creating a larger pool of

researchers on whom the industry could call. Altering the patent laws to recognize the value of

long-term research, rewarding the development of vaccines and cures more generously and

demonstrating a genuine commitment to the prevention of disease would likewise help to put the

industry on a firmer footing in its efforts to decode the molecular basis of disease – surely one of

the biggest and most worthwhile intellectual challenges the world faces.

The Government should take immediate steps to remove the anomalies in the Indian

Pharmacopoeia Commission created by it, and give necessary teeth to truly function as an

independent and autonomous scientific body.


REFERENCES:

www.business-standard.com/india/news/cipla-retains-top-slot-in-domestic-pharma-market/

38512

www.pharmabiz.com/article/detnews.asp?articleid=16738&sectionid=50

www.expresspharmaonline.com/20100228/management03.shtml

www.ey.com/IN/en/SearchResults?

query=indian+pharma+industry&search_options=country_name

www.pharmaceutical-drug-manufacturers.com/pharmaceutical-industry/

www.imsglobal.com/portal/site/imshealth/menuitem.a46c6d4df3db4b3d88f611019418c22a/?

vgnextoid=0dce960144974210VgnVCM100000ed152ca2RCRD&vgnextfmt=default

www.pwc.com/.../pharma.../pharma-2020/pharma-2020-vision-path.jhtml


DATABASES:

Capitalline

Corporate websites

Annual Reports of various Pharmaceutical firms



http://www.pwc.com/.../pharma.../pharma-2020/pharma-2020-vision-path.jhtml

http://www.imsglobal.com/portal/site/imshealth/menuitem.a46c6d4df3db4b3d88f611019418c22a/?vgnextoid=0dce960144974210VgnVCM100000ed152ca2RCRD&vgnextfmt=default

http://www.imsglobal.com/portal/site/imshealth/menuitem.a46c6d4df3db4b3d88f611019418c22a/?vgnextoid=0dce960144974210VgnVCM100000ed152ca2RCRD&vgnextfmt=default

http://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-industry/

http://www.ey.com/IN/en/SearchResults?query=indian+pharma+industry&search_options=country_name

http://www.ey.com/IN/en/SearchResults?query=indian+pharma+industry&search_options=country_name

http://www.expresspharmaonline.com/20100228/management03.shtml

http://www.pharmabiz.com/article/detnews.asp?articleid=16738&sectionid=50

http://www.business-standard.com/india/news/cipla-retains-top-slot-in-domestic-pharma-market/38512

http://www.business-standard.com/india/news/cipla-retains-top-slot-in-domestic-pharma-market/38512

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