secunderabad healthcare ltd Management discussions

HEALTH CARE, PHARMACEUTICAL & INTERMEDIARY DRUGS INDUSTRY - GLOBAL & INDIAN: GLOBAL PHARMACEUTICAL INDUSTRY1

The global pharmaceutical industry is showing signs of recovery, with several positive factors projected for the next five years. Global spending on medicines is expected to reach US$ 1.4 trillion by 2020, an increase of US$ 349 billion from 2015.

Spending will be concentrated in developed markets and focused on non-communicable diseases. Specialty therapies will continue to be more significant in developed markets than in pharmerging markets.

Global demand for pharmaceuticals will be driven by:

• Demographic trends

• Rise in diagnosis and treatment of chronic conditions

• Ageing and growing global population

• Improved access to healthcare

• Increasing per capita income

The key contributors of the US$ 349 billion in growth over the next five years will be:

1. Improving access to modern medicines in pharmerging countries;

2. Enhanced use of more expensive branded medicines in developed markets; and

3. Use of cheaper alternatives when loss of exclusivity happens

Spending and Growth to 2020

The developed markets will contribute 63% of the spending, driven by the US. Original brands will represent 52% of spending and 85% of global spending will be for medicines to treat non-communicable diseases. These distributions of costs belie the very different perspective on a volume basis where lower-cost/higher-volume medicines dominate the overall use of medicines.

Spending and Growth to 2020

The developed markets will contribute 63% of the spending, driven by the US. Original brands will represent 52% of spending and 85% of global spending will be for medicines to treat non-communicable diseases. These distributions of costs belie the very different perspective on a volume basis where lower-cost/higher-volume medicines dominate the overall use of medicines.

Specialty and traditional medicines

A rising proportion of medicines are specialty medicines. In 2020, 28% of global spending will be for specialty medicines, up from 26% in 2015. Spending will be more focused on specialty medicines in developed markets, accounting for 36% of spending in 2020, compared to only 12% in pharmerging markets.

The use of traditional medicines (non specialty) account for the majority of medicine spending globally, but there are very different patterns of usage and spending in developed markets compared to pharmerging markets. In Developed markets, some of the major classes of medicines will experience reduced spending due to patent expiries, whereas differences in disease morbidity and the adoption of innovation drive the remainder of differences.

GLOBAL GENERICS3

The patent cliff has passed its steepest point, and a steady flow of patent expiries continues to offer opportunities for generics, as cost-conscious governments and other healthcare payers increasingly endorse generic drugs. The global generics market was valued at US$ 168 billion in 2013; and is expected to reach US$ 283 billion by 2018, registering an 11% CAGR.

Generic drugs account for around 70% of the US drug market by volume. In Europe they account for around 50%, although the proportion differs significantly by country. To a large extent, the magnitude of savings from generics that each country achieves depends on the utilisation levels and price differentials between the generic and branded versions. In the US, generics use is almost 90% within the off-patent (unprotected) market. However, in some European countries, potential savings are not fully exploited due to lower utilisation of generics in key therapy areas.

Japan, Italy, Spain, Poland and France have adopted progeneric policies that encourage doctors or pharmacists to substitute generics for branded products. The transition to generics in these markets is gradually increasing.

Rising income:

Population expansion and rising wealth should be strong drivers of health spending in developing markets, particularly in Asia and the Middle East. By 2019, the number of high-income households (those earning over US$ 25,000 a year) will likely rise to over 540 million globally; Asia is projected to generate more than half of that growth.

Accessibility and affordability:

The trend towards the adoption of universal healthcare continues, with more countries expanding public or private health care system coverage or deepening it to reduce outof- pocket spending. In perhaps the most visible example of expanding health care coverage, the US federal and state governments continue to implement health insurance exchanges under the Patient Protection and Affordable Care Act of 2010 (ACA).

Growing chronic diseases : The proliferation of chronic diseases — in part, a consequence of enhanced life expectancy and other factors — is having serious repercussions in both developed and emerging countries. Obesity, cardiovascular diseases, hypertension, and diabetes are now persistent, widespread health problems and will challenge public health systems to meet increasing demand for drugs and treatments.

There are around 387 million diabetes patients globally; and the number is expected to touch 592 million by 2035. China and India have the largest number of diabetes sufferers in the world, at more than 96 million and 66 million, respectively.

ENVIRONMENT HEALTH & SAFETY: All our business systems & facilities are designed with appropriate Waste Management Systems and operate in harmony with the surrounding ecosystem, Safe disposal of waste, an ecofriendly.

OUTLOOK: The Companys programs are currently focused on new products development related to lifestyle related diseases like diabetics, cardiovascular, anticoagulant, hypertension, chronic kidney disease, etc.

Cautionary Statement: Statement in the Management Discussion and Analysis describing the Companys objectives, projections, expectations and estimates regarding future performance may be "forward looking statements" and are based on currently available information. The management believes these to be true to the best of its knowledge at the time of preparation of this report. However, these statements are subject to certain future events and uncertainties, which could cause actual results to differ materially from those which may be indicated in such statements.