Overview
The Indian pharmaceuticals market is the third largest in terms of volume and
thirteenth largest in terms of value, as per a report by Equity Master. India is the
largest provider of generic drugs globally with the Indian generics accounting for 20 per
cent of global exports in terms of volume. Of late, consolidation has become an important
characteristic of the Indian pharmaceutical market as the industry is highly fragmented.
India enjoys an important position in the global pharmaceuticals sector. The country
also has a large pool of scientists and engineers who have the potential to steer the
industry ahead to an even higher level. Presently over 80 per cent of the antiretroviral
drugs used globally to combat AIDS (Acquired Immuno Deficiency Syndrome) are supplied by
Indian pharmaceutical firms. The UN-backed Medicines Patent Pool has signed six
sub-licences with Aurobindo, Cipla, Desano, Emcure, Hetero Labs and Laurus Labs, allowing
them to make generic anti-AIDS medicine TenofovirAlafenamide (TAF) for 112 developing
countries.
Pharmaceutical export from India stood at US$ 17.27 billion in 2017-18, and is expected
to grow by 30 per cent to reach US$ 20 billion by the year 2020.
The decline in the US spending on medicines is expected to be balanced by the growth in
the pharmerging markets. The contribution from these markets to global medicine spending
has risen from 13% in 2007 to 24% in 2017, almost doubling in a decade. In total value,
this accounts for an increase in spends from $81 billion in 2007 to $270 billion in 2017,
growing at an average rate of 12.8%, which is estimated at more than twice the global
growth rate.
This rise has been fuelled by the various governments efforts to increase healthcare
access by reducing medicine costs and the efforts of the global drug companies to expand
their reach and scale through tie-ups and partnerships with local companies The outlook
for the current year was, however, positive, Mr. Bhaskar and IPHEX chairman P. Ramesh Babu
said, citing the fact that India bagged more than 30% of Abbreviated New Drug Applications
granted by the U.S. FDA in 2016. According to Pharmexcil, the Indian pharmaceuticals
industry increased at a CAGR of about 17.5% between 2005-2016, growing from $6 billion in
2005 to about $34 billion in 2016. By 2020, it is expected to touch $55 billion. India
accounted for about 30% (by volume) and about 10% (by value) of the $70-80 billion
generics market in the U.S.
Market Size
The Indian pharma industry, which is expected to grow over 15 per cent per annum
between 2015 and 2020, will outperform the global pharma industry, which is set to grow at
an annual rate of 5 per cent between the same period. The market is expected to grow to US
$ 55 billion by 2020, thereby emerging as the sixth largest pharmaceutical market globally
by absolute size, as stated by Mr Arun Singh, Indian Ambassador to the US. Branded
generics dominate the pharmaceuticals market, constituting nearly 80 per cent of the
market share (in terms of revenues). India has also maintained its lead over China in
pharmaceutical exports with a year-on-year growth of 11.44 per cent to US $ 12.91 billion
in FY 2015-16, according to data from the Ministry of Commerce and Industry. In addition,
Indian pharmaceutical exports are poised to grow between 8-10 per cent in FY 2016-17.
Imports of pharmaceutical products rose marginally by 0.80 per cent year-on-year to US $
1,641.15 million. Overall drug approvals given by the US Food and Drug Administration
(USFDA) to Indian companies have nearly doubled to 201 in FY 2015-16 from 109 in FY
2014-15. The country accounts for around 30 per cent (by volume) and about 10 per cent
(value) in the US $ 70-80 billion US generics market.
Indias biotechnology industry comprising bio-pharmaceuticals, bio-services,
bio-agriculture, bio-industry and bioinformatics is expected grow at an average growth
rate of around 30 per cent a year and reach US$ 100 billion by 2025. Biopharma, comprising
vaccines, therapeutics and diagnostics, is the largest sub-sector contributing nearly 62
per cent of the total revenues at Rs 12,600 crore (US$ 1.89 billion).
With 70 per cent of market share (in terms of revenues), generic drugs form the largest
segment of the Indian pharmaceutical sector. India supply 20 per cent of global generic
medicines market exports in terms of volume, making the country the largest provider of
generic medicines globally and expected to expand even further in coming years Over the
Counter (OTC) medicines and patented drugs constitute 21 per cent and 9 per cent,
respectively, of total market revenues of US$ 20 billion
Investments
The Union Cabinet has given its nod for the amendment of the existing Foreign Direct
Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per
cent under the automatic route for manufacturing of medical devices subject to certain
conditions.
The drugs and pharmaceuticals sector attracted cumulative FDI inflows worth US $ 14.53
billion between April 2000 and December 2016, according to data released by the Department
of Industrial Policy and Promotion (DIPP).
Some of the major investments in the Indian pharmaceutical sector are as follows:
• Piramal Enterprises Ltd acquired a portfolio of spasticity and pain management
drugs from UK-based specialty biopharmaceutical company Mallinckrodt Pharmaceuticals, in
an all-cash deal for Rs1,160 crore (US$ 171 million).
• Aurobindo Pharma has bought Portugal based Generis Farmaceutica SA, a generic
drug company, for EUR 135 million (US$ 144 million).
• Sun Pharmaceutical Industries Ltd, Indias largest drug maker, has entered into
an agreement with Switzerland- based Novartis AG, to acquire the latters branded cancer
drug Odomzo for around US$ 175 million.
• Sun Pharmaceuticals Industries Limited plans to acquire 85.1 per cent stake in
Russian company Biosintez for US$ 24 million for increasing its presence in Russia through
local manufacturing capability.
• Abbott Laboratories, a global drug maker based in US, plans to set up an
innovation and development center (I&D) in Mumbai, which will help in developing new
drug formulations, new indications, dosing, packaging and other differentiated offerings
for Abotts global branded generics business..
• Cipla announced the acquisition of two US-based companies, InvaGen
Pharmaceuticals Inc. and Exelan Pharmaceuticals Inc., for US$550 million.
• Glaxosmithkline Pharmaceuticals has started work on its largest greenfield
tablet manufacturing facility in Vemgal in Kolar district, Karnataka, with an estimated
investment of Rs. 1,000 crore (US$ 150 million).
• Several online pharmacy retailers like PharmEasy, Netmeds, Orbimed, are
attracting investments from several investors, due to double digit growth in the Rs 97,000
crore ( US $ 14.55 billion) Indian pharmacy market.
Government Initiatives
The Government of India unveiled Pharma Vision 2020 aimed at making India a global
leader in end-to-end drug manufacture. Approval time for new facilities has been reduced
to boost investments. Further, the government introduced mechanisms such as the Drug Price
Control Order and the National Pharmaceutical Pricing Authority to deal with the issue of
affordability and availability of medicines.
Mr Ananth Kumar, Union Minister of Chemicals and Petrochemicals, has announced setting
up of chemical hubs across the country, early environment clearances in existing clusters,
adequate infrastructure, and establishment of a Central Institute of Chemical Engineering
and Technology. Some of the major initiatives taken by the government to promote the
pharmaceutical sector in India are as follows:
• The Government of India plans to set up around eight mini drug-testing
laboratories across major ports and airports in the country, which is expected to improve
the drug regulatory system and infrastructure facilities by monitoring the standards of
imported and exported drugs and reduce the overall time spent on quality assessment.
• India is expected to rank among the top five global pharmaceutical innovation
hubs by 2020, based on Government of Indias decision to allow 50 per cent public funding
in the pharmaceuticals sector through its Public Private Partnership (PPP) model.
• Indian Pharmaceutical Association (IPA), the professional association of
pharmaceutical companies in India, plans to prepare data integrity guidelines which will
help to measure and benchmark the quality of Indian companies with global peers.
• The Government of India plans to incentivise bulk drug manufacturers, including
both state-run and private companies, to encourage ‘Make in India programme and
reduce dependence on imports of Active Pharmaceutical Ingredients (API), nearly 85 per
cent of which come from China.
• The Department of Pharmaceuticals has set up an inter- ministerial co-ordination
committee, which would periodically review, coordinate and facilitate the resolution of
the issues and constraints faced by the Indian pharmaceutical companies.
• The Department of Pharmaceuticals has planned to launch a venture capital fund
of Rs 1,000 crore (US$ 149.11 million) to support start-ups in the research and
development in the pharmaceutical and biotech industry.
Road Ahead
The Indian pharmaceutical market size is expected to grow to US$ 100 billion by 2025,
driven by increasing consumer spending, rapid urbanization, and raising healthcare
insurance among others. Going forward, better growth in domestic sales would also depend
on the ability of companies to align their product portfolio towards chronic therapies for
diseases such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers that are
on the rise.
The Indian government has taken many steps to reduce costs and bring down healthcare
expenses. Speedy introduction of generic drugs into the market has remained in focus and
is expected to benefit the Indian pharmaceutical companies. In addition, the thrust on
rural health programmes, lifesaving drugs and preventive vaccines also augurs well for the
pharmaceutical companies.
Review of Financial Performance Net Sales
For the financial year 2017-18, the company registered a net sale of INR 718 million.
The sales is affected largely on account of underutilization of its manufacturing
facilities due to non- availability of sufficient working capital funds which caused banks
lowering the valuation and consequently the drawing powers with retrospective effect.
EBIDTA
The EBIDTA for the financial year 2017-18 has been INR (253) million due to
underutilization of manufacturing facilities which resulted in reduced sales and
proportionally higher expenses. PAT
With the recent challenges gripping the economy, the company incurred a net loss of INR
570 million in the FY 2017-18. Apart from the EBIDTA, the major factors accumulating to
the unattractive bottom-line are the high interest rates, quality erosion of semi-
finished stock and high incidence of overheads.
Expenses
The cost stands high due to increased input cost. The cost of employees and allied
services stands at INR 93.03 million in FY 2017-18, against INR 84.66 million in the
previous year. For the entire year, the other expenses stand at INR 162.73 million against
INR 191.88 million in the previous year.
Interest
The Cost of finance for the entire year stands at INR 83.48 million in FY 2017-18,
against INR 99.05 million for the previous year.
Depreciation, Amortization and Deferred Tax asset
The depreciation in FY 2017-18 has gone down marginally to INR 215.87 million, against
INR 218.53 million for the previous year. The R&D writes off for the FY 2017-18 stands
at INR 128.23 million, against INR 314.90 million for the previous year. The deferred tax
assets are NIL, against INR NIL in previous year.
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