Q.

Consultancy report – into a business or public service sector

Choose a business or public service sector located anywhere in the world and produce a
business report, that analyses the future trends most likely to influence the success of that sector
over the next twenty years. In your report you also need to offer recommendations for the ways
that the organisation can take advantage of these trends.

Consultancy Report on:

Cipla limited
Table of Contents

Sr. No. Page

1. Table of Contents 1

2. Executive Summary 2

3. Introduction

3.1 The Pharmaceutical Industry Today 3

3.2 Cipla Limited 3

4. Global Trends & its Impact on Pharma future 4

5. The Pharmaceutical industry in India 8

6. Cipla Limited Business Model & Strategy 13

6.1 Threats for Cipla Limited 14

7. Opportunities & Recommendations for Cipla Limited 15

8. Conclusion 16

9. List of References 17

10. Appendices 19
1. Executive Summary

The global Pharmaceutical industry is constantly transforming where various innovations

and developments are taking place consistently and at a fast pace. Cipla Limited is an
Indian multinational pharmaceutical and biotechnology company, headquartered
in Mumbai, India. This report will focus on considering the global threats and its impacts
on the future of the Pharmaceutical industry where five major trends such as, (1)Mergers
& Acquisitions, (2)Collaborate to Innovate (3)Adoption of Artificial Intelligence(AI),
(4)Rising Healthcare cost drive Innovations, and (5)Small and more frequent Product
launches will transform the pharmaceutical industry. Further next this report investigates
the pharmaceutical industry in India and its trends, followed by the threats opportunities
and recommendations for Cipla Limited in future for the approaching years and in the next
two decades.
2. Introduction

a. The Pharmaceutical Industry Today

The Global pharmaceutical markets are in the middle of considerable

discontinuities. While the expansion in developed markets is about to slow down
in the near terms, emerging markets will become significantly important in the
upcoming. The Indian pharma market, along with the markets that of China,
Brazil and Russia, will spearhead growth within these markets.
The pharmaceutical industry is the one that discovers, develops, produces, and
markets drugs or pharmaceutical drugs for use as medications to be prescribed
to patients to cure, vaccinate, or alleviate a symptom. Pharmaceutical companies
usually deal in generic or brand medications and medical devices. They are
obligated to a variety of laws and regulations that govern the patenting, testing,
safety, efficacy and marketing of drugs.

b. About Cipla
Founded as ‘The Chemical, Industrial & Pharmaceutical Laboratories' in 1935
by Khwaja Abdul Hamied , and changed to Cipla Limited on 20 July 1984,Cipla
th

is one of the leading manufacturer and marketers of prescription drugs, active

pharmaceutical ingredients (API) and veterinary products. Headquartered in
Mumbai, India the company has strong R&D and manufacturing capacity in
India. the company is popularly known for providing generic AIDS and other
drugs to treat poor people in the developing world. Cipla offered medicines
(antiretrovirals) for HIV treatment at a very nominal cost.
3. Global Trends & its Impacts on the Pharma Future
Looking towards the trends form the last two decades globally, continuous transformation
and information has driven immense growth in this industry. Even though companies
have foreseen aa generous number of challenges in past few quarters, the absolute speed
and effect of these has been astounding. “Many leading generics players—in India and
globally—shed up to 40 percent of their market capital in mere months due to a range of
reasons”(IBEF, 2018)—from regulatory sanctions to litigation, impairment charges to
generics market dynamics in the US, and raw material price volatility in China to
evolving regulatory landscape in India, etc.

The generic value is decreasing at a great level due to various reasons. These are: Further
consolidation among distributors and pharmacy chains, increased product approvals, and
resultant competition in the generics space, drop in new launch sales, increasing price
control and protectionism in various global markets.

Considering, the top five trends that may drive the change in the Pharmaceutical industry
in the next two decades are:

1. Mergers & Acquisitions (M&A)

The trend of Mergers and Acquisition in the pharmaceutical industry continues to

grow over the past decades. M&A is a fundamental tool for strategy
implementation in the pharma industry. There are various reasons why pharma
industries resort to M&As, which basically includes strategic repositioning and
efficient capital allocation. With the increasing demand for pharma drugs, it gets
very difficult for companies to cater to the need of a market segment increasing at
a much faster pace than companies could grow. M&A would enable companies to
undergo a much needed fundamental change, a cultural change and also help to
build a new platform.

2. Collaborate to innovate
 An increase in collaboration would lead to a tremendous increase in innovations in
pharma sector To survive successfully in the increasingly competitive modern
pharma market, companies will have to work together to develop innovative new
products, services, and solutions, as well as share skills, knowledge and expertise.

At first sight, it seems to be a vague idea that companies would want to share data
and potentially give away a competitive advantage. However, this assumes two
things: firs, if the possession of such data indeed gives a competitive advantage
and, second, whether such a closed operating model is financially sustainable. The
pharmaceutical industry are not sufficient to sustain large internal R&D
organizations and the current operating model is not financially viable. Thus it is
essential that companies collaborate in near future to either improve success rates
or decrease the cost of failure.

3. Adoption of Artificial Intelligence (AI)

Artificial Intelligence is now being explored at all stages of drug discovery and
development directly from research data mining and helping in lead identification
and validation, to assisting come up with main compounds and drug candidates,
and predicting their properties and risks. Also, AI-based software is now helps to
plan chemical synthesis to obtain compounds of interest. AI is also applied to
planning pre-clinical and clinical trials and analysing biomedical and clinical data.
Apart from this, AI helps pharma industries in computing advanced mathematical
problems, analysing complex statistics, and generating novel hypotheses. (see
figure 10.1)

4. Rising health care costs drive innovations

According to an (IMS Health study,2015), the annual growth in global healthcare

spending increased from $26 billion in 2012 to $70 billion in 2014. This excessive
 increase in the spending is pressing governments to reconsider pharma costs and
apply force to bring these heavy costs down.

One way through with costs are being kept down is by the means of new
innovations in this industry. Some of the new innovations that are likely to hit the
healthcare market include wearable technology. These innovations will be hi-tech,
wearable devices and mobile apps. The Pharmaceutical industry is growing
relentlessly due to these innovations, and also these innovators have an upper on
the market.

5. Small and more frequent product launches

According to a report by (IMS Health,2018) around 200 new drugs are estimated to
be launched in the coming decade.

Currently, there are over 2,000 products in later/ final-stage clinical development,
out of which around a quarter are related to oncology therapies. Looking forward,
the growing number of medicines and drugs earning the FDA’s Breakthrough
Therapy Designation is adding to an expedition of approvals. Hitherto the global
availability of these recently developed or developing new medicines to patients
differs majorly from country to country and the disease, with even less than half of
the new products available across all the major developed markets within five years
of launch in the pharmaceutical industry.

Looking into the future with these trends, pharmaceutical industries may be stirred to
refurbish themselves into a platform of opportunities and challenges. The impact of these
trends on the health sector will be immeasurable in the forthcoming years. These trend in
the pharmaceutical industry will be dramatic by virtually any measure where the growth in
the global pharma market includes, the upcoming innovative drugs and medicines, increase
in intense market competition, and high volume of investments in new drug developing
technologies. Alternatively, considering a few challenges now, which includes a higher
level of customer consolidation, increased competition & number of products approvals
decreased value from new product launches and increased pricing control & protectionism.
Even at home, growth in the domestic market has slowed down. Therefore looking at these
trends, the major question is that if the pharmaceutical industry will be able to adapt the
necessities provided here in the new innovation and an entrant every day in this industry.
 4. The Pharmaceutical industry in India

The Indian pharmaceutical industry is one of the major contributors of not only Indian but also
of global healthcare outcomes. India continues to play a material role in manufacturing various
critical, high- quality and low-cost medicines for Indian and global markets. “It supplies 50 to
60 percent of global demand for many vaccines (including ARVs), 40 percent of generics
consumed in the US and 25 percent of all the medicines dispensed in the UK.”(IBEF, 2018)

Indian sites have filed 35 to 38 percent of total ANDAs approved (including 25-30 % of total
injectable ANDAs) over the last 5 years(USFDA, 2018). Affordable anti-retroviral (ARV)
drugs from India were a major factor in AIDS patients getting greater access to treatment.
India supplies 60% of global ARV drugs and 30% of the annual UNICEF requirement (IPA
white paper, 2016)

However, over the past few quarters many Indian pharmaceutical companies have recorded
significantly lesser growth and profitability. Many have registered high value erosion, which
to a great extent has formed a barrier to industry’s capacity expansion and R&D plans.

Even in these circumstances, the industry has grown in value with an average annual growth
rate of ~6-7 percent over the last 5 years (Department of Commerce, AIOCD).

The following factors have induced this growth:

§ Increasing demand in global markets: There is significant growth of Generic

penetration in high value healthcare markets (e.g., US), where India supplies more than
20% of the generics demand in major geographies.

§ Stable growth in domestic market consumption: “India’s pharmaceutical market has

grown rapidly over the last decade. Despite recent headwinds, a stable growth of 5-7%
was observed last year. India is likely to become one of the Top 3 pharma markets by
2030.” (AIOCD)
§ Low cost and at scale manufacturing capability in India: India has the second
highest number of US FDA approved facilities and labour costs in Indian have been
lower than other manufacturing hubs by up to 40 percent (POBOS- McKinsey’s
proprietary pharma operations benchmarking ).

While the wind is likely to move in opposite direction for the coming 2 to 3 years,
Indian pharmaceutical companies need to come out stronger and adapt to the changing
landscape.
The growth rate for the Indian pharmaceutical market has slowed down consistently over the
last five quarters—from 12-15 percent in 2015 to 5-6 percent in 2017 . The market growth is
driven largely by volume (2016-17 volume growth was 3-4 percent) with an average price
increase of 1-2 percent. (AIOCD, 2018)

Incremental growth in the Indian pharmaceutical market

TRENDS AND OPPORTUNITY FOR INDIAN PHARMA, Ficci- 2018

Even after the slow rate of the growth, companies continue to look after the healthcare needs,
by improving the quality of life. A few of the new comer have also managed to make it to the
top in a very less span of time. “Institutions (both hospitals and government) have become
much larger customers - Government expenditure on healthcare has increased from 22 Billion
USD in 2012 to 53 Billion USD in 2016.”( Union Budget, 2016)

India’s alarming disease rate and increasing access to better healthcare facilities, an effective
diagnosis rate and also a higher affordability would lead to a potential growth in the volumes.
However, the market is most likely to be affected in the coming years due to several factors.

§ Evolving regulatory landscape: The newly scheduled pharma policy and many other
arbitrations have an influence over the value chain- starting from the development, the
manufacturing and also the supply chain to the pricing and customer involvement.
There is still probability for systematically strengthening and stabilizing the Pharma
 policy of 2012, and improving the ease of doing business going forward. As the
Government is still actively involved in widening healthcare reforms, the industry
environment could see some uncertainty in the near term.

§ Alternate means of engagement with doctors: While doctors and physicians are most
likely to last as the significant influencer of treatment and medicine choice single
handedly, other means of involving physicians could gradually become the practice.
Doctors’ conduct is changing with increasing time spent on the internet to acquire
information. Technology-based isolated healthcare will persist to grow, consequently
increasing the reach and clout of the doctors.

§ Increased patient involvement: As patients wanting to have the power and be more
involved, their choices remain to influence healthcare preferences. Although this
fluctuation is visible across the country, with the trend being much stronger in metro
cities –a recent survey in Gurgaon depicts that more than 60 percent of patients look
for their doctor/hospital preferences on Google before deciding, and the products that
are prescribed thereafter.

§ Greater role of pharmacists: In the near terms, Pharmacists will be gaining more
power and the market may acknowledge another wave of association giving surge to
pharmacy chains. E-pharmacies will see a rise with easing governance and growing
private investment in the pharma industry, causing a dramatic change in generic brands
and substitution ability.
5. Business Model & Strategy for Cipla Limited

Cipla has a wide spectrum of a product range that includes APIs and formulations
for humans as well as animal healthcare products. Cipla has over 2000 products in
approximately 65 categories and is continuously looking for expansion of its
product range. The products manufactured by Cipla are well recognized by
regulatory authorities of India, USA, Germany and the UK etc. this provides
credibility to its products.
The main target of Cipla has always been on the development of new products as
well as on the improvement of existing drug delivery systems and increasing
product applications. A very strong Research and development system have been
developed by Cipla for the same which are well backed by many manufacturing
plants across the cities.
Also, Cipla caters to and supports cancer patients by providing them with low-cost
medicines. It has also the initiator of “No Touch Breast Scan” in India which is a
step ahead to screening technology in India.
 a. Threats for Cipla

Even though, Cipla is one the leading pharmaceutical companies of India, it doesn’t save it
from the threats posed to it that can diminish its business. The Constant price rise in the
Indian market is taking its toll and adding the problem of high costs furthermore, fluctuations
in the currency exchange rates have a noticeable impact on the Company’s operations and
financial results.

Also, recently Cipla bought itself a lot of negative publicity as, AIDS healthcare
foundation had challenged Cipla for the price of its drug for AIDS, which is keeping away
drugs out of reach of many in need.

Furthermore, following are the various threats that Cipla shall be cautious of:

1. Drug Pricing control methods in India: Control over pricing of a drug

through national health organisations is in the hand of government. Alterations
in pricing policy affect pharmaceutical companies negatively.

2. Intense competition in generics industry: There is a neck to neck competition

among major competitors such as Lupin, Sun Pharma etc. in the Indian generics
industry. This influences growth potential and also limits the market share for
Cipla.

3. Fluctuation in Exchange rates: Changes in the exchange rates affect the

company’s financial agreement with other countries and thus can influence its
net profitability.
6. Opportunities & Recommendations for Cipla

7.1 Opportunities

1. Strategic Expansion: In the previous years, Cipla has been increasing its
business through initiatives like investments, partnerships and acquisitions in
India along with the international market. For example, Cipla invested in a
biotech manufacturing company in South Africa. It also conquered InvaGen
pharmaceuticals of the USA etc.

2. Treatment of HIV: Cipla offers a wide range of antiretrovirals products for

the treatment of HIV/AIDS in both children as well as adults. The increasing
count of patients can be treatment by Cipla’s medicines at a very low cost.

3. Grow in Emerging markets: Cipla should look forward to developing in

upcoming markets, especially places where medical infrastructure is
improving and hence pharmaceutical is also expected to grow.

7.2 Recommendations
1. Cipla with is strong Research and Development team can venture into
Alzheimer’s disease medication which can bring them a lot of positive
publicity and profitability in the near future.
2. They can use Viramune generic to achieve a higher growth.
3. Cipla should increase investment in the budding markets, to push
expansion in the global economy, most importantly in the places where
the pharmaceutical industries are expected to grow.
 7. Conclusion

In conclusion, India’s pharmaceuticals market has grown in confidence and firmly move on to
an accelerated growth path. Backed by solid fundamentals, the market is giving rise to a variety
of business opportunities. Cipla is a global pharmaceutical company whose goal is ensuring no
patient shall be denied access to high quality & affordable medicine and support. Over the past
77 years, they have emerged as one of the world’s most respected pharmaceutical names, not
just in India but worldwide. To grow even more in the upcoming 20 years, Cipla Limited shall
focus on the upcoming Pharmaceutical trends i.e. (1)Mergers & Acquisitions, (2)Collaborate
to Innovate (3)Adoption of Artificial Intelligence(AI), (4)Rising Healthcare cost drive
Innovations, and (5)Small and more frequent Product launches will transform the
pharmaceutical industry and accordingly plan their strategies to get the best results. The
company can venture into Alzheimer’s disease medication for which there isn’t any proper
medication yet, this will give Cipla a lot of competitive advantage as it has a very strong R&D
team. Moreover, to expand its business, Cipla shall focus on investing in the budding markets
to push its expansion in the emerging markets.
 8. References

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sciences/pdf/global-pharma-looks-to-india-final.pdf
 9. Appendices

Figures

Figure 10.1: Multiple Digital and Advanced Analytics applications in Pharma value
chain

(FICCI 2018)
Figure 10.2: Global emerging pharma markets