Bafna Pharmaceuticals Ltd Management Discussions.

Economic & Industry Overview

After having battled one of the biggest recessions it faced in recent memory, there was some cheer for India’s economy that recorded a positive albeit marginal growth in Q3 FY 2021. Till recently, economic activity seemed to be gathering momentum at a sustainable pace with people demonstrating greater confidence in stepping out and spending. vaccination drive has made good progress too mostly from the vulnerable segment of the population have been inoculated in a span of three months.

Of course, the recent spike in infection and the imminent threat of variants cast a cloud of doubts. Mobility restrictions that hurt the economy the most, are being imposed back (although in a calibrated manner) by a few States. While it is easy to lose hope in tough times, similar experiences around the world provide some comfort. Much the same way the United States witnessed a sharp increase in infection rates during the second wave (starting November) yet experienced economic impact that was relatively low compared to the first wave, we expect the economic and health impact of the subsequent waves in India to be contained to a quarter or two.

We are cautiously optimistic and expect growth to touch 11.7% in FY 2022. Growth in FY 2022 will likely be a story of two halves, with economic activity picking up rapidly in the second half. While we expect a strong revival in the years ahead, it might be naive to not accept the scars the pandemic may leave behind on the economy. One of the apparent aftermaths is the rise of a dichotomous world that we are currently witnessing. In this article, we take a sneak peek at the rising inequalities that may have implications on all walks of the economy.

Source: Global growth is projected at 6% in 2021, moderating to 4.4% in 2022. The projections for 2021 and 2022 are stronger than in the October 2020 WEO. The upward revision reflects additional fiscal support in a few large economies, the anticipated vaccine-powered recovery in the second half of 2021, and continued adaptation of economic activity to subdued mobility. High uncertainty surrounds this outlook, related to the path of the pandemic, the effectiveness of policy support to provide a bridge to vaccine-powered normalization, and the evolution of financial conditions.


The global economy is set to expand 5.6 percent in 2021 its strongest post-recession pace in 80 years. This recovery is uneven and largely reflects sharp rebounds in some major economies. In many emerging market and developing economies (EMDEs), obstacles to vaccination continue to weigh on activity. By 2022, last year’s per capita income losses will not be fully unwound in about two-thirds of EMDEs. The global outlook remains subject to significant downside risks, including the possibility of additional COVID-19 waves and financial stress amid high EMDE debt levels. Policy makers will need to balance the need to support the recovery while safeguarding price stability and fiscal sustainability and to continue efforts toward promoting growth-enhancing reforms.


Pharmaceuticals sector overview

India’s domestic pharmaceutical market is estimated at US$ 42 billion in 2021 and likely to reach US$ 65 billion by 2024 and further expand to reach ~US$ 120-130 billion by 2030. ... The Indian biotechnology industry was valued at US$ 64 billion in 2019 and is expected to reach US$ 150 billion by 2025.

In IQVIA’s latest 5-year forecast through 2025, the life sciences analytical institute says COVID-19 increased spending on pharmaceuticals by $88 billion, or a compound annual growth rate (CAGR) change of 4.6%, compared with 4.5% if the pandemic hadn’t happened.

The 50-page report looks at how the pandemic affected medicine use, pharmaceutical markets, and various therapeutic areas, as well as the world’s general growth rates and spending.

While COVID-19 vaccine spending is projected to add $157 billion to the market through 2025 (range, $73 billion to $213 billion), the authors say the pandemic caused a $68 billion loss due to disruptions. Overall, excluding COVID-19 vaccines, market spending will look largely similar to pre-pandemic times and should result in a 3% to 6% CAGR, according to the report.

"Perhaps the largest uncertainty in the next five years will be the potential impact of economic factors on countries’ budgeting and whether there will be shifts in policies regarding healthcare and medicine spending," the authors write. "It is expected that the pricing and value of medicines will be under increased scrutiny during this period, but this was an event that was already underway in most developed markets and an increasingly key issue in the U.S. market."

Changes in medicine purchases

While the report’s methodologies focused on purchasing patterns rather than defining shortages, the IQVIA authors observed a purchasing increase across all medicine types new/investigational, common intensive care unit (ICU), acute therapies, and chronic sometime from February through May in both developed countries and what the authors call "pharmerging" countries.

(Pharmerging countries fast-growing emerging markets targeted by pharmaceutical companies are led by China, India, Russia, and Brazil, and all have a per capita income below $30,000 per year and a 5-year absolute growth in pharmaceutical greater than $1 billion.) Developed countries saw significantly higher percentage increases than pharmerging countries in new/investigational treatments or common ICU drugs (about 145% vs 125% and 125% vs 110%, respectively). Acute and chronic drugs had comparable peaks and about 110% increases.

The authors say a variety of factors contributed to what they call "abnormal purchasing patterns" across companies and individual patients, such as concerns about how COVID-19 would affect the drug supply chain, increased ICU treatments, and attempts to find and identify COVID-19 treatments.

For instance, rescue inhalers were more frequently used in the ICU. Patients stockpiled chronic therapies early on based on the advice of some healthcare providers or personal concerns. And over-the-counter drug purchases for calming, sleeping, or mood drugs increased by 14.3%.

The authors write that spending on acute therapies such as antibiotics and pain medication fell during stay-at-home orders. High blood pressure treatment purchases were also below the expected volumes after the initial COVID-19 surge, which the authors say could indicate that some patients have been going untreated.

The data showed that medicine use recovered for most countries by the end of 2020, but there was a 10% variability. Developed countries had recovered gross domestic products up to 95% or higher of pre-pandemic levels, and stockpiling had ceased. Still, the authors said some countries with the greatest impact on daily dose volume were hit later in the pandemic, so disruptions may continue through parts of 2021.

"Consistently, pharmerging markets have lower per capita use of medicines, of ten with significant economic disparities within the countries, meaning aggregate impact on volume may be masking more significant impacts on individual patients," they explain.

Leading areas, overall growth rates

COVID-19 has certainly affected the pharmaceutical market, and COVID-19 vaccine spending alone is expected to contribute $157 billion by 2025, according to the report. In fact, excluding spending on COVID-19 vaccines would drop global pharmaceutical spending $4 billion from 2020 to 2025.

The authors say that, with the current manufacturing capacity, 70% of the world could be fully vaccinated against SARS-CoV-2 by the end of 2022, and beyond that, people will probably receive biennial booster shots. Despite news stories of vaccine companies such as Pfizer possibly raising the price of their vaccines after the pandemic, the authors believe that cost per dose will eventually decline because of competition, more one-shot options, and future usage in low-price countries.

The authors also predict that other therapeutics for COVID-19 will see increased demand as well as indirect pandemic consequences, such as substance disorder, mental health, or delayed diagnostic needs. The report does not, however, highlight quantitative predictive data for this.

Besides COVID-19 vaccines, the leading growth areas in the pharmaceutical market continue to be oncology and immunology.

Oncology will probably add about 100 new treatments and is projected to account for 9% to 12% CAGR over the next 5 years, increasing global spending almost $100 billion to reach $273 billion. As for immunology, growth should be about 10% CAGR and spending should hit about $175 billion by 2025, and researchers note that biosimilar competition will hit US immunology medicines particularly in 2023, when adalimumab biosimilars will launch. New therapies could also see significant growth, but key areas of interest such as Alzheimer’s or Parkinson’s have less certainty still.

"Therapy areas with lower growth in the next 5 years than in the last 5, including lipid regulators, anti-ulcerants, dermatology, and cardiovascular, are consistently more focused in more traditional therapy areas where fewer new launches have happened and where savings from losses of exclusivity are contributing to lower growth," the authors add. IQVIA found that almost all countries are expected to have a lower growth rate through 2025 when compared with the previous 5 years, and the authors say that global growth that does occur will be driven by the pharmerging market. (Growth is different than absolute spending, which the authors say will be driven by developed countries.) In general, the average of new active substances launched per year is projected to be between 54 and 63, whereas in the past 5 years the average was 52.

The United States remains the top market for healthcare spending, at $527.8 billion, according to the report in 2020, China spent the second most, but only 25.4% of the US total. Overall, the nation is forecast to grow between 0% and 3% CAGR over the next 5 years, compared with 3% from the past 5 years.

"In addition to discounts and rebates, ongoing market dynamics around the use of medicines, the adoption of newer treatments, the impact of patent expiries, and new generic or biosimilar competition will all contribute to historically slow market growth in the U.S. for the next five years," the authors conclude.

Pharma outlook : positive factors

The new financialyear comes with a new set of challenges in the midst of the ongoing COVID-19 pandemic. However, we are confident of emerging from the current situation stronger and more determined than ever to deliver on our commitments.


While the Indian economy was losing growth momentum for several years before the pandemic, the exceptionally bad growth performance in 2020-21 is largely on account of the 68-day-long hard lockdown which was imposed on March 25, 2020.

Fiscal year 2020-21 ends today, March 31. With an estimated annual contraction of 8% in GDP, 2020-21 has been the worst year in terms of economic performance in India since 1950-51, the earliest period for which data is available. While the Indian economy was losing growth momentum for several years before the pandemic, the exceptionally bad growth performance in 2020-21 is largely on account of the 68-day-long hard lockdown which was imposed on March 25, 2020 to prevent the spread of Covid-19 infections in the country, and continuing restrictions on economic and recreational activities for the rest of the year. To be sure, the economy has been recovering with the easing of restrictions. India’s Gross domestic product (GDP) re-entered growth territory in the quarter ending December 2020. What was 2020-21 like for the Indian economy beyond the quarterly improvement from a 24% GDP contraction in the first quarter to a 0.4% growth in the third quarter of the year.

Indian pharmaceutical sector supplies over 50% of the global demand for various vaccines, 40% of the generic demand for US and 25% of all medicines for UK. India contributes the second-largest share of pharmaceutical and biotech workforce in the world. According to the Indian Economic Survey 2021, the domestic market is expected to grow 3x in the next decade. India’s domestic pharmaceutical market is estimated at US$ 41 billion in 2021 and likely to reach US$ 65 billion by 2024 and further expand to reach ~US$ 120-130 billion by 2030.

Globally, India ranks 3rd in terms of pharmaceutical production by volume and 14th by value. The domestic pharmaceutical industry includes a network of 3,000 drug companies and ~10,500 manufacturing units.

Indian drugs are exported to more than 200 countries in the world, with US being the key market. Generic drugs account for 20% of the global export in terms of volume, making the country the largest provider of generic medicines globally. It is expected to expand even further in the coming years. The Indian pharmaceutical exports, including bulk drugs, intermediates, drug formulations, biologicals, Ayush & herbal products and surgical, reached US$ 16.28 billion in FY20. India’s drugs and pharmaceuticals exports stood at US$ 22.15 billion in FY21 (until February 2021). Medical devices industry in India has been growing 15.2% annually and is expected to reach US$ 8.16 billion by 2020 and US$ 25 billion by 2025. ‘Pharma Vision 2020’ by the Government’s Department of Pharmaceuticals aims to make India a major hub for end-to-end drug discovery. The Indian drugs and pharmaceuticals sector has received cumulative FDI inflows worth US$ 17.75 billion between April 2000 and December 2020.

To achieve self-reliance and minimise import dependency in the country’s essential bulk drugs, the Department of Pharmaceuticals initiated a PLI scheme to promote domestic manufacturing by setting up greenfield plants with minimum domestic value addition in four separate ‘Target Segments’ with a cumulative outlay of Rs. 6,940 crore (US$ 951.27 million) from FY21 to FY30.

Under Union Budget 2021-22, the Ministry of Health and Family Welfare has been allocated Rs. 73,932 crore (US$ 10.35 billion) and the Department of Health Research has been allocated Rs. 2,663 crore (US$ 365.68 billion). The government allocated Rs. 37,130 crore (US$ 5.10 billion) to the ‘National Health Mission’. PM Aatmanirbhar Swasth Bharat Yojana was allocated Rs. 64,180 crore (US$ 8.80 billion) over six years. The Ministry of AYUSH was allocated Rs. 2,970 crore (US$ 407.84 million), up from Rs. 2,122 crore (US$ 291.39 million).

India plans to set up a nearly Rs. 1 lakh crore (US$ 1.3 billion) fund to provide boost to companies to manufacture pharmaceutical ingredients domestically by 2023.

According to the Indian Economic Survey 2021, the domestic market is expected to grow 3x in the next decade. India’s domestic pharmaceutical market is estimated at US$ 42 billion in 2021 and likely to reach US$ 65 billion by 2024 and further expand to reach ~US$ 120-130 billion by 2030.

India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK. 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 Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.

Indian pharmaceutical sector is expected to grow to US$ 100 billion and medical device market expected to grow US$ 25 billion by 2025. Pharmaceuticals exports from India stood at US$ 19.14 billion in FY19 and US$ 13.69 billion in FY20 (up to January 2020). Pharmaceutical exports include bulk drugs, intermediates, drug formulations, biologicals, Ayush & herbal products and surgicals.

Indian companies received 304 Abbreviated New Drug Application (ANDA) approvals from the US Food and Drug Administration (USFDA) in 2017 and received a total of 415 product approvals in 2018 and 73 tentative approvals. 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.

India’s biotechnology industry comprising biopharmaceuticals, 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. India’s domestic pharmaceutical market turnover reached Rs 1.4 lakh crore (US$ 20.03 billion) in 2019, growing 9.8 per cent year-on-year (in Rs) from Rs 129,015 crore (US$ 18.12 billion) in 2018.

Cost efficiency-

Low cost of production and R&D boosts efficiency of Indian Pharma Companies, leading to competitive exports

Economic drivers

High economic growth along with increasing penetration of health insurance to push expenditure on healthcare and medicine in India.

Policy Support

Government of India’s ‘Pharma Vision 2020’ aims to make India a global leader in end to end drug manufacturing. In this sector 100% FDI is allowed under automatic route.

Note: source

Risks and concerns

With the pandemic leading to lockdowns and other curtailments, Outpatient Departments (OPDs) at hospitals remained shut and doctors either stopped functioning or avoided visiting clinics for most part of the year. This had a significant impact on generation of new prescriptions, a critical growth driver for the pharmaceutical industry.

With the gradual relaxation in lockdown rules and the introduction of COVID-19 vaccines, hospitals and clinics started returning to pre-COVID activity level. Though operations were again impacted by the second wave of the pandemic at the start of FY 2021-22, the situation is expected to start normalising again as the surge ebbs. Your Company’s deep customer relationships and a resilient supply chain will continue to ensure high service levels across stakeholders and give it a competitive advantage.

Several experts have predicted that India may experience future waves of COVID-19, which could further stretch the country’s healthcare ecosystem. With agile business continuity processes in place, your Company will, however, ensure that optimum levels of production and supply chain reliability are maintained. Over the medium to long-term, your Company remains positive about delivering healthy growth.

The outbreak of the global pandemic has also created raw material (Active Pharmaceuticals Ingredients or APIs) related disruptions for the Indian pharmaceutical industry. Your Company has long-term loan licenses with various Contract Manufacturing Organisations (CMOs) that should help it tide over such unpredictable situations with minimum impact. However, in the event of an extended period of shutdown, there are risks of supply disruption and higher input costs. From a long-term advocacy perspective, your Company is working closely with industry associations and policy makers to propose a more predictable, transparent API pricing regime, that will be a winwin for all stakeholders.

The healthcare policy landscape in India is at an inflectionpoint. Amid the pandemic, the uptake and acceptance of new areas of healthcare delivery, such as telemedicine, e-pharmacies, Over-the-Counter (OTC) medicines, are at anall-time high. New Government regulations could redefine the healthcare sector in the long term.

Your company constantly reviews its policies and procedures to adhere to ensure conformity to the various regulatory approvals for its manufacturing facilities.

Company Overview

Internationally, our focus is on expanding the revenue from registered products and applying for registration of products enabling for more revenue generation opportunities.

Your company continues to work towards optimizing the capacities of its manufacturing facilities and also on adding additional capacities aimed at the business opportunities available in line with its strategy. Your Company will try to ensure that it remains competitive in market, in costs and will manage the business more dynamically.

Bafna Pharma’s Global footprint

Name of Country No. of Products Approvals No. of Application Pending for Registration
2. CAMBODIA 2 10
5. ETHIOPIA 5 12
7. GHANA - 9
10. KENYA 5 6
12. MYANMAR 1 7
14. NEPAL 10 24
15. NIGERIA 38 24
16. PERU 3 6
18. RUSSIA 3 1
19. RWANDA - 9
20. SRI LANKA 45 50
22. TANZANIA 10 25
23. UGANDA - 9
24. UK -
25. UKRAINE 20 20
26. VIETNAM - 6
27. YEMEN 3 11
28. ZAMBIA - 9
TOTAL 181 294

Standalone Operating Results

The unprecedented adverse business environment, triggered by the COVID-19 pandemic, impacted the overall Indian Pharmaceuticals Market (IPM) during FY 2020-21. As operations resumed after the initial lockdown, your Company sharpened its focus on investing in, and promoting its established brands. As a result of its concerted efforts, the Company not only maintained but successfully consolidated its market position during the year.

The sales and operating income was Rs.7196.28 Lakhs in comparison to Rs. 4272.78 Lakhs in the previous year registering a growth of 59.37%. EBIDTA was Rs.1030.49 Lakhs for the year ending 31st March 2021 in comparison to Rs.138.86 Lakhs for the previous year registering a growth of 86.52%. Net Profit st March 2021 in comparison to ( Rs.182.80) Lakhs for the corresponding year.

Key Ratio for the year ending 31st March 2021

Key Financial Ratios 31st March 2021
Profitability Ratio
Operating Profit Margin (%) Profit from Operations/ Sale of Products 9%
Net Profit Margin (%) Profit after Tax/ Revenue from operations 8%
Return on Net Worth Profit after Tax/ Shareholders equity 0.10
Efficiency Ratios
Current Ratio Current assets/ current liabilities 2.04
Inventory turnover ratio Sale of products/ Average inventories 4.61
Debtors turnover ratio Sale of products/ Average trade receivables 7.45
FA Turnover Ratio Sale of Products/ Average Fixed Assets 1.94

Internal Control Systems

The company has reasonable internal control systems, with defined guidelines on compliance, which enables it to run its facilities and head office with a fair degree of comfort. Internal Audit is being undertaken by an Independent Auditor M/s. Soleti Associates, Chartered Accountant, Chennai, for the Financial year 2020-21.

Internal controls are implemented to safeguard its assets, to keep constant check on cost structure, to provide adequate accounting standards. The system incorporates continuous monitoring, financial routine reporting, checks and balances, purchase policies, authorization and delegation procedures and audit etc. Internal controls are adequately supported by Internal Audit and periodic review by the management.

The Audit Committee meets periodically to review with the management, statutory auditors and with the internal auditors, adequacy/scope of internal audit function, significant findings and follow up there on and findings of any abnormal nature. The system is improved and modified continuously to meet with changes in business condition, statutory and accounting requirements.

Material Development in Human Resources / Industrial Relations Front

The number of employees as on 31st March, 2021 was 288.

The growth attained by the Company is largely a function of the competence and quality of its human resources. The work environment is very challenging and performance-oriented, recognizing employee potentials by providing them with adequate opportunities. We have made efforts to discipline our hiring process. Acquisition and retention of talent which is in line with your company’s goals continues to be a major thrust area.