Marksans Pharma Ltd Management Discussions.

Global economy

Plagued by prolonged trade conflicts and policy uncertainties, the global economy recorded 2.9% growth in 2019 Trade volumes dramatically slowed in recent years and global growth and economic activities weakened considerably in 2019, in sharp contrast to the 21st century average of about 3.4% per annum. Trade wars, geopolitical tensions, and idiosyncratic stress in some of the key emerging economies, including weakening growth in China led to the negative impact. In many parts of the world, the manufacturing sector was hovering close to recession margins and it adversely impacted global growth. In response, central banks relaxed monetary policy with some countries (notably China and the United States) providing additional stimulus to the economy.

Intense social unrest in many countries presented new challenges, while natural calamities such as hurricanes in the Caribbean, drought and bushfires in Australia, floods in eastern Africa, and drought in southern Africa impacted the global economy significantly.

However, towards the end of 2019, market sentiment was boosted by tentative signs of manufacturing and global trade bottoming out. A shift toward accommodative monetary policy, intermittent favourable news on US-China trade negotiations, and diminishing fears of a no-deal Brexit led to some retreat from the risk-off environment. Based on these positive sentiments, global economic growth is likely to improve slightly in 20202021 and is expected to grow at 3.3% and 3.4%, respectively.

United States

Although recession fears hovered over the US economy for most part of 2019, it showed remarkable resilience and grew at 2.3% in 2019 Buoyed by a strong labour market, the US economy showcased strong economic growth in 2019 against a backdrop of weak business sentiment. Further, increased hiring and rising wages have resulted in improved consumer spending, which accounted for more than two-thirds of the US economy. The stock market also rose steadily throughout the year, boosting household income and allowing people to spend more. However, a neutral fiscal stance and waning support from a further loosening of financial conditions are likely to hold back the economic growth in 2020. Hence, the US economy is expected to grow at 2% in 2020 and decline further to 1.7% in 2021.


Headwinds from international trade, the ongoing uncertainty surrounding Brexit and a recession in the manufacturing sector affected the Eurozone economy significantly as it grew at its lowest rate since 2013. In 2019, it recorded growth of 1.4% in comparison to 2.3% in 2018. Trade uncertainty and a weakening global scenario is likely to restrain exports and hit investment and industrial activity. Moreover, cooling employment growth and higher savings are set to constrain household spending. Political uncertainty, impact of the coronavirus pandemic, US - EU trade tensions and Brexit pose major downside risks.

Although GDP growth is slowing in the region, it remains positive, owing to strong private consumption, led mainly by the labour market. Employment and consumption growth have accelerated in a synchronised way, over the last few years. The Eurozone reached record numbers of employment. As many as 5 million new jobs were created since 2017 and unemployment fell to 7.4% in September 2019 compared to 9.5% in 2017. At the same time, inflation has been very low, while disposable income is growing. Driven by strong labour markets, private consumption is likely to be the main economic growth driver in 2020. Growth is therefore, likely to rebound to 1.8% in 2020. Transitioning into a new economic relationship, the UK economy ended 2019 in stagnation owing to pressure from long-term Brexit uncertainty, mounting business costs and a global economic slowdown. Expected to grow at 1.2% in 2019, UKs economic growth is anticipated to stabilise at 1.4% in 2020 and firm up to1.5% in 2021.


After a weak performance in the first half of 2019, helped by monetary easing, faster public spending, and one-off effects, economic growth in Russia picked up in the third quarter of 2019 Consequently, the economy is expected to grow at 1.2% in 2019, 1.6% in 2020; and 1.8% in 2021.

A less restrictive monetary policy and increased spending on national projects are expected to help foster growth.


Expected to have grown at 1% in 2019, the Japanese economy is recovering at a moderate pace mainly due to healthy private consumption and robust capital expenditure by the government. Business investment and exports have been weakened by the trade war between the United States and China, but consumer spending has been relatively strong. Business hiring has also slowed down as a consequence of weakness in investment and exports, negatively impacting household spending. However, owing to the fading impact of the fiscal stimulus, growth is expected to slow down to 0.7% in 2020 and further reduce to 0.5% in 2021.

Emerging and developing economies of Asia

Growth in this region is estimated to have decelerated to 5.6% in 2019 from the previously forecasted 5.9%. However, it still achieved the highest regional growth rates in the world.

The growth markdown was largely because of the downward revision to Indias GDP growth projection, where domestic demand has slowed more sharply than expected amid stress in the nonbank financial sector, subdued consumption, increasing unemployment, and a decline in credit growth. Estimated to have grown at 4.8% in 2019, Indias GDP is likely to improve in 2020 to grow at 5.8% in 2020 and 6.5% in 2021, supported by monetary and fiscal stimulus as well as subdued oil prices. The worlds second-largest economy, China, grew 6.1% in 2019, the slowest in 29 years, but still within the governments expectation of 6 - 6.5% growth. Chinas growth in 2019 was considerably affected by the trade war with US, which brought down exports and weakened sentiment and confidence, while weighing down investment in manufacturing. Chinas trade surplus with the U.S. shrank in 2019 after multiple rounds of U.S. tariffs on Chinese goods. Facing sluggish demand at home and abroad and escalating U.S. trade pressure, Chinese policymakers have been rolling out a stream of growth-boosting measures over the past couple of years, while trying to contain financial and debt risks. Unresolved disputes on broader US-China economic relations as well as much needed domestic financial regulatory stimulus is expected to continue to weigh on Chinas economic activity. Therefore, economic growth is likely to slow down to 6.0% in 2020 and 5.8% in 2021. After slowing to 4.7% in 2019, growth in ASEAN-5 countries is projected to remain stable in 2020, before picking up in 2021. Growth prospects have been slightly revised for Indonesia and Thailand, where continued weakness in exports is weighing on domestic demand.

Global pharma industry

Innovative technologies and cheaper and efficient manufacturing techniques have resulted in a massive overhaul in the global pharmaceutical landscape in recent years. Increasing socio-demographic changes, rising demand for cheaper medicines, and trade liberalisation is likely to sustain its growth over the next decade. Further, with the effective utilisation of AI, data analytics, and machine learning, the industry saw dramatic improvements in in-patient care.

2019 was a bustling year for the drug industry, marked by acquisitions, substantial investment in promising technologies, and a steady stream of new drug approvals.

Fuelled by a growing ageing population in key markets, the global pharmaceutical industry is expected to grow at 3% to 6% to reach USD 1.57 trillion by 2023. M&A in the pharma industry remained vibrant throughout 2019, with some of the big pharma companies acquiring small and mid-sized companies to utilise their innovative capabilities and elevate their position in a highly competitive environment.

Major trends observed in the global pharma industry

• Expansion of biosimilar markets

• Utilising big data and AI for preventive/predictive measures

• Growing preference for precision medicine

• Increased focus on drugmanufacturing quality

• Focus on market solutions to reduce healthcare costs

• Manufacturing innovation to improve cost-efficiency

• A shift in focus from treatment to prevention

Growth drivers and inhibitors for the global pharmaceutical industry

Growth Drivers and Inhibitors:

Insights : Worldwide Population is lijkely to cross 9.3 billion by 2050 by 21% of this population is expected to be aged 60 and above.


Demographics: Improving standard of living, together with demographic and epidemiological trends, will drive demand for pharmaceuticals in all Pharmerging markets. An ageing population and a rapid rise of non-communicable diseases (NCDs) will also lead to growth in this segment. Growing resources will be focused on the control and prevention of NCDs, especially CVS, cancer, and diabetes.

Innovation: Innovative products and emerging pipeline products will be a key driver of growth in the developed pharmaceutical markets, where it has been historically launched first. Specialty, orphan, biologic and oncology products will represent an increasing proportion of these drugs and consequently, the price per patient is likely to edge progressively higher.

Access: To cope with rising demand, driven by demographic and epidemiological trends, governments of most SouthEast & East Asian countries will continue to seek expansion of their national health insurance schemes further, driving up spending on healthcare in the region.

Global generics drug market

Primarily driven by a significant increase in cardiometabolic risk factors among the masses, the global generic drug market is expected to have reached US$ 367 billion in 2019, registering a CAGR of 5.7% during 2014-2019 Enhanced usage of technology and effective utilisation of data analytics has resulted in increased demand for curable and generic medicines from emerging economies. Increasing prevalence of hypertension, diabetes, dyslipidemia, metabolic syndrome, and obesity, mostly a result of sedentary lifestyles, changing dietary patterns, and stress, has resulted in an increase in the uptake of generic medicines, thereby facilitating growth of the market. Further, the high costs linked with medication for several chronic and lifestyle diseases have increased the consumer inclination toward affordable variants, thereby boosting the demand for generic drugs. Moreover, the patent expiration of key blockbuster drugs, coupled with numerous favorable initiatives undertaken by governments of various countries, to promote the use of generic drugs, is expected to drive the growth momentum of the industry. Several regulatory bodies are conducting rigorous reviews to ensure optimal standards during the manufacturing process. On account of the aforementioned factors, the market is anticipated to reach a value of US$ 497 billion by 2025, growing at a CAGR of 5.2% during 2020-2025.

Key forces shaping generic medicine access in emerging markets

Growing patient demand for access to health care and innovative treatments Economic slowdown limits expansion of subsidised drug programs
Expansion of public health care programs over the past decade Growth in public reimbursement programs puts pressure on medicines prices and drives greater prescribing controls
Inclusion of innovative medicines in some subsidised medicines program Inadequate funding limits prescribing of innovative brands include on reimbursed drug lists.

Rising importance of Biologics

Falling under the umbrella of therapeutic products of a biological origin, biologics have opened new avenues in the field of generics. Extracted and made from living cells, animal, or microbial elements instead of chemically synthesised products, biologics are more complex compounds than traditional drugs and have a complicated development process.

With more than 350 biologics commercially available, the global biologics market is expected to reach US$ 625.6 million by 2026 after growing at a CAGR of 11.9%.

The success of biologic drugs in the treatment of major chronic diseases, notably cancer and autoimmune diseases, has garnered the interest of big pharmaceutical companies and attracted substantial investment in these products. The biologics market is majorly driven by growing capital investment from key market players, prevalence of chronic diseases and loss of patent exclusivity of leading biologic drugs, growing demand and higher acceptability for innovative therapies. Biologics have various potential advantages as they can, theoretically, be customised to hit specific ‘gene targets but the high cost can prove to be a hindrance.

Digital innovation transforming Global pharma industry

Digital innovations such as blockchain, cloud-computing, virtual health, AI and robotics, digital reality, the Internet of Medical Things (IoMT), and others are helping reshape the future by making health care delivery more efficient and more accessible.

Major advances in wireless technology, miniaturisation, and computing power are fueling an exponential increase in the pace and scale with which digital healthcare innovations are emerging and impacting both clinical and business operations. These advances are also driving the belief that "being digital" is the new necessity for all healthcare organisations.

Digital innovation is supporting and augmenting workers. It is allowing highly trained resources to focus on more valuable, patient-facing activities. It is also supporting efforts to transition to new models of patient-care and "smart health" approaches to drive innovation, increase access and affordability, improve quality, and lower costs.

Indian economy review

One of the fastest-growing economies in the world, until recently, India recorded below 6% GDP growth on a y-o-y basis for the 1st time in 7 years. During the 1st quarter of FY20, India recorded a near 5% growth, the slowest since the fourth quarter of FY13. Three of the four growth engines such as private consumption, private investment, and exports have slowed down significantly. Consumption, the biggest contributor to Indias growth till date, fell to an 18-quarter low of 3.1% in Q1 FY20, pointing towards fragile consumer sentiment and purchasing ability.

Private consumption is one of the major factors to have impacted Indias GDP growth. Private consumption which contributes nearly 60% to Indias GDP, is estimated to have grown at just 5.7% in 2019-20 compared to 8.1% in the previous fiscal. On the industry side, several core sectors including auto, real estate, and manufacturing were in deep waters for a major part of FY20. The auto sector in 2019 witnessed its worst decline in auto sales, in more than two decades. Manufacturing is expected to have grown at just 2% in 2019-20, the lowest growth rate in nearly 15 years, compared to 6.9% in 2018-19 Exports grew at just 5.7% and have remained volatile owing to global uncertainties around trade and investments and geopolitical tensions. The fourth engine, government consumption and investment is running out of steam owing to the limited elbow room for counter-cyclical spending, as the budget deficit remains under pressure.

The slowdown is mainly due to sluggish demand. Several internal factors like stagnating rural wages, tightening lending conditions (due to the ailing health of financial institutions), and rising unemployment have contributed to low demand for goods and services.

Additionally, structural factors have also contributed to the sluggishness. These include changing consumer preferences due to a rising proportion of millennials in the consumer segment and rapid technological innovations that are transforming demand patterns.

Overview of the Indian pharmaceutical market

Marked by several internal and external challenges, the India pharmaceutical sector showed remarkable resilience by recording stable growth, when the majority of the sectors were impacted by the slowdown. Backed by factors like rebound in domestic growth and stable growth in chronic therapies, the Indian pharmaceutical industrys growth remained stable at 12.2% during the first half of FY20. Growing at around 9% - 11%, the overall Indian pharmaceutical industry is likely to touch US$ 41.9 billion in FY20. On the domestic front, the pharma industry is expected to reach US$ 20.4 - US$ 20.8 billion during FY20, after growing at around 12%.

In terms of export, the Indian pharma industry is likely to touch US$ 21.1 billion in FY20 after growing at around 8% - 10%. Nourished by increasing spending, improving accessibility, and growing exports, Indias pharma and healthcare sector is poised for another year of robust growth even as pricing and cost headwinds could force players to pause and catch a breath. The next leg of export growth for the Indian pharma industry is likely to be driven by the growing presence of Indian companies in large and traditionally underpenetrated markets of Japan, China, Africa, Indonesia, and Latin America.

The Indian pharmaceutical industry has some unique qualities that allows it to stand out from the rest.

• India has the highest number of US-FDA compliant plants outside the US.

• Branded generics dominate the Indian market, accounting for nearly 70% to 80% of the retail market.

• Owing to low-cost formulation development capabilities and early investments, local players enjoy a dominant position.

• Drug prices are relatively lower, driven by intense competition.

• Bio-Pharma is the largest sector contributing to 62% of the total revenue.

Aided by these unique characteristics, the Indian pharmaceutical industry ranks 10th globally, in terms of value and 3rd in terms of volume. Further, India is the largest vaccine producer in the world. The Indian pharmaceutical industry today provides employment to more than 2.7 million people, both directly and indirectly.

Indias growing population is likely to enhance the patient pool to 20% by 2020.

Rising affordability owing to sustained growth in incomes and increase in insurance coverage will augment affordability.

Accessibility to drugs and healthcare facilities is likely to grow with increased investment in medical infrastructure, new business models for Tier-II towns and rural areas, launch of patented products, and greater government spending on healthcare.

Non-traditional business models are likely to provide greater access in Tier-II and rural areas, helping reduce the gap in per capita spends on pharmaceuticals, between rural and urban areas.

Increased acceptability of modern medicine and newer therapies owing to aggressive market creation by players, an increased acceptance of biologics and preventive medicine, and a greater propensity to self-medicate.

Going beyond generics with an increased focus on biologics, new drug development, and next-generation innovative products

Expertise in low cost generic patented drugs and a movement towards end-to-end manufacturing

Launch of the National Health Protection Scheme, the largest government-funded healthcare program globally, as well as an economic growth-driven increase in healthcare spending

Strong growth in the US market by driving higher ANDA share in molecules going off-patent, and potential ease in price erosion

Increased growth in large underpenetrated markets such as Japan and China

Opportunities and challenges of the Indian pharmaceutical industry


Government-sponsored health coverage programs: The Ayushman Bharat Yojana (central governments National Health Protection program) is estimated to benefit 10 crore vulnerable families (~40 percent of Indias population). Aimed at providing access to affordable healthcare facilities to poorer households through health insurance, this provides a great opportunity for companies to widen their footprint.

Growing focus on chronic diseases: Indias disease burden is slowly transitioning towards chronic diseases. Therefore, there is an increasing demand for specialised drugs that treat these diseases. These drugs are currently more expensive than acute drugs and presents an opportunity to the Indian companies that address these needs with affordable yet high-quality specialty drugs.

Opportunities in newer product classes such as biosimilars, gene therapy, and specialty drugs: Large scale production of generic drugs have been one of the main reasons for the success of the Indian pharmaceutical industry. But, the Indian pharmaceutical industry was one of the first to initiate and launch biosimilar development in the Indian market. However, the successful development of these next-generation drugs such as gene therapy and specialty drugs, on a large scale, is still limited. With the governments focus on these drugs, fostering a favourable environment for its development can spur innovation in these product classes and usher in the next leg of growth for the Indian pharmaceutical industry.

Leveraging the patent cliff:

Patents for branded molecules with cumulative global sales worth over US$ 251 billion are expected to expire between 2018 and 2024. This presents a sea of opportunity for the Indian generics players, given an increased Abbreviated New Drug Application (ANDA) share and faster time-to-market.

Exploring the underpenetrated markets: With the Indian pharmaceutical industry aspiring to become the worlds largest exporter of medicine by volume, the next wave of growth could come from increasing exports to large and traditionally underpenetrated markets such as Japan, China, Africa, Indonesia, and Latin America. Case-in-point: Indian pharmaceutical companies account for less than one percent of the Japanese pharma market. Government interventions and enhanced trade-relations support

Exploring the underpenetrated markets: With the Indian pharmaceutical industry aspiring to become the worlds largest exporter of medicine by volume, the next wave of growth could come from increasing exports to large and traditionally underpenetrated markets such as Japan, China, Africa, Indonesia, and Latin America. Case-in-point: Indian pharmaceutical companies account for less than one percent of the Japanese pharma market. Government interventions and enhanced trade-relations support can help the Indian pharma companies gain easy market access in these markets.

Public health sector to offer meaningful opportunities: The public health segment comprises of direct government purchases from pharmaceutical companies. This segment in India is still at a very nascent stage. But with an increased government focus on the public healthcare sector and improved budgetary allocation, this sector is expected to grow substantially in the years ahead. Therefore, it can provide an ocean of opportunity to Indian pharma companies.


India still lacks universal healthcare access: Considering its current population, access to healthcare facilities in India is still inadequate. About 29 skilled health workers are available for every 10,000 people in India compared to about 41 in China, and about 111 in the United States. Although India meets WHOs critical threshold of about 23 skilled professionals for every 10,000 people, it still needs to add ~1.5 million healthcare professionals, a 42% increase, to meet the basic healthcare needs of the population. This is extremely essential for a healthy India and a thriving healthcare ecosystem in the country.

Lack of a stable pricing and policy environment: Frequent and unexpected changes to domestic pricing policy and other healthcare policies are likely to create an uncertain environment. This is harmful to the Indian pharma industry as the investor community may shy away from investing in companies, which in turn may hamper innovation and research processes in Indian companies. The government and other stakeholders need to constructively engage to develop a framework that gives confidence to the investor community. This can ensure availability and accessibility of affordable drugs, while ensuring a workable pricing structure for pharmaceutical companies.

Dependence on external markets for intermediates and Active Pharmaceutical Ingredients (APIs): Lions share of Indias requirements for intermediates and APIs, by volume, are fulfilled by countries such as China. This exposes the Indian companies to high-risk supply disruptions and unexpected price fluctuations. India is unable to seize the API opportunity due to inadequate infrastructural facilities like uninterrupted water and electricity supply, lack of scale in ‘Special Economic Zones and limited governmental support in the form of tax incentives, favourable license renewals, and capital subsidies.

Excessive dependence on one geography: The export of generic drugs, specifically to the US, is one of the key factors contributing to the double-digit growth of top Indian pharmaceutical companies. However, in recent times growth in the US market has been moderate, largely owing to price erosion and higher competition in key molecules. This poses a higher risk to Indian pharma companies as the US accounts for a third of the total exports.


Despite the gloomy economic scenario in India, the pharmaceutical sector is expected to hold on to its growth. Enhanced access to medicines in the domestic market, rising per capita healthcare spending, increasing penetration of health insurance, and a higher instance of chronic diseases is likely to drive growth for the Indian pharmaceutical industry in the years ahead. Further, impetus to the Indian pharmaceutical industry is likely to be provided by the governments Ayushman Bharat Yojana, the worlds biggest health scheme, launched in 2018. Buoyed by these factors, the Indian pharmaceutical industry is expected to hold on to this growth trajectory and is likely to grow at 10 - 12% till FY22.

Operational Review


Standalone turnover of the Company increased from RS 42,416.02 Lakh in 2018-19 to RS 43,341.50 Lakh in 2019-20 i.e. increased by 2.18%. This growth has been driven by strong performance of exports to USA & North America, UK, Australia & New Zealand and Rest of World.

Cost of sales

Cost of sales increased to RS 24,303.24 Lakh in 2019-20 from RS 23,633.97 Lakh in 2018-19 on account of increase in sales.

Other expenses

Other expenses decreased from RS 7,816.04 Lakh in 2018-19 to RS 7,038.75Lakh in 2019-20 i.e. decreased by 994% due to cost optimisation and better controls.

Depreciation and amortisation expenses

Depreciation and amortisation expenses provision increased from RS 868.72 Lakh in 2018-19 to RS 1,164.42 Lakh in 2019-20 i.e. increased by 34.04% due to increased CAPEX.

Finance cost

Finance cost increased from RS 656.22 Lakh in 2018-19 to RS 729.17 Lakh in 2019-20 i.e. increased by 11.12% due to increase in bank charges.

Reserves and Surplus

Reserves & Surplus is RS 46,469.39 Lakh in 2019-20 compared to RS 42,964.30 Lakh in 2018-19 i.e. increased by 8.16% due to profits in current year.

Short-term borrowings

Short-term borrowings reduced to Nil in 2019-20 from RS 7,732.70 Lakh in 2018-19 i.e. decreased by 100% due to better cash generation and optimisation of working capital cycle.

Trade payables

Trade payables increased to RS 5,082.57 Lakh in 2019-20 from RS 3,722.56 Lakh in 2018-19 i.e. increased by 36.53% due to higher purchases.

Other Current Financial Liabilities

Other current financial liabilities increased to RS 768.26 Lakh in 201920 from RS 733.68 Lakh in 2018-19 i.e. increased by 4.71%.

Property, Plant and Equipments

The Companys tangible assets increased to RS 10,041.01 Lakh in 201920 from RS 9,718.62 Lakh in 2018-19 i.e. increased by 3.32% due to addition to fixed assets during the year.

Intangible assets

During 2019-20, the Companys intangible assets increased to RS 1,477.23 Lakh from RS 542.73 Lakh in 2018-19 due to acquisition of licenses during the year.

Other non-current financial assets

Other non-current financial assets increased to RS 204.77 Lakh in 2019-20 from RS 129.20 Lakh in 2018-19


Inventories increased to RS 7,460.21 Lakh in 2019-20 from RS 7,036.37 Lakh in 2018-19 i.e. increased by 6.02% mainly to support the increase in sale of formulation.

Trade receivables

Trade receivables decreased to RS 16,186.88 Lakh in 2019-20 from RS 17,782.97 Lakh in 2018-19 due to better realisation from customers.

Other current assets

Other current assets reduced to RS 62.03 Lakh in 2019-20 from RS 714.36 Lakh in 2018-19.

Cash and cash equivalents

Cash and cash equivalents increased to RS 335.23 Lakh in 2019-20 from RS 180.00 Lakh in 2018-19.


The largest contributors to Marksans revenue mix consist of Bell (OTC portfolio) and Relonchem (high-end Rx portfolio), the two subsidiaries which conduct the Companys business in the UK. With more than 150 products in its OTC portfolio and 200+ marketing authorisations, the Company has marketed its presence across diverse therapeutic segments. Further, the Company established a strong foothold in the European market and has a strong presence in the Rx formulations space with more than 100 products in the high-end Rx portfolio. One of the top-10 Indian pharma companies in the UK, the Company also provides contract manufacturing and research services to some of the top pharmaceutical companies in the EU region. Partnering with major retailers in UK including AAH, Lyods, NHS,Tesco, Asda, Morrisons, Coop, Boots and Superdrug, among others, the Company addresses therapeutic segments across pain management, diabetes, cough and cold, neurology, cardiovascular, and hormonal treatment.

Overview and outlook of the UK economy

Economy size Per capita income Per capita health expenditure
Fifth-largest US$ 2.83 trillion US$ 42,385 US$ 4,070*
* in 2018
The healthcare industry in the UK has served a growing and progressively healthier population for decades. In an era of unparalleled technological advances, Britain is the largest biotech cluster outside the US and one of the top three globally. Valued at around 70 billion (in terms of annual turnover), export accounts for nearly 30 billion, indicating an increased demand for international supply of British life science goods and services.


Present in the USs niche soft gel market, the US represents the second largest market in the Companys revenue mix. With a presence in US since 2015, the Company today supplies more than 20 products to the US market. With a strong marketing presence, supported by a widespread distribution network, the companys products are available across the US. The Company is amongst the few active Indian companies that have a USFDA approval for generic soft gel capsules. Therefore, the Company enjoys a strategic advantage in the worlds largest market and limited competition in the region, resulting in higher margins in the soft gelatin capsules segment in the US generic business.

Overview and outlook of the US economy

Economy size Per capita income Per capita health expenditure
Largest US$ 21.44 trillion US$ 67.43 thousand US$ 10,586*

* in 2018

The US pharmaceutical industry continues to lead its global peers in terms of innovation and competitiveness, while still ranking high in overall growth potential. With more than 15% of the US population above 65 years of age, the US pharma industry is expected to reach USD 685.45 billion by 2023. Expected to hold its position, the US pharma market is expected to account for ~43.72% of the global pharmaceuticals market. Ageing population, increasing affordability, greater focus on curing rare and specialty diseases, innovation in advanced biologics, and better utilisation of patient data is likely to drive sustained growth in the US pharma market.


Over the years, the company has marked its presence in Australia and New Zealands pharmaceutical market, the third-largest contributor to Marksans revenue mix. The Company carries out its regular business operations through its Australian subsidiary Nova Pharmaceuticals. A research-driven specialty pharmaceuticals company, Nova Pharmaceuticals was acquired by Marksans in 2005. One of the leading generics and private label suppliers, Nova holds 30 MAs and has become one of the biggest suppliers of generic products in Australasia while rapidly expanding into key therapeutic classes.

Overview and outlook of the Australian and New Zealands economy

Economy size Per capita income Per capita health expenditure
Australia Fourteenth-largest US$ 1.42 trillion US$ 55,306 US$ 4,543
New Zealand US$ 305 billion# US$ 42,067 -

* in 2018

#As of September 2019

Australias pharma industry: Despite the recent challenges faced by the Australian pharma industry, the outlook for the pharmaceutical industry in Australia is positive. Revenue is forecast to grow by 5.1% over the next five years, reaching $40.1 billion by 2024. Pharmaceutical retailers are expected to grow substantially, adding 300 more establishments during the same period. An ageing population and an increasingly health-conscious society is driving demand for pharmaceutical goods and services.

New Zealands pharma industry: Spending on medicines and healthcare in New Zealand has witnessed steady growth since 2017, reflecting strong potential for new medicine development, infrastructure building and new entry/expansion opportunities. Both Pharmaceutical sales and consumption are on the rise and the outlook for 2025 remains robust, driven by strong pharmaceutical market fundamentals.


With a strong presence in some of the major and most regulated pharma markets across the world, the company widened its global presence by entering the emerging economies. With a prime focus on four major clusters, the Company has marked its presence in a number of other countries such as South East Asia, Russia and the CIS, Middle East and Africa. In these four clusters, it is targeting specific countries like Ukraine, Sri Lanka and Myanmar


The Company plans to further strengthen its presence in these countries and venture into geographies that remain underpenetrated. The Company intends to garner more than 10% of its overall revenue from these countries by 2022.

Human resources

Innovation and technological advances are at the core of our company, and a critical factor that determines our ability to implement this strategy lies in the innovative capacities of our people. As Marksans adapts to reflect trends in society and healthcare, our human resources strategy has evolved to anticipate these changes. Our strategic priorities in human resources include attracting, developing and retaining people with diverse skills; ensuring our people are aligned with the evolving structure of the organisation, and shaping a culture based on our core values that enable the company to fulfill its purpose.

At Marksans Pharma, we seek to provide a supportive and enabling work environment that encourages our employees to embrace challenges and realise their full potential. Employee engagement is nurtured and enhanced through communication and the creation of cross-functional teams. The Company also brings in eminent individuals and professionals to conduct training programs in management and technical skills. The employee count stood at 1150 across facilities as on March 31, 2020.

Financial review

Particulars FY20 FY19 % Change Reason
Debtors Turnover (days) 68 65 4.62 Debtors turnover ratio increased from 65 days to 68 days during the year due to increase in overall sales
Inventory Turnover (days) 179 187 (4.28) Inventory turnover ratio reduced by 8 days due to optimisation of inventory levels
Interest Coverage Ratio 22.02 14.16 55.51 Interest coverage ratio increased from 14.16 times to 22.02 times due to increase in profits and reduction in debt levels
Current Ratio 2.69 2.28 17.98 Current ratio improved from 2.28 to 2.69 due to reduction in current liabilities and better generation on cash during the year
Debt Equity Ratio -0.12 0.12 (196.24) The company became debt free as of 31.3.2020
Operating Profit Margin (%) 16.97 13.61 24.69 Operating profit margin improved due to better product mix and improved operating leverage
PAT Margin (%) 10.64 8.01 32.94 PAT margin improved due to improved operating leverage.
RoE (%) (on Cash Profit) 18.60 14.55 27.84 ROE was 18.60% due to improved margins
RoCE (%) (on Cash Profit) 24.50 19.96 22.75 ROCE increased from 19.96% to 24.5% during the year due to improved margins
Cash Profit Margin (%) 12.66 9.88 28.14 Cash profit margin improved from 9.88% to 12.66% during the year
RoNW 18.40 14.09 30.59 RoNW increased from 14.09% to 18.40% during the year


Industry risk The global pharma industry is expected to grow at 3% to 6% over the next few years.
A slowdown in the pharma industry may negatively impact the companys performance.
Ageing global population, improved standard of living, and innovation makes medicines cheaper, and is likely to drive demand in the pharma industry Indian pharma industry is likely to grow at 10% - 12% over the next couple of years.
Regulatory risk ^ Every product manufactured by the Company is passed through extensive R&D checks and stringent quality control tests as per international norms.
Any change in regulation might dent the growth of the Company as it can impact production
All manufacturing units of the company conform to the guidelines issued by different regulatory bodies across the world.
The Company regularly invests in plant automation which helps to meet regulatory compliances efficiently.
Technology risk ^5^4 The pharmaceutical industry is a technology and research driven industry. The companys management values data security, automation of operations and technological advancement in the industry. The Company therefore continues to invest in state-of-the-art technologies, R&D and laboratory infrastructure to build its manufacturing and innovation capabilities. It maintains close ties with leading global companies and organisations to remain updated on the changes taking place in the industry.
Obsolete technology may hamper the companys performance and erode market advantage
Geographical risk The Company has a business presence in more than 50 countries across the world including countries like the USA and UK.
Presence in one market or dependence on one region could result in stagnant revenues
The Company entered 5+ new countries in the last 5 years.
Two of the biggest pharma markets in the world i.e. the USA and the UK account for only 83.5% of the Companys revenue.
Competition risk ^ The Company has a continued focus on its operating performance from manufacturing to R&D to distribution to ensure that it continues to service the needs of its clients efficiently and in a timely manner.
The Company operates in a competitive environment and, as such, may experience increased competition that could adversely affect the Companys sales, operating margins and market share.
Foreign currency risk -j Rs :^ Foreign exchange rate exposures are managed by the Company by utilising forward foreign exchange contracts.
The Company is exposed to foreign currency risk arising primarily due to its business presence in a number of foreign countries.
The Company enters into forward foreign exchange contracts to manage the risk associated with anticipated future business transactions denominated in foreign currencies.

Internal control systems and their adequacy

The internal control and risk management system are structured and applied in accordance with the principles and criteria established in the corporate governance code of the organisation. It is an integral part of the general organisational structure of the Company and involves personnel who act in a coordinated manner while executing their respective responsibilities.

The Board of Directors offers its guidance and strategic supervision to the Executive Directors and management, monitoring and support committees. The control and risk committee and the head of the audit department work under the supervision of the Board- appointed Statutory Auditors. The system is under constant review by the Chairman, Managing Director, COO, CFO, and a few others, which allows discrepancies to be noted immediately and suitable actions taken in case of lapses.

Cautionary statement

This statement made in this section describes the Companys objectives, projections, expectations, and estimations which may be ‘forwardlooking statements within the meaning of applicable securities laws and regulations. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised by the Company.

The actual result could differ materially from those expressed in the statement or implied due to the influence of external factors which are beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments.