MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Economic outlook
India’s economy has now become the fifth-largest in the world on nominal GDP (US
dollars) and is set to become the second-fastest growing economy in FY 2023, despite the
slower global demand and tightening of monetary policy to manage inflationary pressures.
The Indian economy is projected to record a relatively healthy Gross Domestic Product
(GDP) growth of 6.1% (Source: IMF) in FY 2023 and is showing signs of moderation.
GDP growth is expected to decline to 5.7% in FY 2024, as exports and domestic demand
growth moderate. Inflation will slow private consumption but moderate along with improved
global conditions, to accelerate growth to 6.9% in FY 2025. The key drivers for
medium-term growth are increasing public sector expenditure on infrastructure, supply-side
and financial reforms (GST and better tax compliance, bankruptcy court, bad bank, etc.),
India’s digital architecture that includes the universal payment systems, nationwide
identification framework, distribution of welfare schemes, healthcare official data stack
intended to solve social, inclusion needs, and logistics and favourable demographics are
expected to set the economy on the path of recovery.
Retail inflation prints peaked in September 2022 and have since begun to ease, helped
by favourable base effects. Inflation is expected to remain sticky in the coming months
before gradually rolling off in 2023-24 as growth slows and input price pressure abates.
The USD/C s expected to consolidate between 80 and 84 over the next two years.
Industry update
The Indian pharmaceutical industry has been growing at an average of ~10% over the past
five years. The industry growth was severely impacted in 2020 owing to the COVID-19
pandemic. In 2021, however, the growth reached spiked to 18%, with higher sales in acute
care therapies and COVID-related medicines. In 2022, the industry grew by 6.5%, adding
nearly Rs.12,000 crores of incremental sales. The demand for acute therapies increased,
while most chronic therapies like diabetes and cardiovascular treatments remained
relatively steady.
The IQVIA Prognosis Report (2022) projects that the Indian pharmaceuticals market is
expected to grow at a CAGR ~9.2% (+/-2%) between 2021-26 and reach a market size of
Rs.2,951 billion by 2026. Acute therapies will continue to drive growth, along with an
increase in the incidence of non-communicable diseases (NCDs). Improvements in the drug
registration process will make India more attractive for the early launch of innovative
drugs. The rapid expansion of the e-pharmacy sector, expansion of co-marketing agreements,
coupled with the introduction of new OTC regulations will also be a growth driver till
2026.
Projected size of Indian Pharmaceutical Market by 2026
India advantages
Growth in partnerships and co-marketing agreements: Partnerships and co-marketing
agreements between Indian and foreign companies are expected to increase, reflecting
benefits for both originators and local partners. Such alliances will drive rapid and
broader market penetration for new brands while increasing sales for more established
products.
Expansion of e-pharmacy and chain businesses:
E-pharmacy sales, which were already rising rapidly, saw a strong surge in demand
during the second wave of the pandemic, registering more than 25% growth in 2021. The
rapid growth of the sector is encouraging investments from large businesses, and
consolidation of smaller players; however, it will lead to increased competition and
pressure on drug prices.
Increase in health insurance coverage: The central government’s Ayushman
Bharat - Pradhan Mantri Jan Arogya Yojana (ABPMJAY) health insurance scheme will drive
healthcare access, affordability and improve health outcomes over the forecast period. The
Aap Ke Dwar Ayushman’ campaign, to facilitate door-to-door beneficiary mobilisation,
identified over 40 million people under the scheme.
Low cost of production: The presence of various generic drug companies is a major
factor for India to establish a leadership position in the global pharmaceutical sector.
Furthermore, India provided for ~40% of the generic demand in the United States and 25% of
all medicine in the United Kingdom. India is the worlds largest supplier of generic
medications, accounting for ~20% of the worldwide supply by volume and supplying about
half of the global vaccination demand. This is based on India Brand Equity
Foundation’s Pharmaceutical Industry Report published in March, 2022.
Company performance
We are multinational healthcare organisation with the purpose of "Chasing the
miracles of science to improve people’s lives". In India, we have been at the
forefront of providing patients with cutting-edge, cost-effective medications for the past
75 years. Our portfolio includes a wide range of medications and dietary supplements for
the treatment of heart disease, thrombosis, epilepsy, allergies, infections, and diabetes
(both insulins and oral medications).
Insulin for diabetes
Diabetes portfolio
India is referred to as the diabetes capital of the world. However, Sanofi, with its 70
years of legacy, is committed to make a change and treat people with diabetes by providing
high-quality medicines and services. Our differentiated offerings give us a unique
position as the only company with a substantial presence in oral anti-diabetes drugs and
insulin.
The likely price rationalisation of our flagship brand Lantus? would make this
world-class insulin more affordable for people with diabetes in the extra rural segments
as well.
Our increased footprint in the market followed through with our renewed marketing
strategies, would ensure that we further cement our leadership position in the diabetes
segment in India.
To secure our future leadership in the coming years, we would continue to enhance our
product portfolio. In 2022, we received approvals and positive comments for three new
products, which we would launch over the foreseeable future and make our offerings more
comprehensive for clinicians. In line with our India for India strategy, we have
researched and developed insulin injection devices like the TouStar? pen, with a
dedicated cartridge that is available only in our country.
We would continue to invest in science through clinical studies and research to get a
higher level of understanding of the diabetes paradigms in our country. Our recently
concluded longitudinal RWE (Landmarc) data saw multiple publications in Indian and
international scientific meetings on diabetes and is a reference document on diabetes
epidemiology and management.
Toujeo?, our U300 insulin, doubled its sales in 2022, in the first full year post the
launch of Toujeo? cartridges.
Patient support programmes
As leaders in this segment, we recognise how capability and capacity building among our
stakeholders is crucial to reduce the burden of diabetes in our country. Thus, it is
incumbent on us to shape the diabetes ecosystem and manage it sustainably. Our flagship
doctor education programs like ICON and B-School are led by centres of excellence and aims
to improve the physician capability in managing complex diabetes situations.
Our commitment to patients is underlined by our longest patient support programme:
Saath 7. It touches the lives of more than 100,000 patients each year, in every major city
of India, by educating and hand-holding them though their insulin journey. Through this
process, they are provided with solutions, better education and increased medical
adherence to help them achieve better therapeutic outcomes.
Through our customer-awareness initiative ‘INTOLIFE’ (www.intolife.in),
we activated a series of social media programmes to educate people about various aspects
of diabetes management. Our Sanofi Campus programme keeps physicians updated on the latest
trends in diabetes management and is gaining traction towards being the go-to place for
diabetes clinical information.
*More details of the success of this initiative are available on (www.intolife.in)
Digitalisation
Digitalisation is an acknowledged change in the way we all live and interact with each
other. Thus, we leverage our digital experience by unobtrusively increasing reach and
intensity with doctors and patients alike, enabling them to consume information at their
convenience and in formats of their choice.
Digitalisation and evolution of market economies have resulted in a large imprint of
e-commerce and modern trade in our distribution pipelines, and we now do 20% of our
business with these emerging stakeholders.
We shall continue to partner with them to get insights of the market and patient
purchasing patterns and behaviours which would allow us to fine tune our approach as we
move forward. In 2022, we collaborated with one of the leading e-pharmacy players to
jointly run a programme for making our insulin administration pen device accessible free
of cost to patients newly initiated on our Insulin.
The year 2022 also saw us getting regulatory approvals and positive regulatory comments
for the future launches in the diabetes segment which shall augment our current portfolio
in 2023. Our longitudinal RWE (Landmarc) data saw multiple publications in Indian and
international scientific meetings on diabetes. We also participated in World Diabetes Day
2022’ - a campaign targeted towards access to diabetes care.
Oral diabetes
The oral anti-diabetes drug portfolio maintained its competitive position at #5 in an
extremely fragmented market. The newest line extension, Amaryl MV recorded market-beating
growth and has consolidated its rank in the represented category. An innovative content
strategy of unbranded digital connect allowed our teams to break the cluster and engage in
insightful discussions with our HCPs. Our digital outreach initiative - Sanofi connect -
with our external partners, reaches out to 10,000 doctors not met by our field force and
shown initial success programme. Dedicated efforts were undertaken towards conducting
medico-marketing initiatives.
Consumer healthcare portfolio
Allergy
Allegra? and Avil?, our flagship brands, are the leaders in the allergy category.
With a high double-digit growth rate, they account for 8% share of the market. Allegra?
Nasal portfolio presents major growth opportunities and is driven by Allegra? M,
Allegra? Nasal Spray and Allegra? Duo Spray.
The burden of allergies in India has doubled in the past decade and pollution has been
identified as a key aggravator. Allegra? played a leadership role in driving awareness in
this area with the HCPs, basis the available evidence linking pollution with allergies. We
are on the way of enhancing awareness in this area by engaging with local and internal
experts in various scientific forums.
Apart from this, Allegra? also has developed a strong Physician outreach initiative by
deploying a robust omnichannel activation. This has helped us garnering considerable brand
visibility amongst --100,000 Consulting Physicians across India.
Physicians reached for Allegra? through the omni-channel approach
Nutritional Health
DePura Kids outperformed the market growth in 2022 with a strong double-digit growth
and became the #1 brand in vitamin D kids category. DePura Kids is a Nano Vitamin D brand
with published evidence which have helped gain the trust of paediatricians. On World
Vitamin D Day, Sanofi conducted various activities to spread awareness on the importance
of optimal vitamin D levels for a healthy lifestyle. Apart from this, D3 Expert Cross
Talks were conducted across India to drive advocacy for Nano Vit-D and DePura Kids at key
specialties including Pediatricians, Neonatologist and Endocrinologists. On DePura Kids
60K, there were HCP engagement initiatives for Orthos and Gynecologists driving the
benefits of our Nano Vit-D formulation.
Brand in vitamin D kids category
Pain care
Combiflam?, our heritage brand in Pain Care continued its growth journey and achieved
the milestone of C 200 crores in 2022. Multi-layered channel engagement campaigns led to
fulfil demand and continue its position as the preferred choice in pain management. Nearly
3000 wholesalers were engaged during the year to drive this business with various trade
marketing campaigns. Various initiatives were also undertaken to enhance our indirect
distribution coverage throughout the year.
Wholesalers engaged for driving volumes
Central Nervous System (CNS)
Our epilepsy portfolio recorded good growth during the year, with Frisium? registering
a double-digit growth. Frisium? continues to be the most prescribed brand across all
anti-convulsants in India. The CNS portfolio maintained its market share in epilepsy,
through regular digital customer connects, market-shaping activities and academic
engagements. A world-class HCP education and certification programme was developed in
collaboration with Boston University School of Medicine. Despite being the 2nd most common
neurological condition and India being home to 1 out of 6 people suffering from epilepsy
worldwide, epilepsy awareness in India is limited. Keeping this in mind, we launched a
mega public awareness initiative: DARE (Drive for Awareness & Right information on
Epilepsy), coinciding with ‘National Epilepsy Awareness Month’ (November 2022).
We further partnered with leading neurologists and the cricket legend, Jonty Rhodes to
spread awareness about the ailment via digital and radio channels. We are planning to
strengthen epilepsy management in the paediatric age group with the launch of a new SKU in
2023. In 2022, Sanofi published the first Indian data on clobazam usage in epilepsy
management to strengthen our commitment towards patient benefits.
It was then presented in the National Conference of Neurologists.
GEMS portfolio
Thrombosis
In the anti-coagulant space, Clexane is the standard of care for more than 25 years.
Clexane? continued to strengthen its leadership position led via the vision of ‘VTE
free India’. We stand committed to raising awareness for the risk of Venous
Thromboembolism (VTE) among hospitalised patients. The brand focused on providing trusted
solutions to HCPs in thrombosis care among medical and surgical settings by collaborating
with International scientific associations like Royal College of Surgeons and American
College of Chest Physicians. Several first-of-its-kind initiatives like podcasts titled
‘VTE Unplugged’ were rolled out throughout the year which drove significant
traction among HCPs. The brand also took another giant leap towards driving patient
education around VTE riskfactors on World Thrombosis Day by driving a well-orchestrated
omnichannel experience through different channels.
Cardiology
Cardace?, the flagship brand in cardiology with more than 28 years of Indian clinical
experience, continues to be the leading Angiotensin Converting Enzymes (ACE) inhibitor
brand. The brand is working towards strengthening the Post Ml Protection Space for better
cardiovascular outcomes and addressing underutilisation of ACE inhibitors among these
patients. A focused omnichannel approach was put in place which helped improve brand
preference for the Cardace? group in the post Ml space.
Leading Angiotensin Converting Enzymes (ACE)for28 Years
Antibiotics
Targocid? is backed by real-life experience of over 20 years and continues to commit
towards superior patient safety outcomes. In the resistant Gram+ segment, Targocid? is a
preferred anti-MRSA agent in critically ill patients amongst all stakeholders and
continues to lead this space.
Targocid?’s performance was negatively impacted in 2022 due to a long period of
non-availability and supply issues. Moving ahead, the priority for Targocid? will be to
focus upon early initiation of antibiotics to reduce mortality among hospitalised
patients.
Financial review
During the year ended December 31 2022, the Company registered Revenue from Operations
of Rs. 27,701 million as against Rs. 29,566 million in the previous year, representing
de-growth by 6%.
Net revenue from India, which constituted 84.11% of Net Revenue from Operations,
decreased from Rs. 25,535 million in 2021 to Rs. 23,421 million in 2022, reflecting a
de-growth of 8.76%.
The Profit before Tax decreased from Rs. 12,576 million to Rs. 8,643 million,
representing a de- growth of 31.27% for the year ended December 31 2022. The Profit after
Tax decreased from Rs. 9,444 million to Rs. 6,206 million, representing a de-growth of
34.28% for the year ended December 31 2022. Revenue and Profit are not comparable due to
the divestment and exceptional items involve between the period.
Details of changes in key financial ratios are explained in the table below:
| Particulars |
2022 |
2021 |
| Operahng profit margin (%) |
24.37 |
23.92 |
| Net profit margin (%) |
21.84 |
31.16 |
| Debtors’ turnover ratio |
20.37 |
20.33 |
| Current ratio |
2.17 |
2.85 |
| Inventory turnover ratio |
2.97 |
3.44 |
| Interest coverage ratio |
NA |
NA |
| Debt equity ratio |
NA |
NA |
| Return on Net Worth (%) |
67.88 |
56.59 |
Manufacturing operations
The manufacturing facility in Goa has prioritised safer, healthier, and
environment-friendly working practices with strong quality systems. The manufacturing
operations are heavily regulated by governmental health authorities around the world,
including Regierungsprasidium Darmstadt - Germany, USFDA, Australia - TGA, WHO, Health
Canada, NMRA - Sri Lanka and by many regulatory approvals as per the Indian legislations.
These regulations endorse the quality and safety of the products manufactured. We
incorporate various digital capabilities for data integrity through automation of the
manufacturing process, removal of physical leaflets and implementation of the QR Code.
The manufacturing operations at the Goa site are done in compliance with local and
global regulatory norms, and the limits of any environmental exposures are in line with
these standards. The waste generated from manufacturing operations are disposed as per the
local regulations /
Sanofi guidelines.
Our customer service level has been >98% in 2022 and we plan to maintain the same.
The manufacturing process is done basis market demand to ensure Sanofi products are not
out of stock. The Goa site has state-of-the-art automation systems for the manufacturing
process, which ensures closed loop operations with minimum manual material handling. The
automation is further being enhanced to adhere to DIRA (Data Integrity Risk Assessment)
compliance and reduction of manual errors. The site at Goa is a strategic sourcing site
for the Sanofi Group and is continuously assessed for newer sourcing opportunities in the
area of tablet formulations.
We continue to consolidate the network of CMOs (Contract Manufacturing Organisations)
for better cost efficiency and management of third-party sites. These third-party
manufacturers are qualified at the same level as the owned sites of the Company, in terms
of customer service, quality systems and safety. They are regularly audited and supported
by a team of specialists.
The Goa site has an in-house effluent treatment plant, wherein the effluent generated
by the process is treated inhouse and used for landscaping. There is ZERO discharge of our
treated effluent outside the site.
The site has a system for periodic medical check-ups to ensure employee wellness.
Voluntary stress tests has been initiated for employees above 40 years post COVID. There
are bimonthly health awareness programmes conducted at site by the internal or external
faculty.
All activities are assessed for operational safety risks, and actions are outlined to
mitigate any risk identified. Internal audits and external agency audits are conducted to
ensure HSE standards are met. Employees are trained on operational safety, site leadership
team and managers conduct managerial safety visits to ensure safe working practices and
employees are encouraged to proactively identify workplace weak signals.
Human resources
The Company had 2,651 employees as on December 312022.
The overall industrial relations atmosphere continued to be cordial. Further details on
the Human resources forms part of Human Capital of the Integrated Report
Internal control systems and adequacy
The internal control systems of the Company which are configured in the ERP (SAP) are
adequate and commensurate with the size of operations and are well fortified with a
combination of standard operating procedures, delegation of authority for approval and
segregation of duties in critical activities. These controls are regularly reviewed as per
Audit Plan approved by Audit Committee, the recommendations of which are presented to the
Audit Committee and are followed up regularly with respect to implementation for necessary
remediation.
In addition, quarterly testing of key mandatory controls is undertaken which includes
the financial control framework (FCF).
These controls ensure that transactions are authorised, recorded, and reported on time.
They ensure that assets are safe guarded and protected against loss or unauthorised
disposal. The Internal Audit department has adapted to hybrid way of auditing (physical or
remote) depending upon business dynamics/external context to provide assurance to
Management that all key controls were operating in line with our guidelines.
Along with a strong focus on internal controls, efforts have been directed towards
automating monitoring controls of the business by using automation tools which has
unlocked huge amount of employee productivity by automation of repetitive and manual
tasks, which can now be redirected for achieving our strategic goals. We continue to
expand the scope of automated controls monitoring to bring more simplification and
standardisation in operations to continue to generate operational efficiency.
The Audit Committee of the Board of Directors reviews quarterly audit findings
identified by the Internal Audit department and the audit program which encompasses all
risks including operational, financial, strategic, technological etc.
As a way of reinforcing its Internal Controls & Compliance culture, your Company
has identified colleagues as "Compliance/Control Champions" who act as
ambassadors for the Internal Controls and Compliance teams to spread message to different
areas peer-to-peer and in a common language.
ESG including Environment, Health and Safety, and Corporate Social Responsibility
We have a detailed Health, Safety and Environment policy that is applicable to our
employees’ and external partners.
The Management proactively runs programmes to build awareness and adoption of practices
in this area. We have a dedicated programme called ‘Planet Mobilisation,’ which
focuses on key environmental risks, and provides a suitable framework to manage risks and
opportunities.
We also have a well-defined framework to guide our Corporate Social Responsibility
(CSR) programmes.
We are committed to working in collaboration with relevant stakeholders to increase
access to healthcare and quality medicines, designed to improve people’s health
within an economically sustainable framework that supports innovation. The details of our
initiatives in ESG forms part of the Integrated Report.
Medical affairs
Two all India multicentric real-world evidence studies of more than 6,300 people with
diabetes and more than 400 people with epilepsy, were presented at National/International
congresses. About four posters and two oral presentations were made at the Indian National
RSSDI congress 2022 and five posters at the American Diabetes
Association were made on ‘The need for timely initiation and intensification in
people with diabetes, to improve sugar control and outcomes.’ In the area of
neurology, the team had a panel discussion on results of the study for Frisium? at IANCON
2022.
Six papers were published in scientific journals in areas of Diabetes, Anti-infectives,
Neurology and Thrombosis which included a scientific review on 20 years of insulin
glargine-100 in the Diabetes Therapy journal.
The published content is further being shared with physicians through meetings and via
omnichannel communication.
Mentor-mentee education programmes, co-created with the Royal College of Physicians,
were conducted through virtual fora, upskilling more than 2,000 Health Care Professionals
on insulin initiation and titration. Online newsletters and podcasts were created and
disseminated to physicians to increase awareness on recent updates in management of Venous
Thromboembolism, in addition to international speaker meets and webinars.
Pause Atopic March programmes, conducted by the Allegra? Medical Team in association
with Association of Physicians of India, was to equip pulmonologists, ENTs,
paediatricians, dermatologists, CPs & GPs to be able to manage their patients better
by helping them identify the markers of atopy and halt the Atopic March at the correct
stage. International speaker programmes on vitamin D were conducted by the DePura Kids
medical team, with the National webinar received a high Net promoter score of 76. The
flagship programme on Sulphonylureas namely ‘Safe and Smart’ summit involving
experts was conducted and the programme for critical care specialists on anti-infectives
‘Ideas Evolve’ was cascaded to physicians across India.
Teams gather customer insights from interaction with physicians. Advisory boards and
consultations were conducted through office based medical as also expert group meetings
and >8000 one-to-one hybrid interactions were achieved through field-based medical
teams.
With a patient-centric purpose, disease awareness aimed to remove myths related to
epilepsy were conducted during World Epilepsy Month, reaching more than 21 lakh viewers
through a talk on Facebook and more than 1.64 crore viewers through radio programmes with
expert physicians across the country. On World Diabetes Day, the diabetes medical team
reached out through national and regional newspapers to a wide group of readers with an
aim to increase awareness on managing diabetes in a timely manner.
Opportunities and risks
We believe that the Indian pharmaceutical market would continue to grow due to factors
such as improved healthcare access, awareness and diagnosis around non-communicable
diseases, and government interventions to expand healthcare infrastructure.
Digital health will emerge as a key enabler of demand and delivery. There is a large
opportunity to have more efficient supply chain operations, after the implementation of
GST. We are working on harnessing efficiencies in this area.
Our business is also exposed to few risks. Some of the key risks are listed below:
- In past few years, the Government of India has made frequent changes in regulations
covering drug pricing, trade margins and other laws which impact us. Any adverse changes
in government policies with respect to pricing or trade margins with respect to our
products may impact our performance.
- We are present in therapy areas such as Diabetes, Cardiology, Thrombosis,
Anti-infectives, Central Nervous System and Allergy and Vitamins, Minerals &
Supplements. We depend on the research and development conducted by the Sanofi Group for
new product commercialisation. The future research and product pipeline strategy of the
Sanofi Group may not always be in these therapy areas. This may impact our growth in the
long-term.
- The prices of active pharmaceutical ingredients and intermediates fluctuate based on
the market demand and supply conditions. We may not be able to pass on any sharp increases
in the prices of raw material to consumers, resulting in margin contraction.
- We are also exposed to risks like falling interest rates, cyber security failures,
adverse social media, counterfeit drugs, adverse orders passed by courts in pricing, tax
and other litigations, among others.
However, we continue to take steps to mitigate the above risks by:
Outlook - Renewed strategy and focus on growth
We are moving towards ensuring greater access to quality healthcare products for the
Indian population.
We lay emphasis on innovating new products as well as accelerating efficiency for a
sustainable growth. Some of our priorities going forward will:
Focus on growth
Grow the businesses in line with the strategy, leverage trade organisation to capture
demand and drive growth, and broad public national disease and therapy awareness campaigns
on core assets.
Lead with innovation
Deliver the product innovation plans. Generate localised scientific content. The pharma
industry drives 40% of the growth from New Introductions. Thus, innovation will play a
strong role as we drive our India for India strategy on the same lines. Your Company is
taking a multipronged approach involving global launches, exploring local sourcing and
leveraging existing brand equities through line extensions. Strategic partnerships will
pave the way to have Sanofi present in those geographies where Sanofi has limited or no
presence. The last year has seen some supply issues from Sanofi global plants, and the
India team is working on exploring localisation of some formulations to avoid supply
disruptions.
Accelerate efficiency
- Continue to simplify the business while maximising profitability.
- Advance localisation plans to improve margins and supply reliability.
- Improve supply of products and leverage it for performance tracking.
Reinvent work
- Strengthen our capability building, talent management, and Play to Win culture.
- Achieve greater heights in Corporate Social Responsibility and ESG.
Cautionary statement
Certain statements in the above Report may be forward- looking and are stated as
required by the legislations in force. The actual results may be affected by many factors
that may be different from what is envisaged in terms of future performance and the
outlook presented above.
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