Global economic review
After witnessing a resurgence in 2021 from a pandemic-ridden state, the global economy
experienced a slowdown in 2022 owing primarily to global geo-political turbulence and
subsequent effects on the world supply chain ecosystem. Inflation soared triggering a
cost-of-living crisis which necessitated monetary tightening by the central banks all over
the world.
Generally, a tighter monetary policy typically dampens spending, but in 2022
consumption consistently remained high owing pent-up demand. Aggressive monetary
tightening resulted in the collapse of several global banks which brought on the
tightening of lending standards and dipping consumer confidence.
However, synchronised with high consumption, manufacturing thrived in 2022 as business
conditions improved at a rapid pace. Growth in new orders and output accelerated while
global trade hit record highs, reaching over US$ 32 trillion. But data suggests, the
growth turned negative by the end of the year.
Outlook: In 2023, the rise in the policy rate is likely to continue to weigh on
economic activity. However, global headline inflation is expected to fall from 8.7% in
2022 to 6.8% and 5.2% in 2023 and 2024 respectively. But prolonged war efforts in Ukraine
and extreme weather conditions can cause further tightening of financing costs amid
already existing debt crises around the world.
Indian economic review
The Indian economy sustained its growth momentum in FY23 amid severe headwinds in the
global economy with the GDP registering a growth of 7.2% in the financial year where the
upward movement in the final quarter played a major role in the overall performance.
This formidable growth was underpinned by the Indian Governments capex push to
modernise infrastructure, reflecting an overall increase in growth potential, job creation
and private investments and providing a major cushion against global uncertainties.
However, inflation remained elevated in the fiscal year where energy prices remained
the most important cause of Indias CPI inflation pressure. Despite this area of concern,
the domestic demand recovered well in 2022-23 and almost crossed the pre-Covid levels.
The agriculture sector registered a record-high growth rate in the last quarter over
the last twelve quarters. The industrial sector also rebounded in the final quarter driven
by manufacturing. Also, the contact-intensive services sector fully recovered to its
pre-pandemic expanse and depth.
Total gross GST collection for 2022-23 stood at 18.10 lakh crore which was 22% higher
than the previous fiscal reflecting resilience in the economy and improved business
sentiment in the country.
Merchandise exports were at their peak at US$ 447.46 billion in FY23 – a growth of
6.03% over the previous year (FY 2021-22) amid a high degree of recessionary environment
in advanced economies.
Outlook: Recent indicators suggest that India will be firmly on the path of
sustained growth momentum even in the 2023-24 financial year. However, a spike in headline
inflation, sustained adverse global environment and reduced rainfall owing to El-Nino may
constrain growth temporarily. But with cooling inflation and energy prices, overall
conditions will remain conducive to investment and prosperity.
Global pharma industry
The global pharmaceutical industry has experienced significant growth during the past
two decades. The recent pandemic only reinforced the criticality of the pharmaceutical and
healthcare sector has been reinforced.
By the end of 2029, the global pharmaceutical industry is projected to grow by over US$
2.4 trillion. Spending on Covid-19 vaccinations is still likely to remain the largest
driver of the medicine market through the next five years and is estimated to expand the
net cumulative pharmaceutical market by US$500 billion from 2020 through 2027.
Apart from this, the spending on medicine will be driven primarily by innovations in
the pharma sector. Oncology spending will be driven to approximately US$370 billion by
2027, by demand for innovative drugs. Biotech will contribute to 35% of global spending in
2027 and will include breakthrough cell and gene therapies and an evolving, maturing
biosimilar segment.
Globally, the USA is the leading market for pharmaceuticals. But emerging markets are
gaining the spotlight. According to projections by global market research firm, IMARC, the
global "pharmerging" markets will experience a compound annual growth rate of
10.4% from 2021 to 2026.
Asia Pacific region is expected to be the fastest-growing market. This is due to its
large consumer base, rising healthcare costs, rising disease incidence, and supporting
regulatory frameworks.
Emerging trends
• Emerging markets are driving innovation as the emergence of mRNA technology has
revitalised the product portfolios of large companies.
• Due to inflation, labour costs, the price of raw materials, transportation and
all other costs have been increased. It is putting pressure on the pricing of the products
and impacting revenue, especially in generics.
• Higher borrowing costs and commodity prices are forcing companies towards
consolidations.
• Growing use of cutting-edge technologies like AI and blockchain are impacting
nearly all aspects of the industry ranging from manufacturing to customer experience and
everything in between.
Indian pharma industry
The Indian pharmaceutical industry has grown from US$ 35.41 billion in FY18 to US$49.78
billion in FY23. In fiscal year 2023 (FY23), the Indian pharmaceutical industry grew by
nearly 5%. The domestic market increased by 7% year-on-year, while exports grew by 3%.
Export in developed markets recorded an 8% growth in FY23 while emerging markets remained
relatively flat. The Indian pharmaceutical industry is expected to reach US$ 57 billion by
FY25.
In FY23, the operating margin of the industry moderated owing to elevated input prices,
rising freight expenses, lingering delivery deadlines, and competitive challenges in the
US generics market. However, according to the experts, there are positive signs for the
business as inflation rates have normalised and the pricing pressure in the US generics
market has easing.
Furthermore, due to structural factors like the ageing population, an increase in
lifestyle-related or chronic diseases, healthcare awareness and insurance coverage, as
well as rising government spending on various programmes, it is anticipated that the
Indian pharmaceutical industry will expand steadily over the next few years.
Additionally, shifting global demographics and complicated and speciality generic goods
are anticipated to fuel expansion in the export business. Some experts believe that patent
expiry in highly regulated markets would also assist the development.
Government initiatives
• The Strengthening of Pharmaceutical Industry (SPI) scheme, which has a budget of
500 crores for FY 2021-22 to FY 2025-26. The SPI scheme focuses on MSMEs and pharma
clusters to help them increase their productivity, capacity, and quality.
• A new program to promote research and innovation in the pharmaceutical sector
through Centres of Excellence (CoE). The Government is encouraging businesses to spend
money on R&D in a few chosen priority fields.
• A PLI (Production Linked Incentive) scheme has been launched to promote domestic
manufacturing of essential bulk drugs to reduce the countrys dependence on imports. The
total outlay for the scheme is 6,940 crores and is likely to be implemented between FY21
and FY30.
• Pradhan Mantri Bhartiya Janaushadhi Pariyojana was launched with the objective
of making quality generic medicines available at affordable prices to common people.
Emerging trends
• Companies are increasingly under pressure for getting it ‘First time Right
– a trend which is being supported by tightening regulations and quicker regulatory
approvals. Hence, there is considerable focus on quality assurance and control.
• The pharmaceutical industry is shifting focus from ‘Make in India to
‘Develop in India – driving innovation and research.
• Companies are increasingly focusing on value addition while getting into a
collaborative mode rather than in a competitive mindset.
• Digitisation is reshaping the sector and integrating the entire ecosystem. At
this juncture, all companies irrespective of their sizes need to respond quickly and adapt
to the changing dynamics triggered by new digital players and invest in data and analytics
capabilities.
Our business
Vivimed manufactures formulations for domestic and international customers. Having
started as an integrated pharmaceutical player with API and Formulations manufacturing
facilities, the Company recently divested control of the API business.
In the formulations space, the Company develops and delivers quality generic and
branded generic formulations across diverse delivery platforms. It also develops
formulations under contract manufacturing agreements with large and reputed pharmaceutical
players.
The Company reported a revenue of I188 crore in FY23 against I239 crore in the previous
year.
Export segment
• Received approval for several products from Canada and initiated commercial
supplies for some of the approved products.
• Received orders for Nasal sprays from Cambodia, Uzbekistan and Kyrgyzstan and
executed commercial supply; commercialised 11 Ophthalmic products to Africa.
• Signed CDMO projects with Lab Riva for three products; discussion is at advanced
stages for other products too.
• Concluded product supply contract with a large Russian pharmaceutical company to
develop and supply 13 Ophthalmic products and 5 Otic products. This contract opens a
significant opportunity over the coming years.
Domestic - institutional segment
The institutional business contributed about I40 crore to the Companys topline;
majority of the business came from TSMIDC Telangana. In FY23, the Company could not
participate actively in tenders due to banking issues. These issues should get evened out
during the current year – enabling the institutional segment to make a more
significant contribution to the Companys growth.
Domestic retail segment
The business did not experience significant growth owing to certain field force related
issues. Despite this, the Company was able to maintain a steady revenue run rate
throughout the year. The integration of Vilberry brands brought in marginal additional
revenue during the year. The full benefit of the additional brands is likely to accrue in
the current year.
Finoso Pharma Pvt. Ltd.
It is the R&D unit of the Company which creates the innovation pipeline which
promise to emerge as the future growth levers. During the year under review, the team made
considerable progress in developing new products and scaling approved products (from the
lab to the manufacturing unit).
• Successfully completed and delivered complex category project with positive
pivotal Bio outcome.
• Technically supported clients for approvals of products in Regulatory countries.
• Developed an Antidiabetic product basket for Canadian and EU clients.
• Developed complex products like Sitagliptin + Metformin IR Tablets/ ER Tablets,
Empagliflozin Tablets.
• Started commercial supplies of products like Rivaroxaban Tablets and
Dalfampiridine Tablets
• Filed documents for Molnupiravir Capsules and Favipiravir Tablets in ROW
countries.
• Completed and started New parenteral R&D Analytical Section.
• Signed 18 CDMO projects with a leading Russian pharmaceutical company.
• Created a specialised team for developing complex formulations..
Plant operations Jeedimetla 1
This unit is focused for India institution business and exports. The unit received
Ukraine PICS approval which promises to improve capacity utilisation.
Jeedimetla 2
The unit operated at optimum utilisation as business volumes from some large domestic
clients were consistently high. Some ophthalmic products were scaled up from R&D to
the site. Also, some institutional tender business is serviced from this unit. The unit
also received the regulatory approval from Health Canada which was triggered by customers.
Haridwar
Operations at the unit utilised capacities optimally supported by growing volumes from
GSK and P&G. The unit commercialised exports to Cambodia, Tajikistan and Maldova. The
unit cleared the GSK GMP global audit. It has been assigned A+ category which suggest that
the next GMP audit will be in 2026.
Kashipur
Operations at the unit utilised capacities optimally supported by growing volumes from
GSK and P&G. The unit commercialised exports to Cambodia, Tajikistan and Maldova. The
unit cleared the GSK GMP global audit with an A+ rating which suggest that the next GMP
audit will be in 2026.
Human resource
Progress with people is at the heart of the Companys corporate ethos and human
resource policies. Over the years, the Company has been fostering a meritocratic,
empowering and caring culture that encourages excellence.
The Company nurtures talents by providing its people with opportunities to sharpen
their capabilities. It encourages innovation, lateral thinking, and multi-skilling,
preparing its people for future leadership roles. In addition, the Company endeavours to
provide a safe, conducive, and secure work environment that facilitates efficient
performance from its human capital.
The Company remains committed to ensuring zero harm to its employees, contractors, and
the communities in which it operates. This is integral to the Companys business process
and is laid down in the Companys safety policies, standards and working procedures. At
the same time, the Company expects its employees to honour and uphold its values while
serving the organisation with sincerity, integrity and commitment.
Internal Control Systems and their Adequacy
Vivimed maintains a system of well-established policies and procedures for internal
control of operations and activities. It continuously strives to integrate the entire
organisation – from strategic support functions like finance, human resource and
regulatory affairs to core operations like research, manufacturing and supply chain
management.
The internal audit function is further strengthened in consultation with statutory
auditors for monitoring statutory and operational issues. The Company has appointed
independent agencies as internal auditors. The prime objective of this audit is to test
the adequacy and effectiveness of all internal control systems and suggest improvements.
Significant issues are brought to the attention of the audit committee for a periodical
review.
Risk management
In todays rapidly changing business environment with dynamic customer requirements,
business risks are constantly evolving.
The Management team at the Company continuously monitors the internal and external
environment to identify potential, emerging risks and their impact on the business. The
team evaluates risks that can impact the strategic, operational, compliance and reporting
objectives.
The Companys risk management framework ensures the identification of emerging risks
and is flexible enough to accommodate decentralised risk management practices. The
framework adopts appropriate risk mitigation measures for identified risks across
functions. A report on risk management is periodically presented to the Board committee
responsible for risk governance.
Cautionary statement
This document contains statements about expected events and financial and operational
results which are forward-looking. By their nature, forward-looking statements require the
Company to make assumptions and are subject to inherent risks and uncertainties. There is
a significant chance that the assumptions, predictions and other forward-looking
statements may not be accurate. Readers are cautioned not to place undue reliance on
forward-looking statements as several factors could cause assumptions, and actual results
and events to differ materially from those expressed here.
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