Morepen Laboratories Ltd Management Discussions.


The pharmaceutical industry continues to thrive, yet there are several challenges that may affect the industrys future growth in 2019 and beyond. The drug prices are at an alltime high, R&D productivity has only just begun to climb again following a limitation faced in previous few years. The Indian Pharmaceutical Sectors is recovering from regulatory turbulence in the most profitable global market, top Indian pharma companies have zeroed in on cost rationalization, better compliance standards and a more nimble response to competition while hoping the Chinese market could provide the salve going ahead. A review of the FY19 performance of leading Indian pharma companies point to four dominant themes that hold the future for the industry.

Cost: Rationalisation of cost during difficult times seems to be the most important mantra for Indian pharma companies that compete on low-cost generics. Spending high on R&D related to generic drugs has not been paying off — prompting companies to go back to their planning boards to make R&D more productive. Besides, legal costs as well as expenditure on drug marketing have surged in recent years.

Compliance: With most pharma companies facing compliance issues with the US drug regulator, the topic is bound to be on top of their list of priorities. Right from observations, warning letters to import alerts - companies in India have faced varying degrees of reproach from the USFDA. Besides the loss of business and expenses incurred on remedial action, companies also suffer value erosion on the bourses amid uncertainty about the course correction.

Competition: Competition in the US has worsened in the traditional generic business segment and is no longer as remunerative. Faster pace of drug approvals has accentuated it. To counter it, Indian companies are moving towards difficult to manufacture differentiated drugs like complex generics, specialty drugs and biosimilar - a shift that requires change in expertise, additional investment and management bandwidth. The growth prospects of companies will depend on the selection of the right strategy.

China: The gradual opening of the Chinese market for Indian generics seems to be a timely opportunity for pharma companies. Indian companies are trying to find a sweet spot to export drugs to China amidst the fast-developing trade war between China and the United States.

The pharmaceutical landscape is constantly changing with the rapid growth of biosimilars and disruptions of health technology. The global pharmaceutical market is expected to grow at compound annual growth rate of around 3-6% over the next five years and will cross $1.5 trillion by 2023. The key drivers of growth will continue to be the United States and pharmerging markets with 4-7% and 5-8% compound annual growth, respectively. In the United States, overall spending growth is driven by a range of factors including new product approval and brand pricing, while it is offset by patent expiries and generics. Medicine spending in Japan totaled $86 billion in 2018, however spending on medicines is expected to decline by -3 to 0% through 2023, largely because of exchange rates and the continued uptake of generics. In Europe, cost-containment measures and less growth from new products contribute to slower growth of 1-4%, compared to the 4.7% compound annual growth seen over the past five years. Pharmaceutical spending in China reached $137 billion in 2018 and is expected to reach $140-170 billion by 2023, but its growth is likely to slow to 3-6%.

New products and losses of exclusivity will continue to drive similar dynamics across developed markets, while product mix will continue to shift to specialty and orphan products. An average of 54 new active substance (NAS) launches per year are expected over the next five years and two-thirds of launches will be specialty products, lifting specialty share of spending to near 50% by 2023 in most developed markets. At the same time, the impact of losses of exclusivity in developed markets is expected to be $121 billion between 2019 and 2023, with 80% of this impact, or $95 billion, in the United States. By 2023, biosimilars competition in the biologics market will be nearly three-times larger than it is today. The industry need to address many challenges, in order to thrive in 2019 and beyond.

The United States has led the international pharmaceutical market for many years, so slowed growth here signals bad news for the global economy. Analytical reports i ndicate that market growth in the US will slow to single digits, between 6% and 9%, through 2021, which is down from a 12% growth in earlier years. Still, the US will remain the worlds largest pharmaceutical market, contributing 53% of all forecasted growth within the next five years. China is expected to continue in the second-largest spot by contributing 12% of the worlds pharmaceutical growth.

On a volume basis, the total volume of medicines consumed globally will increase by about 3% annually through 2021, only modestly faster than population and demographic shifts. Issues of pricing, market-access pressures, lower volume growth in emerging markets, and further generic- drug spread will contribute to the lower rate of growth, according to the analysis.

There is still a major issue over high drug prices in the USA. Mounting pressures by patients, politicians and regulatory bodies over drug pricing and reimbursement led to price freezes in 2018 and a proposal to introduce an international pricing index through Medicare - which would aim to reduce Medicare spending by 30%. The proposal was met widely with criticism due to concerns and in early 2019 several pharmaceutical companies hiked their prices up even further - an average of 6.3%. The government faces an ongoing and complex challenge to control increasing drug prices to pave the way or more affordable and accessible healthcare for its citizens.

Biosimilars have made big waves in recent years and there is strong growth predicted across all markets, forecasting over 20% increases over the next five years. However, even though biosimilars are growing at an accelerated rate, the market is still dominated by small molecules with 76% of the market share.

Although biosimilars are a growing segment and threaten to take market share from small molecules, there are some challenges to their production. Based on progress to date, the development of biosimilars seems to provide challenges of its own. Despite considerable growth, the market is still in early nascent stage and, in some markets, this development is being further slowed by lawsuits over biologic patents. The regulatory processes are not yet solidified either and those that have been developed thus far have required costly clinical trials to gain market approval.

Although biosimilars will present competition for biologics, they represent significant savings to the consumer. In the United States, the projected cost savings from switching to biosimilars is expected to be between $40 and $250 billion within the next 10 years. This will go some way in combatting the drug price crisis and make life saving medicines more affordable.

Because they are so new to market, biosimilars also present an opportunity for pharmaceutical companies. Those who excel at marketing biosimilars within their product range stand to gain an edge over their competitors. Even companies with limited experience of developing biosimilars can grow their portfolios with strategic mergers/acquisitions to increase their capabilities.

With the deadline fast approaching for the UK to confirm the terms of their departure from the European Union (EU), the effect of the potential outcomes on the pharmaceutical industry, both in the UK and globally, is not fully known. The fear of a no-deal Brexit is causing a sense of panic in the European industry that the UK is working hard to assuage. 2019 is proving to be an interesting year for the pharmaceutical industry for many reasons. Slowed market growth, Brexit implications and inflated drug prices are main areas of concern, but we have also seen this in prior years where the market bounced back and adapted to change.

Still, even with its challenges, the pharmaceutical industry is maintaining a stronghold. There is promising news on the horizon with biosimilars and patient-centric healthcare trends that are likely to help the market return to a full thriving state. Emerging markets with strong market growth such as China promise more innovative drug development, hopefully leading to more life-saving drug approvals for patients worldwide.


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. The exports of Indian pharmaceutical industry to the US will get a boost, as branded drugs worth US$ 55 billion will become off-patent during 2017-2019. Medicine spending in India is projected to grow 9-12% over the next five years, leading India to become one of the top 10 countries in terms of medicine spending.

The pharmaceutical sector was valued at US$ 33 billion in 2017. The countrys pharmaceutical industry is expected to expand at a CAGR of 22.4% till 2020 to reach US$ 55 billion. Indias pharmaceutical exports stood at US$ 17.27 billion in FY18 and have surpassed US$ 15.52 billion in FY19.

Indias domestic pharmaceutical market turnover reached US$ 18.12 billion in 2018, growing 9.4% year-on-year US$ 17.87 billion in 2017. During 2018, Indian pharma companies received 290 ANDA approvals from US FDA. The country accounts for around 30% (by volume) and about 10% (value) in the US$ 70-80 billion US generics market.

Indias biotechnology industry comprising biopharmaceuticals, bio-services, bio-agriculture, bio-industry and bioinformatics is expected grow at an average growth rate of around 30% a year and reach US$ 100 billion by 2025.

Further investment (as % of sales) in research & development by Indian pharma companies* increased from 5.3% in FY12 to 8.5% in FY18.

The 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.


The company is having strong foothold in the fields of Anti-hypertensive, Anti-histaminic, Anti-asthmatic, Anti-hypercholesterolemia & Anti-diabetic drugs and has been servicing customers both in export as well as domestic markets from many years. The Candesartan Cilexetil and Olmesartan Medoxomil Genotoxic DMF filing is slated during the current calendar year. The USDMFs for already commercialized latest anti-diabetic drugs of gliptin series i.e. Saxagliptin Hydrochloride & Sitagliptin phosphate were filed during the current year whereas USDMF filing for another commercialized product of this category i.e. Linagliptin, is also planned for the current year. Development & transfer of technology of another New molecules of this series i.e. Alogliptin Benzoate & Vildagliptin were completed successfully in the plant. Two new products in the latest anti-diabetic gliflozin series i.e. Dapagliflozin Propanediol & Empagliflozin have been commercialized & their USDMF filing is also slated for the coming year. Furthermore, development of Amorphous Dapagliflozin has also been completed and has been transferred to plant. The commercialization of Canagliflozin Hemihydrate is being planned in the current year. Morepen has also selected Ertugliflozin, another new drug of this series, for development, which seems to have good market potential. These valuable additions would make Morepen1 very strong in Anti-histaminic, Anti-asthmatic, Anti- hypercholesterolemic & Anti-diabetic drugs. The new product additions in aforesaid new categories are expected to bring additional business to the Company.

Apart from this, development of another complex molecules Ursodiol or Ursodeoxycholic acid, for treatment of primary biliary cirrhosis, has been completed by enzymatic technology as a green chemistry initiative and its technology has been transferred to plant.

Morepen is world leader in Loratadine produced in its USFDA approved Masulkhana as well as Baddi facility. The Company has achieved leadership position, of being one of the largest suppliers of block buster drugs i.e. anti-asthmatic drug Montelukast Sodium produced in its USFDA approved Masulkhana along with Desloratadine, another anti- histaminic drug.

Morepen continues to be a prominent player in commercial production of block buster drugs Atorvastatin calcium, Rosuvastatin calcium of Anti-hypercholesterolemic series, Fexofenadine Hydrochloride of anti-histaminic series, Olmesartan & Candesartan of anti-hypertensive series & their intermediates produced in its USFDA approved Baddi facility. Another block buster drugs Sitagliptin, Saxagliptin, Linagliptin of Gliptin series and Empagliflozin, Dapagliflozin Propanediol of Gliflozin series are also produced in the Baddi facility to cater the requirement of various customers for formulation development & for patent free countries.

Morepen wishes to make its hold further strong in anti- histaminic category by developing Rupatadine Fumarate in the coming year.

Morepen has filed five new patent applications for Crystalline Empagliflozin, Novel purification process of UDCA, Novel purification and preparation process of Rivaroxaban, Rupatadine Fumarate Polymorphic Form A & for Pharmaceutical Composition in Form of Aqueous Syrup Comprising Desloratadine and Montelukast Sodium.


Your Company has made considerable progress in both formulations and home diagnostics business segments. Formulation business has recorded a growth of 39% during the year whereas Home - diagnostics business is up by 35% against last year. Blood Gluco monitoring business is up 43% whereas Blood Pressure monitoring business is up by 22%. The Company has cumulatively sold 285 Million Gluco Strips as on close of current year.

Home Diagnostics business continues to make handsome growth year on year and has touched Rs 139.75 Crores in the current year from Rs 51.30 Crores in FY2015. The manufacturing of Blood Glucometers started few years back has made the company self-reliant. It had saved foreign exchange worth USD 3 million during the current year. Further in house production of Glucometer strips was started last year is bearing fruits. The Company taken up in house manufacturing Nebulizers and Thermometers.

The formulation and home diagnostics business has significantly improved during the year and efforts are on to make significant growth in the coming years. The customers having reposed confidence in our branded product portfolio will be offered new products during the coming years and market penetration shall also be improved.


Brand sharing and contract manufacturing business has been significant growth during the current year. Your Company has been able to make inroads across most of the therapeutic areas based on its brand image and quality product delivery.

The tie-up with Vesale Pharma International of Belgium will be offering the entire product folio in immediate future and company expects to have some footprint in Probiotics market in India.

The Company is reaching more markets and servicing large spectrum of people to deliver its wide range of products.


This growth is fuelled by the growing and ageing population in key markets. As per World Population Prospects by United Nations, the worldwide population is likely to cross 9.3 billion by 2050 and around 21% of this population is expected to be aged 60 and above. Apart from ageing and rising population the improvements in purchasing power and access to quality healthcare and pharmaceuticals to poor and middle-class families worldwide also is driving the growth of global pharma industry. Another aspect which is leading this growth is rising focus of pharmaceuticals companies to tap the rare and speciality diseases market. Innovations in advanced biologics, nucleic acid therapeutics, cell therapies and bioelectronics & implantable has attracted investments in the industry by even non-pharma companies which is also driving the global pharmaceuticals industry growth.

On the other hand, adoption of cost control policies along with tightening of rules by governments in key markets are expected to impact the growth prospect of the global pharmaceuticals industry. Pharmaceuticals companies are forced to reduce their research and development (R&D) spending due to slowdown of growth in last few years which is also expected to hamper growth of the global pharma market as new drugs revenue form large part of pharma firms revenue due to exclusivity of the drug. Apart from these generics pharma market is facing decreasing return on investment due to price erosion in key markets which is forcing many firms to look for other avenues and markets to sustain growth.

However medicine spending in India is projected to grow 9-12% over the next five years, leading India to become one of the top 10 countries in terms of medicine spending.

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 such as cardiovascular, anti-diabetes, anti-depressants and anticancers that are on the rise.

Morepen is thinking out of box and targeting totally different segment of drugs, with consideration of Elagolix Sodium in GnRH Antagonist Category, Ivacaftor in Transmembrane conductance regulator category, Febuxostat in Anti-gout category & Vortioxetine Hydrobromide in anti-depressant category. Two more drugs in Anti-depressant category namely Suvorexant & Brexpiprazole, are considered for R&D development. Three more drugs, Vonoprazan Fumarate in Anti-ulcer category, Tofogliflozin in Antidiabetic Category & Topiroxostat in Anti-Gout category may also be considered as future pipeline.


In 2019, drug pricing pressure from regulators, patients, politicians and payers will remain and aggressive negotiation tactics to drive down drug prices are expected. The drug pricing and reimbursement constraints will have the greatest negative impact on the pharmaceutical sector in the years to come. The rise of China, vertical integration and patent expiry of biologics are expected to have an adverse equal impact.

The cost containment measures such as price and reimbursement cuts are leading to tougher market conditions for drug manufacturers and shrinking profit margins. In response to these pressures, companies are reassessing their strategies and market focus. As a result, companies will need to adopt more flexible pricing strategies to maximise return on investment including negotiate earlier with payers.

Despite concerns about a trade war, it is not a surprise that China is still viewed as a huge market opportunity for the pharmaceutical industry. China has a large population with a growing middle class and it has become a leader in R&D innovation for medicine, particularly regenerative medicine and perhaps even gene editing. The big challenge that companies will face is how to best navigate the Chinese regulatory and commercial landscape.

The patent expiry of biologics will have a major impact in 2019, and it is anticipated that the immediate impact will be less than expected, particularly in the US. Although several biosimilars are now approved in the US, the pace of their subsequent launch and market growth remains slow and most biosimilars still face stiff legal battles.

Since the pharmaceutical industry needs to increase efficiency, particularly when it comes to drug development. The pharma companies losing margins and lacking the required capital to continue to run trials or testing. At the same time, Artificial Intelligence (AI) is maturing - turning the hype into more tangible use cases.

The predictive and analytic powers of AI enable companies to make smarter, faster, and more strategic decisions. AI will increase drug development efficiency by not wasting research efforts, for example creating alternative hypotheses for trials by discovering more data to enable drug repurposing. AI will be critical to the future of pharma as the amount of available data and monitoring devices increase. In the short term, it will have a real impact with its ability to collect and aggregate disparate data sets and identify patterns which in turn will generate more insights. The real potential of AI and machine learning is in enabling pharma companies to be smarter, faster, and more cost efficient.


Fixed Assets of the Company are generally well maintained and are in good condition.


Your Companys internal systems are adequate and commensurate with the size of operations. These controls ensure that transactions are authorized, recorded and reported on time. They ensure that assets are safe guarded and protected against loss or unauthorized disposal.

The Internal Audit department carried out audits in different areas of your Companys operations. Post-audit reviews were carried out to ensure that audit recommendations were implemented. Discrepancies and weaknesses, if any, found at various levels are timely and suitably addressed with a view to efficiently manage the companys valuable resources.



Your Company strongly believes that its human resource function is of strategic significance and works towards building a strong employee value proposition for its employees. It provides channels for exceptional career growth, superior leadership development, modern day HR practices, transparent communication, opportunities for continual learning, enhanced well-being and safety and engagement. Its traditions of fair play, equal opportunity and value chain enhancement are alive and progressing. Our professionals receive competitive salaries and benefits. The inter-personal relationship amongst workers, staff and officers has always been pleasant and of peaceful coexistence. As on 31st March, 2019, there were 1,376 permanent employees on the rolls of the Company.

Health, safety and well-being of employees is of paramount importance at Morepen and initiatives including medical plan benefits, health coaching and awareness have been implemented during the year. Employee training and development forms a crucial part of human resource development agenda at Morepen and various interventions including trainings on plant safety and POSH have been undertaken.

Your Directors would also like to take this opportunity to express their appreciation for the hard work and commitment of the employees of the Company and look forward to their continued contribution.


Key financial parameters as on closure of the financial years on the basis of Standalone Financials are as follows;

Particulars FY 2019 FY 2018
Debtors Turnover (days) 62 72
Inventory Turnover 5.66 5.02
Interest Coverage Ratio 14.82 7.08
Current Ratio 0.88 0.70
Debt Equity Ratio 0.47 0.49
Operating Profit Margin 4.26% 5.42%
Net Profit Margin 3.97% 4.66%

During the year, the Return on Net Worth of the Company is 10.31% as compared to the previous financial year 10.42%.


The market data and other information contained herein have been based on the statistics gathered from various published and unpublished sources and the Company does not take any assurance about their authenticity. The Companys Management reserves the right to revisit any of the analytical statements to decide the best course of action for the maximization of Shareholders value in addition to meeting social and corporate obligations.

Certain statements contained in the Management Discussions and Analysis Report pertaining to Companys objectives, strategies, estimates, expectations or predictions, future plans and projections may be forward looking statements within the meaning of applicable laws and regulations and have been made in good faith. The actual results may be affected by many factors that may be different from what is envisaged in terms of future performance and outlook presented above.

For and on behalf of Board of Directors

Sushil Suri
(Chairman & Managing Director)
Place: New Delhi
Date: 27th July, 2019