Pharma

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 KEY POINTERS TO UNDERSTAND PHARMA
INDUSTRY

• Important pharma terminologies :

Formulation, Bulk Drugs, API, Generics, OTC Drugs, Acute diseases
and chronic diseases, Specialty Drugs, Regulated markets, semi-
regulated markets, ANDA, DMF, FDA approved facilities, Biologics,
Bio-similar.
• Key Regulatory changes and their impact
• Indian pharma industry trends
 Size, Growth and Share of Exports
 Exports geographies
 Domestic Market-share of Companies
 Share of market between acute and chronic diseases
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 Player Performance
 KEY POINTERS TO UNDERSTAND PHARMA
INDUSTRY

• Global pharma industry trends

 Growth and Size
 Market Shares
 Regulated vs Semi-regulated market
 Importance of Patented drugs
• Growth drivers
• Key Concerns or Challenges
• Future Outlook
• Long-term Strategy

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 Key Pharma Terminologies

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 Simplified Definitions

•Formulation – Final Drug in the form of tablets, capsules, injections etc

•Bulk Drugs /API– Active Pharma Ingredients used in the formulation
•Generics – Drugs that have come out of patents
•Acute diseases and chronic diseases: Acute diseases require short-term
treatment (Ex: cold, Fever etc), whereas Chronic diseases require long-
term treatment (Ex: Diabates, Blood Pressure etc)
•Regulated markets: Developed markets (US, Western Europe and
Japan)
•Semi-regulated markets: Developing markets (Asia, Africa etc)

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 Simplified Definitions

•Patents

•ANDA: Abbreviated New Drug Approval. ANDA is required to sell

Generics in the US retail market
•DMF: Drug Master Files: DMF is required to sell bulk-drugs/APIs in the
US.
•US FDA approved facilities: Manufacturing facilities approved by USFDA
•Biologics: Drugs derived from living cells. Complex to Manufacture.
•Biosimilars: Almost an identical copy of a Biologics drug(equivalent of
Generics for Biologics)

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 Major Regulatory Changes

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 PRE 1970s
• Indian pharma companies were
 Era of MNCs
marginal players
1970-1995
•Decline of MNCs
•Emergence of Strong Domestic Players
• Indian Patents Act,
• Process Chemistry or Reverse
1970
engineering skills
• DPCO, 1970
• Low Manufacturing Costs
• SSI
•Restriction on Indian exports
• FERA
• No investment / effort in new drug
development by Indian companies
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 1995-2014

• Product Patents from 2004 • Return of MNCs

• Relaxation of DPCO • Growth of Exports
• Relaxation of SSI norms • Growing Strength of Large
• Dilution of FERA Indian Pharma Companies
Post 2014
• US regulatory pressures
• Slowing down of
• Competition from countries
Growth especially
like China
Exports growth
• Increasing domestic price
controls.
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 TRENDS IN INDIAN
PHARMA INDUSTRY

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 Between 2003 to 2015, Indian Pharma market grew at a CAGR
of 12-14% while between 2015-21, the growth rate dropped to a
CAGR of 6-7%
INDIAN PHARMA : SIZE AND GROWTH
Segment 2003 2015 2021
Domestic $4 bn $11 bn $19 bn
Formulation
Formulation $1.5 bn $12 bn $18 bn Global Pharma
Exports industry : $ 1170 bn (in
Bulk-Drugs/ $1 bn $3.5 bn $ 4 bn 2021)
API Exports

Total $6.5 bn $26.5 bn $41 bn

Source:
Estimates from company and media reports
https://www.businesstoday.in/industry/pharma/story/indian-pharma-must-grow-at-12-cagr-to-
be-130-billion-in-size-by-2030-289333-2021-02-25
https://pdfs.semanticscholar.org/cb4a/dffd42178a967a32fcf7ba8d477dc51f5200.pdf
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 Formulation Exports to regulated markets now constitutes 56%
of total formulation exports.

Formulation exports by India (2015 to 2020)

Formulation Exports 2015 2020 CAGR

(2015 to
2020)
Regulated Markets 48% 56% 10%
Semi-Regulated 52% 44% 3.5%
Markets

Source:
Pharmaceuticals Export Promotion Council of India
DGCIS
 US, South Africa and UK are the top 3 exports destination.

Source:
Pharmaceuticals Export Promotion Council of India
 Indian formulation industry is fragmented and the top 10
players put together have only 44% market share.

DOMESTIC FORMULATION MARKET SHARE (FY 20)

Source: Company Documents, Based on Domestic Revenues

 ACUTE VS CHRONIC MARKET

• In India, the largest selling drug

category is anti-infectives
whereas globally it is oncologic.
• Acute segment constitute 60% of
Indian pharma market unlike
regulated markets where chronic
segment constitute 70%.
• But the chronic segment growing
faster than the acute segment.

Source: https://www.medicalbuyer.co.in/demand-for-chronic-illness-
medicines-rising-faster-than-acute-drugs-report/
 Player Performance – Formulation
Players

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CLASSIFICATION OF THE FORMULATION PLAYERS

•Indian formulation players can be categorized into:

• large (revenues greater than Rs. 500 crores),

•small players (revenues less than Rs. 500 crores).

•Performance of each type of players vary significantly

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 Large players perform better than the small players.

GROWTH RATES OF DIFFERENT FORMULATION PLAYERS

Type of CAGR OPM in %

Player (2015 to (2015 to 20) Exports as % of Revenues
20)
Large 8 to 12% 20-22%
60 % to 70%

Small 2-3% 10 – 12% 10% to 20%

Source: Company Documents and Industry Interactions

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 GLOBAL MARKET TRENDS

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 Global pharma industry’s growth is quite up and down.

GLOBAL PHARMA INDUSTRY: SIZE AND GROWTH

Source:
Estimated from Company and Industry Sources
https://blog.marketresearch.com/the-growing-pharmaceuticals-market-expert-forecasts-and-analysis
 North America, US and Japan (Regulated markets) contribute to
72% of the global pharma industry

REGULATED VS SEMI-REGULATED MARKET

US: 36%
Europe: 23%
Japan : 13%

Source:
Estimated from Company Reports
https://www.iqvia.com/
 Global pharma industry is highly fragmented.

Source: https://blog.bizvibe.com/blog/largest-pharmaceutical-companies
 Global companies are heavily dependent on a few
drugs for bulk of their revenues

HIGH DEPENDENCE ON SPECIFIC DRUGS

Drug
contribution In
Drug Sales Company % of Company
Company Drug in $bn Sales in $bn Revenues Ailment

Arthritis and
Abbvie Humira 19.9 33.2 60% Spondylitis

Bristol-Myers Blood clots in veins

Squibb Eliquis 9.9 22.6 44% of legs or lungs
Celegne Revlimid 9.69 15.2 65% Leukemia
 Reason for Faster Growth between
2005 to 2015

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 Between 2005 and 2015, exports growth has been double that
of domestic market growth

EXPORTS AND DOMESTIC GROWTH: 2005-15 In US $bn

10%
20% CAGR
CAGR

Source:
25 Company and media reports since 2010
 Why did Exports grew at a CAGR of 20% between 2005
and 2015?

 Patent Expiries
 Between 2006-14, $250bn worth of drugs came off patent.
 Indian players utilized this opportunity to launch Generics
 Low Manufacturing Costs
 Indian drug manufacturing cost (in US FDA approved plants) is
less than half of the manufacturing cost in US/Europe
 Health care costs constitute 10% to 15% of GDP of Regulated
markets
 Generics segment constitute more than 1/4 th of US and European
market.
 US FDA approved Plants
 India has got the second largest number of US FDA approved
manufacturing plants in the world after US
 Why did Exports grew at a CAGR of 20% between 2005
and 2015?

 Abbreviated New Drug Approval (ANDA)

 ANDA is required to sell Generics in the US market
 Between 2005 and 2020, Indian companies received around 35%-
40% of the total ANDAs granted (US companies received 50%)
 Drug Master Files (DMF)
 DMFs are required to sell Bulk Drug/API in the US market
 Between 2005 and 2020, Indian companies received around 45%-
50% of the total DMFs granted (China comes second with 18%)
 Patents
 Indian companies got 26 patents between 2006-16 (out of 840
patents)
 Why did growth slow down
between 2015 to 2021

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 Factors contributing to the growth
Slow-down

International Factors Domestic Factors

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 International Factors
contributing to slow-down

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 Why did growth slowed down between 2015 to 2021

 Patent Expiries
 Reduction in patent expiries
 Between 2006-14, $250bn worth of drugs came off patent.
 Between 2014-22, only $160 bn worth of drugs to go off patent
 Reduction of 36% and slowdown in Generics market
 Competition from China in Bulk-Drugs
 Between 2015 and 2021, Bulk Drugs exports growth was stagnant
- $3.5bn in 2015 to $4bn in 2021
 India face stiff competition from China in Bulk-Drug /API
 Even for domestic consumption, India imports intermediaries
from China
 WHOLESALER CONSOLIDATION

• Indian companies sell Generics in US

through Wholesalers.
• About a decade ago, US had more than 10
wholesalers contributing to about 80 per
cent of the USA's generic market.
• Due to several M&As, the US wholesale
market is currently highly consolidated,
with three players accounting for 85% of
the market.
• Therefore, the bargaining power of Indian
players had substantially reduced.
Source: Media Reports on Industry
 Why did growth slowed down between 2015 to 2021

 Generics Market has become more competitive

 Companies from other developing countries have also been
focussing on generics and applying for ANDAs.
 Number of companies getting ANDAs gone up by 75% from 114
in 2010 to 193 in 2020
 Number of ANDAs gone up 50% from 500 since 2012 to 750 in
2020
 Why did growth slowed down between 2015 to 2021

 Import Alerts and Warning Letters from USFDA

 USFDA conducting more inspections of facilities
 USFDA issues import alerts or warning letters if there are deviations/non-
conformances from their prescribed standards
 This impact the exports till the non-conformances are rectified
 Many Indian companies have been getting import alerts and warning letters in
some of their manufacturing facilities. (Ex: Sun pharma facilities in Mohali)
 Domestic Factors contributing to
Slow-down

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 Why did growth slowed down between 2015 to 2021

 Increasing Domestic Price controls

 Government gradually including the number of drugs under price control in
the list of National List of Essential Medicines (NLEM)
 Drugs constituting around 20% of the overall domestic market was under
price control in fiscal 2020 impacting growth and profitability.
 Why did growth slowed down between 2015 to 2021

BAN ON FIXED DOSE COMBINATIONS (FDCs)

• FDCs are two or more drugs contained in a single dosage form, such as a capsule
or tablet.
• An example of a fixed-dose combination HIV drug is Atripla (a combination
of efavirenz, emtricitabine, and tenofovir).
• In March 2016, Supreme Court banned 344 FDC drugs due to safety concerns.
•The ban covered about 6,000 brands from major pharma houses including Pfizer
Ltd, Wockhardt Ltd, Alkem Laboratories Ltd, Cipla Ltd, Sanofi India Ltd, and Sun
Pharmaceutical Industries Ltd.
•On Sep 12, 2018, the government prohibited the manufacture, sale or distribution
of 328 fixed dose combination (FDC) drugs for human use with immediate effect.

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 Future Growth Outlook

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 Trends between 2021 to 2025

 Global generics market is expected to increase from $411.6 bn in 2020 to

$650.3bn in 2025
 Share of vaccines in exports is expected to increase from 5% in FY 2016-2020 to
25% in FY 2021-25.
 China’s supply chain disruptions and global companies are exploring alternate
sources for bulk drugs.
 Indian government has brought pharma manufacturing under PLI scheme in
March 2020 approving Rs. 10,000 crores for Bulk Drugs growth.
 Indian companies are increasingly focussing on Biosimilars which are more
difficult to manufacture than me-too Generics.
 Indian companies are gradually expanding their play from Me-too Generics to
Specialty Drugs. (Ex: Illumya from Sun Pharma).
Source: Company Reports, Media Reports
https://www.researchandmarkets.com/reports/5328624/global-generic-drugs-market-2020-2025
 Pharma industry is expected to return to healthy CAGR of around
12% between 20201 and 2026.

INDIAN PHARMA : SIZE AND GROWTH

Segment 2015 2021 2026 CAGR CAGR
(2015-2021) (2021–
2026)
Domestic $11 bn $19 bn $31bn 10% 11-12%
Formulation
Formulation $12 bn $18 bn $30 bn 6-7% 13-14%
Exports
Bulk-Drugs $3.5 bn $ 4 bn $6 bn 2.2% 8-9%
Exports
Total $26.5bn $41 bn $67 bn 7% 12%

Source:
Estimates from company reports, media reports and industry interactions
https://www.businesstoday.in/industry/pharma/story/indian-pharma-must-grow-at-12-cagr-to-be-
130-billion-in-size-by-2030-289333-2021-02-25
https://pdfs.semanticscholar.org/cb4a/dffd42178a967a32fcf7ba8d477dc51f5200.pdf
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 To become strong global players, Indian companies will
have to significantly increase their R&D expenditure.

LONG-TERM STRATEGY

 Indian companies spend on

R&D is much less than that of

MNCs.

 Most of Indian R&D

expenditure go into developing

generics.

Source: Company reports and industry interactions

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