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Issue 59 - 11th August, 2011

Sector Profile Indian Life Sciences

While EU and India may be heavily embroiled in a tug of war regarding sezuire of Indian generic drugs at European ports, the burgeioning bilateral ties between the two economies in the pharmaceutical and life sciences industry can hardly be ignored. Clinical trials, collaborations on vaccine R & D, are just some of the areas being explored by life sciences companies in the Indo-Dutch space. Connect brings you a report on the bilateral relations in the industry thus far

Indias long-established position as a manufacturing location for multinational pharmaceutical companies is quickly spreading into other areas of outsourcing. Due to soaring R&D and administration costs in the West, drug manufacturers are moving their discovery research and clinical trials activities to the subcontinent and establishing administrative centers, says a KPMG report on Indian Pharmaceutical sector. Not only multi-nations, major Indian pharma firms have reportedly applied for licenses to conduct clinical trials on at least 12 new drugs in 2010. India has 50 percent lower production costs than western nations, R&D costs are about one-eighth and clinical trial expenses around one-tenth of Western levels. During April 2009-March 2010 DCGI granted permission to 237 global clinical trials. The Indian healthcare Industry has locked in $55 billion and is poised for another fantastic year in 2011. A 1.2 billion population with 60 percent poised to be in the working class in the next decade, there can be no company whether MNC or Indian, which can afford to neglect the Indian market, Sandeep Sinha, Director, Healthcare Practice, South Asia and Middle East, Frost & Sullivan has reportedly said. The healthcare industry here includes pharma, biotech, medical technology, hospitals, healthcare IT, diagnostics to wellness and private equity sectors. A survey by BioSpectrum Asia puts the revenues of publicly listed lifesciences companies in India at $21 billion, not including general healthcare and equipment providers. Patients from the developed world are flocking to India for surgeries and procedures as the cost of treatment is about one tenth and there is no waiting period. Medical tourism in India is expected to touch $2 billion by 2012. While pharmaceuticals, medical equipment and biotechnology remain the top revenue generators for the lifesciences industry in India, healthcare including medical tourism,

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wellness, and rural medicine are catching up and will be the new drivers going forward. India has 119 manufacturing sites approved by the USFDA, the highest in any foreign country. It also offers a large, well-educated, English-speaking workforce, with 700,000 scientists and engineers graduating every year, including 122,000 chemists and chemical engineers, with 1,500 PhDs. Pharmaceuticals The Indian pharmaceutical market will grow to $55 billion by 2020 on the back of five new opportunitiespatented products, consumer healthcare, biologics, vaccines and public healthaccording to a report by McKinsey & Company. India's $12 billion Indian drug industry, which produces high-quality generic medicines, is also set to reap new benefits as $150 billion business opportunities open up by 2014 when several drug patents expire. Currently, Indian firms produce 20 percent of global generic drugs, and account for almost 30 percent of the U.S. generic market. This market is estimated to grow to $20 billion by 2020. Foreign companies hope to get a share of the generic pie, once the blockbuster drugs go off patent, by acquiring Indian companies. Since 2008, global pharmaceutical giants have acquired six Indian drug companies. These acquisitions have led to fears that cheap generic drugs may no longer be available for millions of poor people in the coming years. The government is reported to be considering barriers to prevent takeovers. The pharmaceutical industry is highly fragmented, however, with only 250-300 companies in the organized sector accounting for 70 percent of products on the market. However, the total sector is estimated at nearly 20,000 businesses. Today, ten MNCs -Daiichi Sankyo-controlled Ranbaxy, GlaxoSmithKline (GSK), Abbott which owns Piramals domestic formulation business, Pfizer, Abbott and Solvay combine, sanofi-aventis, Novartis, Merck & Co, MSD and AstraZeneca accounted for 25.4 per cent, of the Rs 47,690-crore domestic pharmaceutical market in 2010 calendar year, according to IMS India. Biotech The Indian biotech industry has grown threefold in just five years to report revenues of $3 billion in 2009-10, a rise of 17 per cent over the previous year, according to the eighth annual survey conducted by the Association of Biotechnology-Led Enterprises (ABLE). The industry is estimated to witness a 20 per cent annual growth rate, to reach $ 8 billion in 2015, according to a report by the Confederation of Indian Industries and YES Bank. The biopharma sector contributed nearly three-fifth to the industry's revenues, followed by bioservices bioagri, bioindustrials and bioinformatics. Biotech sector is set to touch $8 billion by 2015 on the back of outsourcing activities and exports Medical Devices: Growing rapidly along with healthcare delivery The domestic market for medical equipment is estimated at $820 million. The value of annual medical equipments manufactured is about $520 millionand annual exports are about $ 75 million. Its clearly a significant opportunity. Siemens, Wipro GE and Philips are the leaders in the space with 18%, 17% and 10% market share respectively.

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CRAMS Contract research and contract manufacturing services (CRAMS) has emerged as a significant opportunity area for the Indian lifesciences industry. Though reliable estimates are not available for the size of the Indian CRAMS industry, is expected to grow at a compounded annual growth rate of 30-35 per cent. Dishman Pharmaceuticals, Sasun Chemicals, Jubilant Organosys, and Nicholas Piramal are some of the leading Indian players in the CRAMS sphere. Rural markets: Yet untapped Rural areas, home to about 72 percent of India's population, for a market characterised by ignorance about symptoms and available treatments, limited number of healthcare infrastructure and a tendency to delay seeking treatment for reasons of time and cost involved. Rural markets will constitute 25 per cent to the Indian pharmaceuticals market by 2020, says the McKinsey report. A two-way relationship As global lifesciences companies look at India for a bigger market and lower costs, Indian companies are venturing overseas to exploit the generic market and sell new drugs. Specific to the Netherlands, Sun Pharma has set up its European headquarters and Dishman Pharmaceuticals and Chemicals Ltd has set up a manufacturing unit in the country. Indian companies as well MNCs benefit from this two-way relationship giving rise to newer opportunities. Opportunities for foreign companies in India Low production, R&D and clinical trial cost Ride on Indias strength to tap the $150 billion generic market As treatment costs are significantly lower with no waiting period, medical tourism is set

to grow more than 25% over the next five years Huge domestic market, despite price controls, an opportunityinsurance and rural healthcare especially Biotechnology expected to be $8 billion by 2015

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