Business Overview
Contract Development and Manufacturing Organisation
Contract Development and Manufacturing Organisation (CDMO) has emerged as a viable
model for the global pharmaceutical industry. With increasing globalization and focus of
large players on cutting costs and optimizing operations, CDMOs have seen significant
acceptance in the industry worldwide over the past few years. With the growing demand for
generic medicines and biologics, focus on reducing time to market (TTM), the
capital-intensive nature of the business, and the complex manufacturing requirements, many
pharmaceutical companies have identified the potential benefits of contract manufacturing
manufacturing activities. Pharmaceutical companies are also gradually outsourcing research
and development
(R&D) activities to academic and private Contract Research Organisations (CROs) to
reduce drug-development timelines and costs.
Overview of CDMO services
Source: CRISIL MI&A
Cost-cutting, chasing innovation, gaining access to specialised knowledge and
technology, lower capex spends, increasing speed and agility are some of the significant
factors encouraging the pharmaceutical companies to outsource their development and
manufacturing activities. As per CRISIL Report, in value terms, the global CDMO market
grew at a CAGR of 7% from approximately US$ 99 Billion in 2016 to approximately US$ 135
Billion in 2021. Compared to a 4-5% CAGR growth of the global pharmaceutical industry
across the same period, the CDMO industry grew at a faster pace, indicating increase in
willingness for outsourcing. Going forward, the global CDMO industry is expected to grow
at a CAGR of 6-7% from 2022 to 2026 to reach US$ 170-180 Billion by 2026.
Using acquisitions to expand business capabilities, CDMOs are able to deliver
technically advanced services at scale. CDMOs are expanding at the edges of the value
chain, becoming active in clinical trial services as well as increasing their focus on the
pre-clinical research stage by selected acquisitions. They are also investing in
developing specialised manufacturing capacities for example novel modalities of cell
therapies, gene therapies or mRNA therapies and innovative vaccines for viral vectors,
cell manipulation, as well as nucleic acids and lipid-based formulations. Thus, CDMO
market is growing not just by manufacturing outsourcing revenue but also by catering to
specialised manufacturing capabilities and focusing on research and development area
pharmaceutical value chain.
Increasing demand for diversified sourcing for supply stability
Regulatory authorities across the world have strongly recommended pharmaceutical
companies to secure a source for stable drug production. For example, the US FDA requested
pharmaceutical companies to establish a contingency plan, believing that supply stability
cannot be guaranteed in case the drug is manufactured at a single site. Accordingly,
pharmaceutical companies are making use of CDMOs to run multiple manufacturers for a
single drug.
Consolidation in CDMO industry
Many pharmaceutical companies are seeking advanced supply chain opportunities in order
to optimise the development of their molecule. This has led to a lot of firms establishing
a partnership with a CDMO as opposed to investing internally infrastructure. Industry
consolidation has been partly driven by the desire to diversify capabilities, so that
CDMOs can effectively provide customers with comprehensive end-to-drug development and
manufacturing services, whilst also reducing operational costs. This is because drug
developers are keen to progress their drug product to market as quickly as possible, with
minimal supply chain complexity. Additionally, changing service provider mid-development
incurs heavy expenditure and so full-service providers are often seen as way to decrease
overall costs for drug developers.
Global Complex Generics Market
As per the definition by US FDA, complex generics are products that have complex dosage
forms, or routes of administration, or are complex drug-device combination products.
Generics of complex brand name drugs (i.e., reference listed drugs) are usually more
difficult to develop and requires deep understanding and development process which has
often acted as a key entry barrier for players entering the complex generic space. As per
Crisil Report, the global complex generics market was valued at US$ 65-70 Billion in 2022,
growing at 11.7% CAGR from 2016 to 2022. Further, it expects this market to grow at a CAGR
of 10-12% during 2022-26 to reach US$ 100-110 Billion by 2026. Rising R&D trends,
increase in novel drug delivery systems, the growing demand of shifting toward the
development of complex molecules used in novel formulations and targeting niche
therapeutic areas are likely to boost the global complex generics market. In the global
complex generics market, the complex hospital generics constitutes majority of the market
with share of approximately 70-80%, with retail forming the rest. Anaesthesia, Pain
management, Blood-related, Anti-infective are some of the key therapy areas in the complex
hospital generics market.
Review and outlook of global complex generics market
(US$ Bn)
Inhalation Anaesthetics like sevoflurane, isoflurane, desflurane, and halothane,
are the most-used agents in practice today. They are used for induction and maintenance of
general anaesthesia. As per IQVIA data (MIDAS MATR December 2022), the cumulative global
market size of sevoflurane, isoflurane, desflurane, and halothane was about US$ 1.05
Billion, with sevoflurane constituting about 84% of this market. US and China are the two
largest markets for these four products, with about 48% of the global market share. Due to
high-entry barriers such as high initial investments for supplying medical devices such as
vaporisers, as well as dedicated production facilities for raw materials and finish dosage
products, competition is limited in inhalation anaesthesia market as compared to
traditional generics. Abbvie, Baxter, Hengrui, Piramal Pharma and Lunan are amongst the
few companies who have launched the generic versions of the inhalation anaesthesia drugs.
Intrathecal therapy as an area has gained prominence in the recent years. In
intrathecal therapy, the drug is injected into tis the brain and spinal cord. Some of the
key molecules in the thefluid-filledspacebetweenthethinlayersof segment includes Baclofen
injection and Morphine Sulfate injection. As per IQVIA data (MIDAS MATR December 2022),
the US market of Baclofens pre-filled syringe and vial was about US$ 31 million. The
development of generics in this critical therapy area has been important in terms of
providing treatment option to patients suffering from spasticity (involuntary muscle
contractions that cause stiffness) and dystonia (muscle contractions that can result in
twisted or abnormal postures).
High-entry barriers in intrathecal therapy due to the complexity in administering the
drug
Indian OTC Industry
As per the definition of US FDA, Over-the-Counter (OTC) medicines are the drugs which
are legally allowed to be sold by pharmacists without any need for a prescription. These
drugs can be purchased by consumers from any pharmacies, retail store, supermarkets and
online pharmacies without a prescription of register medical practitioner and retailers
also dont need drug licence to sell these medicine. OTC market also includes products in
the consumer care segments such as skincare, hygiene, self-care and preventive care. The
usage of OTC products has grown steadily in the last few years in India. As per Crisil
Report, Indias OTC drug market stands at H310 Billion in FY2022, having grown at a rate
of 7.9% CAGR between FY2017-2022. It is expected to further grow at 11.5-12% CAGR between
FY2022-27 and reach H535-545 Billion by FY2027, driven by easy availability, increased
affordability, and awareness. These drugs allow faster and cheaper access to healthcare;
however, their misuse and adverse health effects are a matter of concern.
Some of the common ailments which witness high usage of OTC products are acidity,
indigestion, constipation, diarrhoea/dehydration, cold and cough, analgesics, rashes/ ring
worm, acne, feminine/intimate hygiene, cuts/burns/ wounds, skincare,
vitamins/minerals/supplement, eye strain, sleeplessness, smoking control, etc.
Indian OTC drugs market size
(INR Bn)
Company Overview
Piramal Pharma Limited is a pharmaceutical company with global operations, providing
end-to-end pharma services to its customers and a portfolio of differentiated pharma
products across a domestic and global distribution network The Company has a worldwide
presence with (i) 17 development and manufacturing facilities across India, United Kingdom
and North America; (ii) commercial presence in over 100 countries; (iii) 6,295 full-time
employees across the world with 4,644 in India and 1,651 outside India; and (iv) 21
subsidiaries with 20 of such subsidiaries incorporated outside
India in, among others, South Africa, Japan, Italy, UK, Canada, Australia and US. PPL
operates under three business verticals (i) Piramal Pharma Solutions (PPS), an integrated
Contract Development and Manufacturing Organisation (CDMO); (ii) Piramal Critical Care
(PCC), a Complex Hospital Generics (CHG) business; and (iii) India Consumer Healthcare
(ICH) business, selling Over-The-Counter (OTC) products. In addition, PPL has a joint
venture (Allergan India Private Limited) with Allergan (now AbbVie), one of the market
leaders in ophthalmology in the Indian formulations market. PPL holds 49% of the paid-up
equity share capital in the joint venture. Further, PPL has a minority investment of
33.33% in Yapan Bio that operates in the biologics/ bio-therapeutics and vaccine segments.
Contract Development and Manufacturing Organisation
Piramal Pharma Solutions, an integrated Contract Development and Manufacturing
Organisation, provides integrated drug discovery, development, and manufacturing
servicesforbothdrugsubstances.e. ingredients (APIs) and drug products, i.e. formulations
across the life cycle of a molecule. PPS has an integrated network of facilities across
India, UK and North America that provides development and manufacturing capabilities in
areas such as highpotencyAPIs,antibodydrugconjugates(ADC), sterile injectable and hormonal
products. Companys associate, Yapan Bio also has capabilities in the
biologics/bio-therapeutics and vaccine segments.
Under the discovery services, PPS offers a range of contract research services
including medicinal chemistry, in-vitro ADME services, non-GMP kilo lab and analytical
support services to support drug discovery activities of its customers. It also clinical
development services from pre-clinical stage to phase
III for various dosage forms. Its drug development offerings include services in the
areas of route scouting, process R&D, pre-formulation studies, pharmaceutical
development analytical support services, regulatory services and clinical services.
Further, PPS also provides commercial manufacturing of on-patented as well as off-patented
products.
Apart from the CDMO services, PPS also has a generic API division that offers over 30
off-patented APIs for global markets. Additionally, it also manufactures and supplies
vitamins and minerals ingredients and premixes for human and animal nutrition. These
products are sold to pharmaceutical, nutraceutical, food and beverage, personal care,
animal feed industries and government organisations.
PPS has a diverse customer base of over 500 customers comprising global innovator
pharma companies, emerging biopharma companies and generic pharma companies. It has a low
revenue concentration with its top five customers contributing about 25% of its total
revenue from operations from the CDMO business. During Financial Year 2023, 77% of PPS
revenue from operations were achieved from regulated markets such as US, Europe and Japan.
Discovery, development and commercial manufacturing contributed towards 5%, 30% and 65%,
respectively of the revenue from operations from the CDMO business during Financial Year
2023.
Over the years, the Company has had a successful track record of acquiring multiple
capabilities and expanding development and manufacturing capacities through customer-led
brownfield expansions. The Company leverages its ‘end-to-end model to offer
integrated services
(services that involve more than one site) to its customers with a compelling value
propositions such as reduced time-to-market, reduced operational chain costs. The Company
has executed over 100 integrated projects since its incorporation.
PPL is committed to meeting the requirements and expectations of it patients,
customers, regulators and partners. Its facilities are inspected by various regulatory
authorities across the worlds such as US FDA, Medicines & Healthcare Products
Regulatory Agency, UK, Therapeutic Goods Administration, Australia and Pharmaceuticals and
Medical Devices Agency, Japan. Additionally, the facilities also undergo customer audits
throughout the year. In order to maintain a sustainable and consistent quality system at
all the development and manufacturing facilities, the Company has several internal
policies and statement of purpose outlining criteria to ensure site quality health,
quality of raw materials and key starting materials. Further, it trains its employees to
ensure safe handling of equipments and chemicals. The policies are periodically updated
from time to time.
FY2023 Performance
The CDMO business grew 7% YoY, impacted by slowdown in biotech funding, delayed
decision making by the customers and muted demand in existing generic API and vitamins
portfolio. Further, the profitability of the CDMO business significantly impacted by
inflationary pressures caused by higher utility cost, raw materials prices and wage
inflation, along with sub-optimal utilization levels at some of its leading to under
absorption of fixed costs. To offset these challenges, the Company has undertaken
initiatives for cost optimisation, strategising procurement and operational excellence.
While the Company witnessed slower order bookings in the first nine months of the
financial year, it picked up significantly in the last quarter, which should help drive
revenue growth.
During the financial year, the Company also went live with capacity expansion at
Riverview facility in US and peptide facility at Turbhe, India. The Company also opened a
new In-Vitro laboratory at PDS Ahmedabad facility. Further, the capacity expansion at
Grangemouth facility in the UK is also expected to go live in H2FY24, which should help in
strengthening its position in the anti-body drug conjugate segment. These capacity
expansions would be an important driver of revenue growth in the near term.
In terms of quality and compliance, FY2023 was a successful year for the Company, as it
cleared 36 regulatory inspections and multiple customer audits. During the year, four of
the Companys facilities underwent US FDA inspections, with two of them receiving zero
observation. For the remaining two facilitates with VAI, the Company is in receipt of an
EIR and the inspections are closed satisfactorily.
2x
Growth in number of commercial products under patent
(9 in FY2019; 18 in FY2023)
Complex Hospital Generic
Piramal Critical Cares (PCC) complex hospital generics portfolio comprises over 35
hospital-focused products in the areas of inhalation anaesthesia, injectable anaesthesia
and pain management, intrathecal therapy and other injectable. CHG products are sold in
over 100 countries, to more than 6,000 hospitals with direct sales presence in US, UK,
Germany, France and Italy, and through distribution partners in other geographies. These
products are used in hospitals, surgical centres, and veterinary clinics. Further, CHG
also has product pipeline of 25+ SKUs in various stages of development which will be an
important driver of future growth.
Capabilities in complex hospital generic products are complex and capital intensive.
Due to high entry barriers such as high initial investments for supplying and sustaining
medical devices such as vaporizers, as well as dedicated production facilities,
competition remains limited as compared to traditional generics. Further, strict quality
assurance system, extensive regulatory experience in establishing marketing and
distribution relationships such as with GPOs (Group Purchasing Organisation) create
hurdles for less experienced competitors and new entrants.
The Company has leading positions* in some of its products/ segments, such as:
• The fourth largest inhalation anaesthesia company globally as per US$ value for
a combined market of sevoflurane, desflurane, isoflurane and halothane
• The leading player in sevoflurane in the US market with value market share of
38.92%
• Number one rank in the US Baclofen pre-filled syringe and vial market with the
Companys brand Gablofen having 78.28% value market share
• The Companys brand Fentanyl (ampoules) is the number one ranking brand by US$
value in the Japan, South Africa and Indonesia markets
* Source: IQVIA MIDAS MATR December 2022
The Company is vertically integrated in inhalation anaesthesia with Dahej (India)
facility manufacturing the key starting material, and Digwal (India) facility and
Bethlehem (US) facility manufacturing APIs and drug products. Given the demand for
inhalation anaesthesia products, the Company is expanding its manufacturing capacities
which will drive growth in the future.
CHG geographic revenue breakup
FY2023 Performance
The CHG business grew 14% YoY. Growth was mainly driven by inhalation anaesthesia sales
in the US and ROW markets with volume growth driving market share gains. To keep up with
the growing demand for inhalation anaesthesia products, the Company is expanding its
capacities at India and the US. In the intrathecal portfolio, the Company continued to
command leading market share in the US. However, growth in the injectable anaesthesia and
pain management portfolio was impacted by scale up challenges at new CMOs. The Company has
addressed the same, and the production ramped up towards the end of the financial year and
should lead to better supplies in FY2024.
During FY2023, the Company launched three new products with 10 SKUs in the US and
European markets. Further, the Company has a new product pipeline of 25+ SKUs in various
stages of development.
India Consumer Healthcare
Companys ICH business has a diverse portfolio of over 30 OTC products across
categories of analgesics, skin care, VMS, kids wellness, digestives, womens health, and
hygiene and protection categories, with well-known brands such as Littles, Lacto
Calamine, I-Pill, Polycrol, and Tetmosol. The Company also has a manufacturing and
distribution agreement with Bayer Pharmaceuticals Private Limited (BayerR) for their
brands such as Saridon, Supradyn, Becozym and Benadon, among others. The Company sells its
products through a wide distribution network where it partners with various distributers
who in turn supply to several chemists, grocers, modern trade, and kids stores across the
country and are listed on many e-commerce portals. PPL has also launched its own
direct-to-customer (D2C) platform, Wellify.in. The Company has 100% tech-enabled sales
coverage and leverages analytics to enhance the productivity of its field force.
The business operates on an asset-light model with product portfolio such as baby
diapers, baby wipes, medicated soap, lacto lotions, antacid liquids and other products
being manufactured at the third parties. The Company has also entered into agreements with
media houses to manage
Distribution network its social media platforms and promote its brands- through
celebrity endorsements and trade promotions. The media spends are mainly for the power
brands which comprise of brands such as Lacto Calamine, Littles, Polycrol, Tetmosol and
I-range which contributed about 42% of total ICH revenue from operations during FY2023.
FY2023 Performance
The ICH business grew 6% YoY (like-to-like growth was 16%) primarily driven by robust
growth in the power brands and new product launches. During the financial year:
• Power brands grew by 37% YoY driven by continuous efforts towards brand building
and trade promotions.
• Launched 26 new products and 37 new SKUs. New products launched since April 2020
now contributes to 18% of the consumer business sales.
• E-commerce sales grew at over 40% YoY rate and contributed 6% to ICH revenues
• Littles grew over 50% YoY
• Lacto Calamine grew at more than 40% YoY powered by new launches and excellent
traction on e-commerce
• The Company launched its own D2C platform, Wellify.in, tostrengthen its
e-commerce presence
Financial Review
(INR Crore)
| Particulars |
FY2023 |
FY2022 |
YoY Change |
| Revenue from operations |
7,081.55 |
6,559.10 |
7.97% |
| Other Income (Net) |
225.11 |
275.80 |
-18.38% |
| Total Income |
7,306.66 |
6,834.90 |
6.90% |
| Expenses |
|
|
|
| Cost of Materials Consumed |
2,703.30 |
2,451.24 |
10.28% |
| Employee benefits expense |
1,896.35 |
1,588.83 |
19.36% |
| Finance Costs |
344.18 |
198.25 |
73.61% |
| Depreciation and amortisation 676.69 586.18 15.44% |
| Other Expenses (Net) |
1,853.66 |
1,569.37 |
18.11% |
| Total Expenses |
7,474.18 |
6,393.87 |
16.90% |
| EBITDA |
853.35 |
1,225.46 |
-30.36% |
| Profit/(Loss) before share of net profit of associates, exceptional items and tax |
-167.52 |
441.03 |
-137.98% |
| Share of net profit of associates |
54.33 |
59.03 |
-7.96% |
| Profit/(Loss) after share of net profit of associates before exceptional item and tax |
-113.19 |
500.06 |
-122.64% |
| Exceptional |
-6.96 |
-15.08 |
53.85% |
| Profit/(Loss) after share of net profit of associates and before tax |
-120.15 |
484.98 |
-124.77% |
| Tax Expense |
66.31 |
109.02 |
-39.18% |
| Net Profit/(Loss) after tax |
-186.46 |
375.96 |
-149.60% |
FY2023 compared to FY2022
Total Income
Revenue from operations
The Companys revenue from operations increased by 7.97% to 7,081.55 Crores in the
Financial Year 2023 from 6,559.10 Crores in the Financial Year 2022, primarily driven by
growth in:
• CDMO business due to growth in North America facilities and Discovery services,
• CHG Business driven by Inhalation Anaesthesia sales, particularly Sevoflurane
with healthy growth momentum particularly in the US markets and,
• India Consumer Healthcare business driven by strong growth in power brands and
strong sales traction in the D2C and e-commerce channel.
Total Expenses
Total expenses increased by 16.90% to 7,474.18 Crores in Financial Year 2023 from
6,393.87 Crores in Financial Year 2022. This was primarily due to increase in cost of
goods sold, employee benefits expenses, finance cost, depreciation and amortisation cost
and other expenses.
Cost of goods sold
Cost of goods sold increased by 10.28% to 2,703.30 Crores in Financial Year 2023 from
2,451.24 Crores in Financial Year 2022. This was primarily due to higher sales during the
period and one time impact of inventory margin on account of demerger of 68 Crores.
Employee benefits expense
Employee benefits expense increased by 19.36% to 1,896.35 Crores in Financial Year 2023
from 1,588.83 Crores in
Financial Year 2022. This was primarily on account of increment, headcount,
annualisation impact of cost for positions recruited previous year and foreign currency
fluctuation impact.
Finance costs
Finance costs increased by 73.61% to 344.18 Crores in Financial Year 2023 from 198.25
Crores in Financial Year 2022. This was primarily due to increase in average borrowings to
fund capital expenditure and increase in interest rate.
Depreciation and amortisation expenses
Depreciation and Amortisation expenses increased by 15.44% to 676.69 Crores in
Financial Year 2023 from 586.18 Crores in Financial Year 2022. This was primarily on
account of capitalisation during the year and foreign currency fluctuation impact.
Other expenses
Other expenses increased by 18.11% to 1,853.66 Crores in Financial Year 2023 from
1,569.37 Crores in Financial Year 2022. This was primarily on account in marketing spend
in the consumer product business, increase in operating expense related to additional
capacities, impact of inflation and foreign currency fluctuation.
Profit/Loss for the Year
The loss for the Financial year 2023 stood at 186.46 Crores compared to profit of
375.96 Crores in Financial Year 2022. This is primarily due to increase in total income by
471.76 Crores offset by increase in total expenses by 1,080.31 Crores on account of higher
cost of goods sold, employee benefits expense, finance cost, depreciation and amortisation
expense and other expenses.
|
As at |
|
| Key Balance Sheet Items |
|
|
|
Mar23 |
Mar22 |
| Total Equity |
6,773.50 |
6,696.60 |
| Net Debt |
4,784.33 |
3,657.28 |
| Deferred Consideration |
11.13 |
89.91 |
| Total |
11,568.96 |
10,443.79 |
| Net Fixed Assets |
8,887.18 |
8,051.52 |
| Tangible Assets |
4,441.45 |
3,715.74 |
| Intangible Assets including goodwill |
4,445.73 |
4,335.78 |
| Net Working Capital |
2,325.69 |
2,056.85 |
| Other Assets* |
356.09 |
335.42 |
| Total Assets |
11,568.96 |
10,443.79 |
*Other Assets includes Investments & Tax assets
Equity
The net worth as on March 31, 2023, increased to 6,773.50 Crores from 6,696.60 Crores
as of March 31, 2022, primarily due to foreign currency translation impact.
Net Debt
The net debt as on March 31, 2023, increased to 4,784.33 Crores from 3,657.28 Crores as
of March 31, 2022, primarily due to increase in borrowing to fund capital expenditure.
Net Fixed Asset
The net fixed asset as on March 31, 2023, increased to 8,887.18 Crores from 8,051.52
Crores as of March 31, 2022, primarily due to capacity additions at various sites such as
Riverview, Turbhe, In-Vitro facility creation at Discovery services, etc.
Net Working Capital
The net working capital as on March 31, 2023, increased to
2,325.69 Crores from 2,056.85 Crores as of March 31, 2022, primarily due to strategic
buildup of inventory.
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