Bliss GVS Pharma Ltd Management Discussions.

Global Economy Overview

The calendar year 2020 was a great disruption unleashed by a viral pandemic that hit the world economy very hard. The pandemic spread like a forest fire, reaching every corner of the world, infecting more than 90 million and killing close to 2.8 million people worldwide (as of January 2021). For several months, uncertainties and panic paralysed most economic activities in both developed and developing economies. The pandemic has exposed the systemic vulnerability of the world economy. Building economic, social, and environmental resilience must guide the recovery from the crisis.

World GDP fell by an estimated 4.3 percent in 2020, the sharpest contraction of global output since the Great Depression. The pandemic hit the developed economies the hardest, given the strict lockdown measures that many countries in Europe and several states of the United States of America imposed early on during the outbreak. The developing countries experienced a relatively less severe contraction, with output shrinking by 2.5 percent in 2020. Their economies are projected to grow by 5.7 percent in 2021.

The global recovery, which has been dampened in the near term by a resurgence of COVID-19 cases, is expected to strengthen as confidence, consumption, and trade gradually improve, supported by ongoing vaccination. Activity is expected to strengthen in the second half of this year and firm up further next year, as improved COVID-19 management aided by ongoing vaccination allows for an easing of pandemic control measures. Global economic output is expected to expand 4 percent in 2021 but is yet expected to remain below pre-pandemic projections. Global growth is projected to moderate to 3.8 percent in 2022, weighed down by the pandemics lasting damage to potential growth.

Source: UN Report, 2021, World Bank Report (PDF)

Indian Economy Overview

Financial Year 2020-21 started with a Nation-wide lockdown in India, although India emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. The Economic Survey has projected that the economy will grow at 11 percent, up from an estimated historic decline of 7.7 percent in 2020-21, on account of the COVID-19 pandemic. Also, the vaccination drive is expected to provide an impetus for the restoration of contact-intensive sectors and a leading edge to the Indian pharma industry in the global market.

The government has the ambition of making India a USD 5 trillion economy by 2024 for which various initiatives have been undertaken in the last few years to improve ease of doing business, encourage Make in India, invite foreign companies to India with schemes like PLI (production-linked incentive) and tweak the legacy labour laws, Agri policies, etc. The Government of India, under its Make in India initiative, is trying to boost the contribution made by the manufacturing sector to take it to 25% of the GDP from the current 17%. Besides, the Government has also come up with the Digital India initiative, which focuses on three core components: the creation of digital infrastructure, delivering services digitally, and increasing digital literacy.

With the shift in sentiment to reduce dependence on a single country i.e. China, there is an increasing interest from international companies wanting to invest in India. Interest is largely from Asia led by Japan, Korea, and Thailand although we are also seeing interest from Europe. Some of these inquiries are in sectors such as agrochemicals, building products, logistics, packaging, and new-age technology including electronics, sectors where we have not seen significant interest in the past.

Source: Economic Times, IBEFReport- Economic Overview

Global Pharmaceuticals Industry

The global pharmaceuticals market is expected to grow from USD 1,228.45 billion in 2020 to USD 1250.24 billion in 2021 at a compound annual growth rate (CAGR) of 1.8%. The growth is mainly due to the companies rearranging their operations and recovering from the COVID-19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges. The market is expected to reach USD 1700.97 billion in 2025 at a CAGR of 8%. North America was the largest region in the global pharmaceuticals market, accounting for 46% of the market in 2020. The Asia Pacific was the second largest region accounting for 26% of the global pharmaceuticals market. Africa was the smallest region in the global pharmaceuticals market.

As of 2020, total pharmaceutical sales in the United States are estimated to be around USD 514 billion. Total pharmaceutical sales numbers in North America are projected to amount to some USD 633 billion in 2024, making it the regional submarket with the highest global pharma sales by far. Europe was responsible for generating around USD 195 billion. These two markets, together with Japan, Canada and Australia, form the so-called established (or developed) markets. The rest of the global pharmaceutical revenue is mainly from emerging markets which include countries like China, Russia, Brazil and India. These emerging markets show the fastest increase in pharmaceutical sales. Latin America, the Indian Subcontinent, and European non-EU countries are the

world regions with the highest predicted compound annual growth rates up until 2024.

In 2024, the United States is projected to spend between USD 605 and 635 billion on medicine, making it the country with the highest pharmaceutical spending by far. China, which is estimated to be in second place, has a maximum projected expenditure estimate of USD 195 billion for that year.

As of April 2021, there were 1,159 drugs and vaccines in development targeting the coronavirus disease (COVID-19). Of these, 689 were still in the preclinical phase. However, there were three products already registered, while one was in the pre-registration phase. Going forward, technological advances, changes in lifestyles, new methods for drug discovery, the large pool of undiagnosed population, and an increase in pharmaceutical drug usage due to the covid-19 pandemic will drive the growth.

Source: PR News, BusinessResearchCompany.com

Indian Pharmaceuticals Industry

The Indian pharma industry has grown at a compounded growth rate of (CAGR) of ~11% in the domestic market and ~16% in exports over the last two decades. While the domestic market has grown at a similar pace to the gross domestic product (GDP), the overall growth has been driven by the industrys leadership in supplying generic formulations to markets across the globe. In the 2020-2030 period, Ernst & Young expects the Indian pharma industry to grow at a compounded annual growth rate (CAGR) of ~12% to reach USD 130 billion by 2030 from USD 41.7 billion in 2020.

The Indian pharma industry has achieved significant growth in both domestic and global markets during the past five decades. The share of "Made in India" medicines in the Indian pharma market has grown to almost 80% in 2020 as compared to a mere 5%, five decades ago. More importantly, during the same period, the country has also established a leading position in the global generic pharmaceuticals landscape and is now known as the "Pharmacy of the world". The pharma industry in India contributes more than 20% by volume of the global generics market and 62% of the global demand for vaccines.

India is the source of 60,000 generic brands across 60 therapeutic categories. The country accounts for 40% of the generics demand in the US and ~25% of all medicines in the UK. India also fulfils about 80% of the global demand for antiretroviral drugs for Acquired Immune Deficiency Syndrome (AIDS), significantly contributing towards increasing accessibility of AIDS treatments. Indian pharma manufacturers export nearly half of the pharma production, both in terms of volume and value, to the US, UK, South Africa, Russia and other countries. However, there remains a significant opportunity, largely untapped across Japan, China, Australia, ASEAN countries, the Middle East region, Latin Americas and other African countries. Some of the factors impacting lower penetration of these regions are; relatively slower-paced entry strategy, long negotiations cycle, regulations emphasizing on local manufacturing, volatility in the global prices, patent recognitions, disharmony in the drug registration process, lack of guidelines on the regulation of biosimilars, bioequivalence studies and delayed market approvals.

The pharma sector has been contributing significantly to Indias economic growth as one of the top 10 sectors in reducing the trade deficit and attracting Foreign Direct Investment (FDI). The drugs and pharmaceuticals sector attracted cumulative FDI inflow worth USD 16.54 billion between 2000 and 2020. It is of prime importance also due to the trade surplus it has been generating with pharmaceuticals exports accounting for USD 20.7 billion and imports at USD 2.31 billion in FY20. The industry employs over 2.7 million people either directly or indirectly and ranks third in terms of volume and 14th in terms of value globally.

African Pharmaceutical Industry

The pharmaceuticals market in Africa is expected to reach a business opportunity of USD 45 billion in 2020, propelled by a convergence of changing economic profiles, rapid urbanization, increased healthcare spending and investment, and increasing incidence of chronic lifestyle diseases. The growth is expected to continue on the backing of the following factors:

• Rapid Urbanization - Africas population is undergoing a massive shift. By 2025, two-fifths of economic growth will come from 30 cities of two million people or more; 22 of these cities will have GDP over USD 20 billion. Cities enjoy better logistics infrastructures and healthcare capabilities, and urban households have more purchasing power and are quicker to adopt modern medicines. Healthcare provision is becoming more efficient through initiatives such as Mozambiques switch to specialist nurse anaesthetists and South Africas use of nurses to initiate antiretroviral drug therapy. The introduction of innovative delivery models is increasing capacity still further.

• Africas Changing Business Environment - In a world of slowing and stagnating markets, Africa represents the last geographic frontier where high growth is still achievable. As ever, the key to success lies in understanding individual markets in granular detail. Early movers with the right approach should be able to capture a competitive advantage. A flurry of mergers and acquisitions, joint ventures, strategic alliances, partnerships, and private equity deals are further extending Africas markets. Africa will continue to grow for the foreseeable future.

The tropical climate of Africa makes the continent the largest reservoir of infectious diseases, particularly malaria, tuberculosis (TB), and acquired immune deficiency syndrome (AIDS), besides frequent outbreaks of polio, meningitis, cholera, pandemic influenza, yellow fever, measles, hepatitis, and tetanus. With the increasing adoption of the Western lifestyle in Africa, there has been a paradigm shift in the burden of illness towards non-communicable diseases (NCDs), driving the demand for chronic prescription drugs. While continuing to suffer from infectious and parasitic illness, lifestyle diseases such as cardiovascular diseases, diabetes, and cancer will witness high growth rates throughout the forecast period. The World Health Organisation predicts that the proportional contribution of NCDs to the healthcare burden in Africa will rise by 21% through 2030.

Opportunities:

It is observed that Africa accounts only for 3% of global medicine production while 95% of the medicines consumed in Africa are imported with countries like South Africa and Morocco managing to produce 70% to 80% of their medicines and certain central African countries importing close to 100% of their need. Some African countries have a handful of local companies that produce for the domestic market. Most do not and are also currently uncompetitive for local drug production. The continent overall has roughly 375 drug makers, most in North Africa, to serve a population of around 1.3 billion people. Those in sub-Saharan Africa are largely clustered in just nine of 46 countries, and theyre mostly small, with operations that do not meet international standards. By comparison, China and India, each with roughly 1.4 billion in population, have as many as 5,000 and 10,500 drug manufacturers, respectively. And the sub-Saharan markets value is still relatively small, at roughly USD 14 billion compared to China and India. It is opportunistic for multinationals and pharmaceutical companies seeking new sources of growth as developed markets stagnate while patients will also gain access to medicines previously unavailable on the continent. Indian firms in particular have been able to fill this niche.

Source: News Africa, Mckinsey Report, Orfonline.org Global Malaria Outlook

Malaria is a life-threatening disease caused by parasites that are transmitted to people through the bites of infected female Anopheles mosquitoes. It is preventable and curable. According to the latest World malaria report, released in 2020, there were 229 million cases of malaria in the past calendar year, as compared to 228 million cases in 2018. The estimated number of malaria deaths stood at 4,09,000.

As per the report, nearly half of the worlds population was at risk of malaria. Most malaria cases and deaths occur in subSaharan Africa. However, the WHO regions of South-East Asia, Eastern Mediterranean, Western Pacific, and the Americas are also at risk. Some population groups are at considerably higher risk of contracting malaria, and developing severe disease, than others. These include infants, children under 5 years of age, pregnant women and patients with HIV/AIDS, as well as nonimmune migrants, mobile populations and travellers.

The WHO African Region continues to carry a disproportionately high share of the global malaria burden. The region was home to 94% of all malaria cases and deaths. The top 6 countries accounted for approximately half of all malaria deaths worldwide: Nigeria (23%), the Democratic Republic of the Congo (11%), United Republic of Tanzania (5%), Burkina Faso (4%), Mozambique (4%) and Niger (4%) each.