Torrent Pharmaceuticals Ltd Management Discussions.


The Shareholders


Shareholders are cautioned that certain data and information external to the Company is included in this section. Though these data and information are based on sources believed to be reliable, no representation is made on their accuracy or comprehensiveness.

Further, though utmost care has been taken to ensure that the opinions expressed by the management herein contain their perceptions on most of the important trends having a material impact on the Companys operations, no representation is made that the following presents an exhaustive coverage on and of all issues related to the same. The opinions expressed by the management may contain certain forward-looking statements in the current scenario, which is extremely dynamic and increasingly fraught with risks and uncertainties. Actual results, performances, achievements or sequence of events may be materially different from the views expressed herein. Shareholders are hence cautioned not to place undue reliance on these statements and are advised to conduct their own investigation and analysis of the information contained or referred to in this section before taking any action with regard to their own specific objectives. Further, the discussion following herein reflects the perceptions on major issues as on date and the opinions expressed here are subject to change without notice. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this section, consequent to new information, future events, or otherwise.


Except stated otherwise, all figures, percentages, analysis, views and opinions are on consolidated financial statements of Torrent Pharmaceuticals Limited and its wholly owned subsidiaries (jointly referred as Torrent or the Company, hereinafter). Financial information presented in various sections of the Management Discussion and Analysis is classified under suitable heads, which may be different from the classification reported under the Consolidated Financial Statements. Some additional financial information is also included in this section, which may not be readily available from the Consolidated Financial Statements. Previous years figures have been re-grouped, wherever necessary, to make it comparable with the current year.

Global Economy

Although the global economy is emerging from the collapse triggered by the pandemic, the recovery is projected to be subdued.

Global economic output is expected to expand 4% in 2020-21 but still remain over 5% below its pre-pandemic trend. Moreover, there is a material risk of setbacks in containing the pandemic or other adverse events derailing the recovery. Growth in emerging market and developing economies (EMDEs) is envisioned to firm upto 5% in 2020-21, but EMDE output is also expected to remain well below its pre-pandemic projection. The pandemic is likely to steepen the long-expected slowdown in potential growth over the next decade, undermining prospects. The heightened level of uncertainty around the global outlook highlights policy makers role in raising the likelihood of better growth outcomes while warding off worse ones. Global growth is projected to moderate to 3.8% in 2021-22, weighed down by the pandemics lasting damage to potential growth. In particular, the impact of the pandemic on investment and human capital is expected to erode growth prospects in EMDEs and set back key development goals. The global recovery, which has been dampened in the near term by a resurgence of COVID-19 cases, is expected to strengthen over the forecast horizon as confidence, consumption and trade gradually improve, supported by ongoing vaccination.

Downside risks to this baseline predominate, including the possibility of a further increase in the spread of the virus, delays in vaccine procurement and distribution, more severe and longer-lasting effects on potential output from the pandemic, and financial stress triggered by high debt levels and weak growth. Global co-operation will be key in addressing many of these challenges.

Indian Economy

COVID-19 virus posed the most formidable economic challenge to India and to the world in a century. The imperative of flattening the disease curve was entwined with the livelihood cost of an imminent recession, which emanated from the restrictions in economic activities from the lockdown required to contain the pandemic. This inherent trade-off led to the policy dilemma of lives versus livelihoods.

Governments and central banks across the world deployed a range of policy tools to support their economies, such as lowering key policy rates, quantitative easing measures, loan guarantees, cash transfers and fiscal stimulus measures. India recognised the disruptive impact of the pandemic and charted its own unique path, amid dismal projections by several international institutions, with reference to the outbreak in the country given its huge population, high population density and an overburdened health infrastructure. A favourable monetary policy ensured abundant liquidity and immediate relief to debtors via temporary moratoria, while unclogging monetary policy transmission. As anticipated, while the lockdown resulted in a 23.9% contraction in GDP in Q1 2020-21, the recovery has been a V-shaped one as seen in the 7.5% decline in Q2 and the recovery across all key economic indicators. Starting July, a resilient V-shaped recovery is underway, as demonstrated by the recovery in GDP growth in Q2 after the sharp decline in Q1, a sustained resurgence in high frequency indicators, such as power demand, E-way bills, GST collection, steel consumption, among others. The reignited inter- and intra-state movement and record-high monthly GST collections have marked the unlocking of industrial and commercial activity.

Global Pharma Market

Life science companies are facing unprecedented change. Their customers are changing, the nature of their products and sales models are changing, and they face new kinds of competitors. Budgetary pressures are affecting health care systems globally, payers are pushing back aggressively on prices and demanding evidence of value, and digitally empowered and increasingly informed patients are playing a more active role in their treatment. By 2025, many life science companies will have transitioned toward more patient-centric business models, offering products and services designed to improve outcomes and address the specific needs of empowered customers. The market will be characterised by mass customisation, enabled by continuous technological advancements and a host of new health care players.

Insights on Global Pharma Spending

• Global medicine spending is expected to grow more slowly, but projected to exceed $1.1 trillion in the next five years

• The rise in spending is partly due to increased use, but is also driven by changes in the specialty and innovative product composition of new brands reaching the market. Other factors, such as pricing pressures and brand losses of exclusivity offset rises in spending. With these dynamics, spending growth is projected to slow in the next five years

• Developed markets are expected to see an average CAGR between 1 4% through 2023-24, below the historical 3.3% CAGR from 2014 19. Developed markets are expected to see slowing brand growth despite increases in specialty medicine spending, as greater brand losses of exclusivity (LOE) offset higher new brand product spending, and price and volume growth both slow

• Pharmerging markets are expected to show the most growth with a 5 8% CAGR through 2023-24. Most pharmerging market growth has been driven by access expansions, leading to greater volume use and adoption of more novel therapies

• Brand LOEs are projected to have a $139 billion negative impact on brand sales from 2020 24, compared to the $107 billion impact seen from 2014 19

Below graphs depicts the trend in the pharma spending across the major markets, where the Company has its presence:

Outlook on Pharma Spending across Key Markets (USD billion)

Emerging trends: Following are some novel advances that are expected to have an impact on the industry:

• Brand loss of exclusivity: Brand LOEs will result in $139 billion less in brand sales at invoice-level in developed markets, an increase in LOE impact compared with the $107 billion seen in the past five years. The largest losses are projected in 2023, with an expected $39 billion in losses in this year alone. Some losses are offset by generic uptake and increased uptake overall, meaning payer savings could be less than the stated amounts.

• Pricing pressure: With rising demand for healthcare and falling budgets, governments and payers are exerting pressure to drive down prices. Governments, insurers and patients are requiring greater transparency around drug pricing. Channel consolidation in the US continues to exert pressure on generic pricing. One of the challenges facing drug manufacturers is to build closer relationships with patients. This has many benefits including better understanding of patient experience and improved adherence.

However, the industry has some way to go to become a trusted part of the healthcare ecosystem.

• Specialty Pharma: Specialty medicines are used in treatment of complex, rare or chronic diseases. Specialty medicine spending currently account for 36% of global spending and is projected to account for 40% of global spending in 2023-24. New specialty products are increasingly in niche areas, primarily driven by oncology, immunology, autoimmune, HIV and multiple sclerosis therapies and are likely to affect more among small patient populations in the developed markets.

• Complex generics: A complex generic come with complex active ingredient, formulation, route of delivery, or drug device combinations. Complex generic drugs are cheaper than branded drugs and offer the opportunity to capture additional value for patients by addressing additional unmet needs and enabling complex drug manufacturers to achieve market differentiation and earn higher margins. Opportunities for generics remain strong and positive across the globe, with an increasing demand for affordable healthcare and government focus on cost control and expansion of medical infrastructure. The availability of cost-effective, safe generic alternatives offer a tool, that can be used to balance access to and affordability of many major therapies required to maintain a healthy population of patients across multiple disease areas.

• Pharma 4.0: Pharma 4.0, originally Industry 4.0, applied to pharmaceutical manufacturing, which is the addition of cyber-physical systems to computerise manufacturing while focusing on the human element. Four pillars of Pharma 4.0 Resources, Information Systems, Organisation & Processes and Culture.

One of the main facets of the Resources pillar is digital transformation, which centres on real-time data and information to increase productivity, enable machine operators to do their jobs more efficiently, and further allow the use of predictive technologies, augmented reality (AR), virtual reality (VR), big data, artificial intelligence (AI) and machine learning (ML). It allows for connectivity through integrated systems, equipment, people, and other software systems; real-time visibility into operations; transparency for quicker reaction time; and, at its highest levels, predictability and self-optimisation in that the system can predict the outcome of a batch or machines performance and self-correct. In this kind of environment, apps, smart sensors, or the Industrial Internet of Things (IIoT) are used as a means of first capturing the data from the floor, which is then transferred to the cloud, available for use.

• Biosimilars: Biosimilar products are an identical copy of an original product already authorised for use and offering new therapeutic options with the potential for cost savings to the healthcare system. The biosimilar market reached a value of US$ 5.1 billion in 2018-19 and projected to reach US$ 24.5 billion by 2024-25 growing at a CAGR of nearly 30% during the next five years.

• Growing incidence of chronic and sub-chronic therapies: With changing lifestyles, aging population and improved diagnosis, incidence of chronic diseases or life style therapies are significantly increasing. This includes therapies, such as Cardio-vascular, Anti-diabetic and Central Nervous System. This trend is even more prevalent in emerging markets like India and Brazil.

Future of Generics

Generic medicine is designed to be identical as branded drugs, marketed by private companies in dosage form, strength, safety, route of administration, performance characteristics, quality, and intended use. Generic drugs work in the same way as branded drugs in terms of clinical benefits. Generic drugs are manufactured after the expiration of the exclusive rights or patent of the branded drugs.

The global generic pharmaceuticals market is expected to grow from $233.66 billion in 2019-20 to $245.6 billion in 2020-21 at a compound annual growth rate (CAGR) of 5.1%.

Growth is mainly due to the companies resuming their operations and adapting to the new normal while recovering from the COVID-19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities, resulting in operational challenges.

The Generic pharmaceuticals market is expected to reach $331.54 billion in 2024-25 at a CAGR of 7.8%.

The rising incidence of chronic diseases is one of the major drivers of the generic pharmaceuticals market. As more individuals are diagnosed with chronic diseases, they look for more medicines for the treatment. Branded drugs come at a premium price, while generic drugs are available at a lower cost having the same chemical composition of branded drugs. The low-cost and same chemical composition and strength of generic drugs make a patient buy generic drugs instead of branded drugs. If it is a chronic disease, the treatment goes for a longer period of time and hence, the sales of generic drugs also increase. For instance, according to the WHO

(World Health Organisation), over the next 10 years, the deaths due to chronic disease is projected to increase by 17%. Also, in 2019-20, almost 3-quarters of all deaths in the world is due to chronic diseases.

The market of the generic drugs consists of both Branded Generics and Non Branded Generics. Branded Generic drugs are marketed under another the companys brand name but they are bioequivalent to their generic counterparts. It is expected that the global Branded Generics market will be led China, India and Asia Pacific (excluding Japan). Drugs for cardiovascular diseases and diabetes, which account for major share of Branded Generics sales in the global market, are projected to remain at the top over the next 10 years.

COVID-19 Pandemic: Impact Assessment and Mitigating Measures

COVID-19 pandemic and related lockdowns across different markets impacted pharma supply chains on intermittent basis. Torrent Pharma proactively took all the required measures to ensure continuity of supplies to its patients and safeguarding of health of its employees and their families.


Over the past several decades, there has been rapid globalisation in the development, manufacture, marketing and distribution of medical products. The Pharma industry operates in one of the worlds most regulated environments to meet the public expectation of safe, effective and high quality medicines and therefore organisations must navigate and comply with a highly complex set of global, regional, country, and industry-specific directives and regulations; as well as industry standards and codes that span a drugs developmental and commercial lifecycle. Managing current operating models and future regulatory requirements will test a companys abilities to respond in a coordinated, cost-efficient, and timely way. Differing data requirements across countries necessitates additional clinical trials and animal studies, increasing the cost of potentially important medicines and slowing patient access to them.

In many developing countries, regulatory capacity is insufficient to ensure a smooth process for new drug approval. Even after drugs are approved, international differences in systems to monitor the ongoing safety and quality of approved drugs slow recognition of any safety or manufacturing problems affecting public health. For reasons such as these, demand has been increasing for globally harmonised, science-based standards for the development and evaluation of safety, quality and efficacy of medical products. This will help in achieving the goal of improving efficiency, evaluation and approval process in overall drug development while ensuring safe, efficienct and quality products towards the public health.

The COVID-19 pandemic is the defining global health crisis of our time. It came as an unfortunate reminder of the importance of global health to the social, political and economic future of humanity. Investing in public health and supporting strong and resilient health systems is an important as ever. But it requires a coordinated, focused approach. COVID-19 has led to implementation of expedited pathways and risk-based approaches that may lead to transformation of drug development in future.

China Plus One Strategy coupled with Production Linked Incentive (PLI) scheme

The pandemic has aroused renewed interest for the China Plus One strategy to enhance supply chain resilience, by diversifying manufacturing activities into other countries. Global companies stepped up efforts to implement the ‘China Plus One strategy, of diversifying and de-risking their supply chains in the wake of the COVID-19-induced disruptions and US-China trade tensions. This provides a unique opportunity for India to emerge as a global manufacturing hub. India stands out as an attractive option due to its strategic location, a large domestic market, skilled labour and low labour cost, among others. On top of these arguments the policy offer, Production-Linked Incentive Scheme, announced in April 2020, is proving to be attractive to many manufacturers, more importantly to pharmaceuticals manufacturers. After the pandemic, global pharma majors are securing supply chains and reducing dependence on China. Chinas huge economies of scale account for the 25-30% cost difference between Chinese and Indian APIs and intermediates. India imports 68% of its requirements from China. The government has launched a Rs 3,000 crores scheme for setting up bulk drug parks. It has also announced a production-linked incentive scheme of Rs 6,940 crores, targeting domestic manufacturing of 53 APIs with high dependence on imports. Additionally, in February 2021, the cabinet also approved a production linked incentive scheme for pharma sector, entailing an outlay of Rs 15,000 crores. The China Plus

One policy coupled with the Government of Indias PLI scheme, is likely to improvise the competitiveness of Indian Pharmaceuticals Manufacturers in the long run.

Key Developments

Following the exit of UK and transition period ending, the post Brexit relationship between the UK and the European Union are hard to predict which is leading to many uncertainties on what will be the consequence of a complete exit. While it is already made clear that the UKs departure from the EU will remove the British drug market from the jurisdiction of the European Medicines Agency (EMA), the future relationship is strongly dependent on how successful the negotiators will be in reaching a deal on the contractual framework outlining the guidelines of the relationship, including the agreements on medicines and related regulations and procedures.

The new pharmaceutical strategy announced by European Commission will define both legislative and non-legislative actions covering the whole ecosystem of pharmaceuticals industry with a vision to build a stronger European Health Union. The key objective is to ensure that patients have access to innovative and affordable medicines and to support the competitiveness, innovative capacity.

Mergers & Acquisitions (M&A)

M&A play a crucial role in the growth strategies for life science companies. Over the last few decades, waves of M&A have led to significant consolidation within the industry. M&A is an important mechanism for achieving growth when opportunities for organic expansion are limited or non-existent. Large pharmaceutical companies has turned to megadeals to address pipeline, therapeutic, and geographic expansion needs. Bolt-on acquisitions have also increased as large companies snap up emerging/specialty companies with promising novel drug candidates. Consolidation and megadeals in particular, provide drug companies with the level of income necessary to fund R&D and new drug development. Revenue growth has been increasingly challenging in the face of growing generic and biosimilar competition, downward pricing pressure and shrinking pipelines due to patent expiries or R&D failures and more complex regulatory requirements. M&A provides a means for gaining access to new revenue streams, particularly for companies with significant cash reserves.

Owing to COVID-19, H1 2020 was an unprecedented time for dealmaking in the life science sector. While the COVID-19 pandemic rapidly provoked a significant level of partnering activity among biopharma companies keen to expedite the development of vaccines or therapeutics to tackle the virus, it also acted as a brake on other types of dealmaking, most notably M&A, which saw a sharp decline in activity as a result of uncertainty and operational disruption. Indeed, H1 2020 was notable for the absence of any US$5 billion deals on the scale seen in previous years as companies instead focused their attentions on internal programmes and potential COVID-19 solutions, opting only for a few asset-driven acquisitions. As a result, aggregate spending on M&A by life science companies plummeted to just US$19.1 billion in the first 6 months of 2020. The COVID-19 pandemic had a profound effect on M&A activity in H1 2020, with the number of deals announced down by 14% on H1 2019 as M&A dropped down the corporate priority list amid a barrage of operational challenges. Moreover, the aggregate total value of all M&A deals signed in H1 2020 plummeted by 91%.

Infectious diseases overtook oncology to become the principal therapy area for dealmaking in H1 2020 in terms of deal volume, driven by a plethora of deals centered on COVID-19 as life science companies quickly rose to the challenge presented by the virus. Indeed, many companies focused resources on COVID-19 that ordinarily would have been directed elsewhere. Collaborative R&D alliances jumped in number as the industry combined expertise to advance the development of COVID-19 therapeutics and vaccines while pharmaceutical companies looked to supplement their internal R&D endeavours with external research in core therapeutic areas.

Recording the performance

Torrent Pharma is one of the front-runners in the Indian pharmaceuticals industry having presence in domestic as well as International markets. The Company has subsidiaries across the globe as under. The Company also has major commercial presence in other countries mainly covering Southeast Asia, Africa and the Middle East.

During the year 2020-21, the Company reported revenues of Rs 8,005 crores, growth of 1% compared with Rs 7,939 crores in the previous financial year.

Revenue Breakup

Revenue (in crores) 2020-21 2019-20 Growth
Amount Share Amount Share %
India 3,739 47% 3,517 44% 6%
USA 1,261 16% 1,523 19% -17%
Germany 1,038 13% 947 12% 10%
Brazil 630 8% 715 9% -12%
Other countries 820 10% 766 10% 7%
CRAMS/others 517 6% 472 6% 10%
Total 8,005 100% 7,939 100% 1%

Torrents core competencies

Torrents four major pharma markets are India, US, Germany and Brazil. The Companys strategic priorities in India and Brazil continue to focus on strengthening specialties, field force productivity and new product development. These markets remain a key priority for the Company and offer higher visibility and sustainability to the business. In the US and Germany, the Company continues to focus on its new product pipeline by developing complex products.


The Indian pharmaceutical market (IPM), which is valued at more than $20 billion has demonstrated its resilience in 2020-21 during the pandemic. Over the past several years, the IPM has exhibited a strong growth trajectory and is fundamentally poised to remain a double-digit growth market owing to several demand levers over the coming years. With rising prevalence of chronic diseases, a significant push towards increasing healthcare coverage towards a large set of the population coupled with government support and insurance coverage, volume growth in the IPM in all therapies is more than likely to sustain this momentum in the near term, and even increase over the medium term. Notwithstanding the therapy specific impact that the pandemic is likely to have in the coming year 2021-22, the IPM should grow at a significantly higher rate than the previous year. The fiscal 2020-21 witnessed demand disruptions in several forms; lockdowns reduced patient footfalls, general infections remained low due to greater social distancing measures followed, and physician practice was impacted in the first half of the year. On the other hand, pandemic related drugs, including repurposed antivirals, multivitamins, immunity boosters and nutraceuticals saw a boost. In 2021-22, while the impact related to lockdowns may be much lower on an annual basis, the second wave of the pandemic is likely to affect overall demand in the first half of the year.

Resurgence of IPM growth in the market will be dependent on how quickly the economy is able to bounce back from the pandemic and how long the social distancing phenomenon continues to impact patient behaviour. Recent IPM growth trend (in value) is as follows:

For the year ended 31st March 2021, India continues to be the largest business unit contributing 47% to the Torrent Pharmas revenues.

The Company is ranked 8th in the IPM and continues to grow faster than the market. It has the 5th position among combined chronic and sub-chronic therapy areas, with 16 brands featuring among the Top 500 brands of the IPM, 10 brands have revenue of over Rs 100 crores.

8th largest Company in IPM 5th ranked among combined chronic/sub-chronic segment* 6th ranked by prescription at specialists
16 brands among Top 500 Brands in IPM 10 brands above 100 crores Ranked among Top 5 across CVD, VMN and CNS therapy areas

In IPM, Cardiac is the major contributor followed by Anti Infective, Gastro-intestinal, Anti-diabetic and Vitamin Mineral Nutrients (VMN) segment. Torrent Pharma has strong presence in Cardiac, Gastro-intestinal, CNS, Vitamin Minerals Nutrients and Anti-diabetic, with Top 5 therapies contributing 85% to sales.

*February 2021 AIOCD Data

New introductions in key therapies have been a focus area for Torrent Pharma to drive higher than market growth and it has launched a significant number of new products in 2020-21. In addition to patent expiration launches, Torrent Pharma has launched several brand extensions with first-in-India combinations for unmet needs, and this will remain a focus for the coming years. Some important new introductions in key markets were - Dapagliflozin and Rivaroxaban in the CVD therapeutic area; Brivaracetam in the CNS segment;

Obeticholic Acid within the Gatro-intestinal therapy along with strengthened presence in Pain Analgesic segment through NDDS Tapentadol Nasal Spray. Tapentadol NS is Torrents own patented and in-house developed nasal spray for severe pain management. many opportunities for new launches due to a lower number of patent expirations, however our The pipeline over the next three years remains robust and the focus will be to ensure leadership positions in all recent launches from the last two years.

Field force productivity has been an important focus area for Torrent Pharma and over the last five years the Company has been able to significantly enhance per capita per month (PCPM) productivity, by optimising focus on brand building. From a PCPM of under 5 lakhs in 2017-18, The Companys PCPM has crossed Rs 8 lakhs in 2020-21 and it continues to set a goal of achieving a PCPM of 10 lakhs, which is nearly double the industry average. The Companys continued focus on operational efficiency and high chronic mix have been key enablers in achieving this improvement, and while it still believes there is much greater room for productivity upside, it conducts periodic evaluations on the need for field force expansion. Over the next two to three years, as the Company enters more high potential markets and launch new products, there would be a need for sizeable expansion of the field force in certain therapies, to ensure it remains competitive across its focus markets without diluting focus on the existing portfolio.

The pandemic has led to a surge in the use of digital for marketing and reaching out to physicians, and the second wave has further emphasised the need for digital adoption. Torrent Pharma is geared up to adapt to digital as an evolutionary marketing approach, rather than revolutionary, and will continue to innovate in the field of digital marketing. It is the belief that a good part of digital initiatives taken up during the pandemic would persist following the pandemic, and in fact many of these initiatives would end up proving much more effective compared to traditional counterparts. At the same time, the Company does not foresee digital to significantly alter the cost structure and would instead use it as a complementary tool to the existing promotions.


Brazil is the largest pharmaceutical market in Latin America and the 10 th largest in the world. The Brazilian pharma market is estimated to be around US$ 33.6 billion as of Dec-2019 and is expected to grow through a year-on-year growth of 6-9% over next 5 years, depending on expected improvements on macroeconomic parameters under government controls and its policies.

Brazils economic scenario worsened due to the pandemic. GDP in 2019-20 declined by 4.1%. Inflation is expected to remain in the range of 4% to 5% in 2021. Apart from economic impact, Brazil is still facing difficulties in implementing reforms. In 2019-20, both tax and administrative reforms were included in Congress agenda but are still facing resistance. Main objective of tax reform is to simplify taxation rules by implementing GST (Goods and Service Tax) whereas administrative reform is to address the fiscal imbalances and high cost of the administrative structure. Economic challenges stemming from productivity and low investments remain to be addressed by the government also through privatisation of state-owned companies.

Despite negative GDP growth and COVID-19 impact, the Brazilian pharmaceuticals market has been resilient, registering a growth of 8.9% for 2020-21. Government subsidies under health care schemes has reduced while opportunity for the pharmaceutical companies to gain from direct sales to consumers is increasing. On the regulatory front, the Brazil government is assessing changing the patent regulation to allow early entry of generic players.

During the year, Brazilian operations registered revenue of Rs 630 crores (sales in local currency BRL 454 million, 11% growth in constant currency). Growth in rupee terms was negative due to depreciation of Brazilian currency, which depreciated by 30% against US dollars in 2020-21. In our focused business (Branded-Generic and Generic-Generic) the Company grew by 14% at constant currency. The Company intends to gain market share through specialty focus, enhancing field force productivity, new product filings and new launches. In parallel, it is preparing for entry into newer therapeutic segments.

Among the Indian companies, in terms of value Torrent Pharma ranks No. 1, with the second largest less than half of the size of Torrent (IQVIA dataset). Currently, Torrent has commercialised 24 Branded Generics and 20 Generic products. In its Branded Generic portfolio, the Company has 11 filings awaiting approval, 23 under preparation for filing in existing business and 17 in new business. In addition, the Company has been building its portfolio in the Generic segment with parallel filings and launches of its Branded Generic products.


USA continues to be the largest pharmaceutical market, accounting for approximately 41% of global pharmaceutical spending. It recorded 4% CAGR for 2014-19 and is expected to grow at 3-6% CAGR to US $605-635 billion by 2023-24.

Growth will likely be principally driven by the development and launch of innovative specialty drugs but will be partially tempered by existing drug patent expiries and cost reduction initiatives by payers.

Generic drugs play a vital role in facilitating access to lifesaving medicines and remain a public health priority for the U.S. Food and

Drug administration (FDA). There are more than 10,000 FDA-approved Generic drugs and nine of every 10 prescriptions in the U.S. are filled by Generics. Generic drugs have saved the health care system close to $2.2 trillion dollars in the past decade.

Amid the challenges of a worldwide pandemic and rapidly advancing science, the FDAs generic drug program continued steadfast efforts to help increase the availability of safe, effective, high-quality, more affordable drugs in the U.S.

In 2020, the FDA approved or tentatively approved 948 Generic drug applications (ANDAs). Among the total approvals were 50 original applications and 668 supplement submissions for drug products used as potential treatments and supportive therapies for patients with COVID-19. It also includes 72 first-time Generic drugs, and 30 Generics were approved under the Competitive Generic Therapy (CGT) pathway.

In 2019-20, there was a continued FDA focus on policies designed to expedite the availability of Generic drug products and to help lower prices with an aim to further encourage robust and timely market competition for these drugs and help bring greater efficiency and transparency to the review process, without sacrificing the scientific rigour underlying the Generic drug programme, including:

• Listing all approved ANDAs for products that received a CGT designation, having inadequate generic competition

• An Orange Book-focused guidance and two planned events to help educate and engage Orange Book users.

A list of products with CGT designation that is updated every six months to ensure continued transparency regarding drug products, where increased competition has the potential to provide significant benefit to patients.

Torrent Pharma is ranked 11 among the US Generic Indian companies and has a market share of around 13% in its covered market. Revenues from the US business were Rs 1261 crores (sales US$ 166 million) during 2020-21 as compared to Rs 1,523 crores (sales US$ 207 million) in the previous year with a de-growth of 17%. New approvals from facilities at Dahej and Indrad were on hold pursuant to their negative classification by USFDA. Torrent Pharma has completed all the remediation actions and submitted the closure report. It is now waiting for guidance on re-inspection from USFDA. For Levittown facilities at US, Torrent Pharma has completed upgradation of its facilities and is likely to commence commercial manufacturing and launch its existing approved products, from Q1 of 2021-22. New approvals from said facilities shall commence, post its re-inspection by USFDA.

Given the future market moving towards complex products, Torrent Pharma is diversifying its pipeline with products like oral liquids, suppositories, ophthalmics, ointments and creams and oncology drugs as well as focusing on Value Added Medicines (VAMs) that are approvable via the 505(b)(2) regulatory pathway. The Company has filled 12 ANDAs during 2020-21. The Company has 103 ANDA approvals (including 6 tentative approvals) and its pipeline consists of 54 pending approvals (not including tentative or partnered filings) and more than 40 products under development to be filed over the next 3 years.


Top 5 European markets are Germany, France, Italy, UK and Spain. Medicine spending in top 5 European countries will increase from US$ 174 billion 2018-19 to US$ 210 to US$ 240 billion in 2024. CAGR from 2019-20 to 2023-24 is expected to be 3% to 6%.

Despite the COVID-19 disruptions, with continued support and industry resilience, the European pharma outlook for 2021 is positive.

The presence of leading companies in the European region is also expected to boost the demand for pharmaceutical manufacturing.

Towards the end of 2019-20, European Commission published the Pharmaceutical Strategy for Europe with the aim to ensure equitable access to medicines throughout the region and support the industrys competitiveness and innovation on the global pharmaceutical stage. This includes access to safe, effective, and high-quality medicines at an affordable price. The pharmaceutical strategy for Europe aims at creating a future-proof regulatory framework and supporting industry in promoting research and technologies that actually reach patients in order to fulfil their therapeutic needs, while addressing market failures. It will also take into account the weaknesses exposed by the pandemic and take appropriate actions to strengthen the system.

Key Pillars of Pharmaceutical Strategy for Europe

• Ensuring access to affordable medicines for patients, and addressing unmet medical needs

• Supporting competitiveness, innovation and sustainability of the EUs pharmaceutical industry and the development of quality, safe, effective and greener medicines

• Enhancing crisis preparedness and response mechanisms, diversified and secure supply chains, address medicines shortages

• Ensuring a strong EU voice in the world, by promoting a high level of quality, efficacy and safety standards

The Companys European business is mainly in Germany and the UK, where the Company has its direct presence.

Germany is the 4th largest pharmaceutical market in the world and the largest in Western Europe. It is valued at around $52 billion and is expected to grow at a CAGR of 4% to 75 till 2020-24. Majority of the market is tender driven, which leads to a very competitive environment for the industry. Among the Generic players, Torrent Pharma holds 5th position with a market share of around 6.6% and is ranked first among Indian players in the German market. Revenues from Germany operations during 2020-21 were1,038 crores (sales in euro 119 milliom) with a growth of 10%.


The Companys state-of-the-art manufacturing facilities for Formulation and API have significantly contributed to the demand of high quality products and in sustaining its growth and success. Revenues from manufacturing of human insulins for Novo Nordisk for India market 2020-21 were Rs 280 crores during the year, down by 2% compared to previous year.

New Capital Investments

As part of its strategy to diversify into different dosage forms, the Company has set up manufacturing facility for oral oncology products and will be initiating necessary regulatory approvals.

Research and Development

Discovery Research

The Company is currently developing several in-house New Chemical entities (NCE) in the areas of metabolic, cardiovascular, gastrointestinal, dermatological and respiratory disorders. The Company has cumulatively filed 818 patent applications for NCEs from these and earlier projects in all major markets of which, 497 patents were granted so far.

The most advanced discovery programme of the Company is a metabolic modulator NCE, omzotirome, for the treatment of diabetes.

This program me is currently undergoing the pivotal phase-3 clinical trial in key markets where the Company has presence, with India gearing up to be the first to launch. The Company believes that this asset is uniquely positioned to address the consequences of Cardiometabolic-Based Chronic Disease (CMBCD), which is assuming alarming proportions in India and other emerging economies besides developed countries.

The next advanced discovery program me is for management of heart failure in diabetic patients, for which the Phase-2 clinical trial has been completed in India and Europe. Phase-2 study for the Companys 3rd NCE, being developed for Inflammatory Bowel Disease, is ongoing.

NDDS and Pipeline Augmentation

Novel Drug Delivery Systems (NDDS) emerged from application of new technology platforms to design products with an aim to reposition existing drugs, if required through an alternate route of administration. The aim is to improve their performance with respect to efficacy, safety and patient compliance through enhanced bio-availability, dosage reduction, frequency and onset of action. The Companys pipeline includes several NDDS programmes, adapted for existing medications, which will give the Company an edge over its competitors through differentiation. The Company is currently focusing its R&D efforts on several innovative projects in the area of complex generics, with respect to oral solids, foams/ointments/creams and nasal delivery.

Foam-based topical product for psoriasis was launched successfully. Another product for the indication of acute pain management through nasal route of delivery was also launched. Nasal route of delivery is also being explored for management of vitamin B12 deficiency. The phase-3 trial has been completed and filed for marketing approval.

Threats, Risks and Concerns

Drug Price Control

Currently 376 drugs and 890 formulations are covered under National List of essential Medicines [NLEM]. It is likely that the government may bring more such drugs and formulations under price control or change the mechanism of calculating the ceiling price of the drugs, which are under the ambit of drug Price Control order 2015 [DPCO 2015], which in turn will have impact on the margins of the Company. The Company manages its product portfolio so as to minimise the product weightage of drugs under price control.


The Government of India is encouraging use of Generic products through various initiatives. This may have impact on future business strategies of the Company.

New Product Risk

New product development and launch involves substantial expenditure, which may not be recovered due to several factors, including development uncertainties, increased competition, regulatory delays, lower than anticipated price realisations, delay in market launch and marketing failure.

In a highly regulated business, it is important to obtain regulatory approval based on a products safety, efficacy and quality before it can be marketed for an indication in a particular country, as well as maintain and comply with licences and other regulations relating to its manufacture and marketing, are particularly important. The submission of an application to regulatory authorities (which vary, with different requirements, in each region or country) may or may not lead to the grant of marketing approval. regulators can refuse to grant approval or may require additional data before approval is given, even though the medicine may already be launched in other countries. In some instances, regulatory authorities require the Company to develop plans to ensure safe use of a marketed product before a product is approved, or after approval, if a new and significant safety issue is established. The Industry is also subject to strict controls on the commercialisation processes for products, including their development, production, distribution and marketing. The Company manages the above risks related to the launch of new products and their regulatory approvals through careful market research for selection of new products, detailed project planning and continuous monitoring.

Product Liability Risks

The business is exposed to potential claims for product liability. These risks are sought to be managed by appropriate laboratory and clinical studies for each new product, and compliance with Good Manufacturing Practices and independent quality assurance system. The Company has an adequate insurance cover for product liability. The Company is facing litigation on two of its products vis. Losartan and Valsartan in the US due to detection of certain impurities in the outsourced API during 2018-19.

Litigation Risks

The Company may launch a Generic product based on legal and commercial factors, even though patent litigation is pending. The outcome of such patent litigation could affect the Companys business adversely in case it is established by the court of law that there has been a patent infringement. In addition to the substantial liabilities for patent infringement, the Company may also incur high costs of litigation for defending against the infringement. This risk is sought to be managed by a careful patent analysis prior to development and launch of the Generic products and strategy of early settlement with the patent holders on case-to-case basis, particularly in the US market.

Future Acquisition Proposals

The Company continuously looks for opportunities in order to expand its product line either through complimentary or strategic acquisitions of other companies, asset acquisition, licencing agreements or any other arrangement. Any such acquisitions, may involve significant challenges in terms of integration with existing operations, which may lead to requiring considerable amount of time, resources and effort. This may lead to temporary disruption of ongoing business, affect relations with the employees and customers with whom the Company has been dealing.

Manufacturing and Supply Risks

Although a major portion of the Companys finished formulations are being manufactured at in-house facilities, it also depends on third-party suppliers to source to some markets. Any significant disruption at in-house facilities or any third-party manufacturing locations due to economic, regulatory political and social factors or any other event may impair the Companys ability to produce, procure and/or ship products to the markets on a timely basis. This could expose the Company to penalties and claims from customers.

The Company purchases APIs and other materials that it uses in its manufacturing operations from foreign and domestic suppliers.

Although the Company has a policy to actively develop alternate supply sources for key products subject to economic justification, there would be certain cases where the Company has listed only one supplier in its application with regulatory agencies. An interruption in the supply from single sourced material can impact the financial performance of the Company. In addition, the Companys manufacturing capabilities could be impacted by quality deficiencies in the products, which its suppliers provide, leading to impact on its financial performance.

New Capital Investments

The Company continuously adds capacity to meet the increasing demand of pharma products from various markets. The Company faces risks arising out of delay in implementation, cost overrun and inappropriate implementation. The capacities are built in anticipation of demand and the Company runs the risk of under-utilisation of capacities resulting in high manufacturing cost. The risks are sought to be mitigated by forming appropriate project management team and corporate management oversight.

Overseas Markets

The development of the business in overseas markets is a critical factor in determining future ability to sustain or increase global product revenues. This poses various challenges, including volatile economic conditions, IP issues, developed market compliance standards, inadvertent breaches of local/international law and interventions by national governments or regulators restricting access to market and/pr introducing adverse price controls. However, the Company carefully monitors the business scenarios of these markets, prepares the business plan and undertakes various researches to reduce the risk at the minimal level.

In the US, there is a continuing trend towards consolidation of certain customer groups, such as wholesale drug distribution and retail pharmacies as well as emergence of large buying groups. The consolidation may result into these groups gaining additional purchasing leverage and consequently increasing the product pricing pressures. Additionally, the emergence of large buying groups representing independent retail pharmacies, prevalence and influence of managed care organisations and similar institutions potentially enable those groups to attempt to extract price discounts on the Companys products. The result of such developments could affect the sales volumes and price realisations of the Companys products on an overall basis.

In Brazil, where the Company sells Branded Generics, the pure generic competition could adversely affect development of branded business. Price erosion continues in the German generic market leading to shrinking operating margins. The insurance companies have been empowered to enter into rebate contracts and float tenders. Aggressive bidding by competitors could lead to unsuccessful bids in tenders exposing the Company to loss of existing sales. Likewise, in other European markets, regulatory changes could affect price realisations. The risks are sought to be mitigated through careful market analysis, improved management bandwidth, marketing alliances and corporate management oversight.

A significant portion of the revenue in various markets would be derived from sales to limited number of customers. In case of experiencing loss of business from one such customer or difficulties experienced by the customer in paying us on timely basis, it may impact the business performance.

Currency Fluctuation Risks

Currency risks mainly arise out of overseas operations and financing activities. exchange rate fluctuations could significantly impact earnings and net equity because of invoicing and expenditure in foreign currencies, foreign currency borrowings and translation of financial statements of overseas subsidiaries into Indian rupees. The Company has a defined foreign exchange risk management framework to manage these risks excluding translation risks.

International Taxation

The Company has potential tax exposure resulting from application of varying laws and interpretations, which include inter-company transactions with subsidiaries in relation to various aspects of business. Although the Company believes its cross-border transactions between affiliates are based on internationally accepted practices, tax authorities in various jurisdictions may have different views or interpretations and subsequently challenge the amount of profits taxed in their jurisdiction resulting into increase in tax liability, including interest and penalties causing the tax expenses to increase.

Base erosion Profit Shifting (BePS) action plan and reporting formulated by the OECD (Organisation of economic co-operation and development) has been implemented in India, which provides for revised standards for transfer pricing documentation and country-by-country reporting of income, earnings, taxes paid and certain measure of economic activities. Accordingly, the Company has done the filings as per prescribed guidelines. There may be issues with respect to the resolution of disputes arising due to interpretation by different tax jurisdictions in different countries. The Company has taken adequate measures to ensure compliances of these guidelines.

Discovery Research

The key risks are high rate of failure and long gestation period of a discovery project coupled with significant upfront costs to be incurred before results are known. The Company today may not have resources to carry through a discovery project to final commercial stage for global markets. These risks are sought to be mitigated by seeking suitable alliances with partners at appropriate stage to share the risks and rewards of the project while continuing to develop the NCEs for India. The Company is also evaluating the feasibility to extend the market outside India where it has reasonable understanding of the branded products space.

Company undertakes clinical trials on an ongoing basis as part of its discovery research programme. Insurance is obtained to cover the risks associated with testing in human volunteers and the Company may be subject to claims that are not covered by the policy.

Dependence on Information Technology

The Company is highly dependent on information technology systems and related infrastructure. Any breakdown, destruction or interruptions of this system could impact day-to-day operations. There is also a risk of theft of information, reputational damage resulting from infiltration of a data centre and data leakage of confidential information either internally or otherwise. The Company keeps on investing appropriately on the protection of data and information technology to reduce these risks.

Human Resources

The total employee strength of the Company at the end of 2020-21 was 13,505 against 13,801 at the end of 2019-20, a decrease of 298 employees.

Internal Control System

The Company has a robust system of internal controls comprising authority levels and powers, supervision, checks and balances, policies and procedures. The system is reviewed and updated on an on-going ongoing basis. The Company continuously upgrades its internal control systems by measures, such as strengthening of IT infrastructure and use of external management assurance services. The Company has in place a well-defined internal audit system whereby the internal audit is performed across locations of the Company and the results of the audit findings are reviewed by the audit Committee.

Results of Operations for 2020-21 Versus 2019-20

Summary Financial Information

Particulars 2020-21 2019-20
Rs crores % to Revenues Rs crores % to Revenues
Sales and Operating Income (Revenues) 8,005 100% 7,939 100%
Gross Profit 5,858 73% 5,772 73%
Selling, General and Admin Expenses (SG&A) 2,886 36% 3,108 39%
Research and Development Spend 487 6% 494 6%
Forex Gain/(Loss) 32 0% 83 1%
Other Income 20 0% 31 0%
EBIDTA 2,537 32% 2,284 29%
Depreciation/amortisation 658 8% 654 8%
Net Interest expense/(Income) 353 4% 443 6%
Profit Before Tax and Exceptional Items 1,526 19% 1,187 15%
Exceptional Items - 0% - 0%
Profit Before Tax and After Exceptional Items 1,526 19% 1,187 15%
Income Tax 274 3% 162 1%
Profit after Tax 1,252 16% 1,025 13%

Key Financial Performance

• Revenues grew by 1% to Rs 8,005 crores from Rs 7,939 crores in the previous year

• EBDITA grew by 11% to Rs 2,537 crores from Rs 2,284 crores in the previous year

• Borrowings reduced by Rs 959 crores

Working Capital and Liquidity

The trade working capital i.e. net working capital investment, excluding current investments, cash and cash equivalents, bank balances other than cash and cash equivalents, loan given to employees, short-term borrowings, current maturity of long-term debt, derivative financial instruments and accruals for health insurance contracts (in Germany) increased by361 crores from Rs 2,542 crores at the end of 2019-20 to Rs 2,903 crores at the end of 2020-21. The number of days of net trade working capital has increased from 119 days in 2019-20 to 134 days in 2020-21. The increase is mainly because of building safety inventory levels across all the input materials to ensure product availability and reduce the risk of global supply chain disruptions. Cash and cash equivalents, including current investments was at Rs 573 crores during 2020-21 compared to Rs 662 crores at the end of financial year 2019-20.

Key Financial Ratios for 2020-21 Versus 2019-20

# Particulars 2020-21 2019-20
Profitability Ratios
a) Operating Profit Margin 32% 29%
b) Net Profit Margin 16% 13%
c) Return on Net Worth 21% 21%
Working Capital Ratios
d) Debtors Turnover (days) 71 77
e) Inventory Turnover (days) 124 101
Gearing Ratios
f) Interest Coverage 6.21 4.73
g) Debt/equity 0.71 0.98
Liquidity Ratios
h) Current Ratio 1.13 0.91

The ratios have been computed as follows:

• Operating profit margin: Revenues (Cost of goods sold + employee benefits + other expenses)+ (Other income-Interest income)/


• Net profit margin: Profit after taxes/Revenues

• Return on net worth: Profit after taxes/Net worth (Net worth = Share capital + Reserves and Surplus)

• Debtors days: (Net sales/Trade receivables) 365*

• Inventory days: (Net sales/Inventory) 365*

• Interest coverage: (Profit after tax + Deferred tax + Depreciation and amortisation + Interest expense)/Interest expense

• Debt to equity: Debt/Net worth

Debt: Long term borrowings (current and non current portion)

Net worth: Share capital + Reserves and surplus

• Current ratio: Current assets/Current liabilities

For and on behalf of the Board of Directors
Ahmedabad Samir Mehta
18th May 2021 Executive Chairman


1. Global Economic Prospects, World Bank Group, Flagship Report, January 2021

2. Economic Survey of India, 2020-21, Volume I and II

3. Global Medicine Spending and Usage Trends- Outlook to 2024, IQVIA Institute, March, 2020

4. Global Use of Medicine in 2019 and Outlook to 2023

5. IQVIA Pharma Deals, Half Year Review of 2020

6. AIOCD MAT March 2021 Data Set