The business environment of world pharma segment is changing rapidly and every player has to take steps to improve financial working. The industry is facing challenges like decline in R&D productivity, stiff generic competition, pricing pressure, intellectual property rights in developing world, ageing populations in the developed world, legal fights, stringent approval norms, reduction in healthcare spending by several countries and rising selling and distribution expenses. Despite several odds, Indian companies are spreading their geographical presence.
The 34 Indian pharmaceutical companies improved their export earnings strongly by 20.8 per cent during the year 2005-06 to Rs 12,652 crore from Rs 10,477 crore in the previous year. There was noticeable growth of over 50 per cent in export earnings of Cadila Healthcare, Indoco Remedies, Kopran Ltd, Nicholas Piramal India, Panacea Biotec, Suven Life Sciences, Torrent Pharma, Unichem Laboratories and Wanbury Ltd. However, a few companies like Ranbaxy Labs, Biocon, Ajanta Pharma, FDC Ltd, IPCA Laboratories and Medicamen Biotech received set back and their exports declined during 2005-06. Glenmark Pharma, Shasun and Wockhardt managed single digit growth in exports. The growth in exports also continues in the first half of the current year and Indian pharma is set to boost export earnings.
To overcome stiff competition, the Indian pharma majors changed their business strategy and focused more and more on R&D, expansion and upgradation, filing of DMFs and ANDAs, research collaborations, marketing tie-ups and aggressive launching of products. This strategy played well and started earning results. The Indian companies have presence in almost all major markets with large product basket in key therapeutic segments, well organized manufacturing infrastructure with necessary approvals from international regulatory authorities, a strong back up of skills amongst scientists and technical staff. Further, with the strong financial position, Indian companies have set to achieve inorganic growth by mergers & acquisition in foreign countries. CRAMS (contract research and manufacturing services) represents one of the most prominent opportunities in this rapidly changing industry landscape. It address an array of service providers like contract research organizations (CROs), site management organizations (SMOs), clinical research centres, contract sales, manufacturing and central laboratory facilities. This strategic business helps forge win-win relationship between small large research based companies.
Most MNC pharmaceutical companies are experiencing rising R&D costs; consequently, the number of commercialized molecules are declining, compelling these companies to consider outsourcing to retain their effectiveness in India.
At present, global output of Indian pharma industry ranks fourth in terms of volume and thirteenth in terms of value and it is set to move up the value chain by overhauling its strategies to suit the new patent regime. Several drugs are coming off patent in the next few years and Indian pharma segment has well positioned to take advantage of the opportunities with strong front-end, development, partnerships and pipeline.
According to IMS Health, the global pharmaceutical market grew by 7 per cent to US $ 602 billion in 2005. The 10 major markets continued to dominate and accounted for 81 per cent of the total global pharmaceutical market in 2005.The emerging markets of China, Korea, Mexico, Russia and Turkey, experienced double-digit growth, clearly outpacing global performance. As per the IMS forecasts, the total pharmaceutical market is expected to expand at a compounded annual growth rate of 5-8 per cent over next five years. North America and Europe are each projected to grow at 5-8 per cent; Asia-Pacific/Africa at 9-12 per cent, Latin America at 7-10 per cent and Japan 3-6 per cent. Thus there are several opportunities for Indian companies through focus on own R&D and expansion.
Cadila
Cadila Healthcare (Cadila), a Ahmedabad based pharma company, has considerable growth of over 43.7 per cent in exports during the year ended March 2006 to Rs 207 crore from Rs 138 crore. The company's international formulations business on a consolidated basis grew by 114 per cent to Rs 197 crore from Rs 92 crore in the previous year.
Cadila has commenced operations in US, Brazil and South Africa during 2005-06. Its generics segment posted strong sales growth of 20.6 per cent. It has signed a 50-50 per cent joint venture agreement with Mayne Pharma of Australia to manufacture generics injectables, cytotoxic (anti cancer) medicines as well as active pharmaceutical ingredients (API) for the global markets. The plant will manufacture both solution and freeze-dried products and have a maximum capacity of approximately 10-12 mn vials per annum.
RPG
RPG Life Sciences Ltd, a Mumbai based pharma company, has achieved substantial export growth of 27 per cent in export which amounted to Rs 50 crore during 2005-06 against Rs 39 crore in the previous year. The company continues to remain the only manufacturer of doxorubicin and epirubicin and one of few manufacturers for the same products in the world.
Indoco
Indoco Remedies has two fully owned subsidiaries-Indoco Healthcare Ltd. (IHL) and Indoco Netherlands BV, (IHN). The company's Indian subsidiary, IHL has a manufacturing facility at Baddi, Himachal Pradesh and IHN at Netherlands. The company's international business, which made a small beginning, has grown substantially over the years and accounts for about 16 per cent of the total revenues of Indoco. Early in July 2006, Indoco has acquired 100 per cent shares of La Nova Chem (India) Ltd.
Divi's
Divi's Laboratories, has achieved growth of 11 per cent in exports during the year ended March 2006 to Rs 334 crore from Rs 301 crore. The company has incorporate Divi's Laboratories (USA) Inc. in the United States of America and Divi's Laboratories Europe AG in Switzerland as 100 per cent subsidiaries for the purpose of making its products and a greater reach of customers within these regions.
Biocon
Biocon's exports has declined by 4.9 per cent during the year ended March 2006 to Rs 357 crore from Rs 376 crore due fall in prices of statin in Europe. The company's consolidated revenues grew 9 per cent while operating profits (EBITDA) and profit after tax declined by 2 per cent and 12 per cent respectively.
Nicholas Piramal
Nicholas Piramal India (NPIL) recorded significant growth of over 74 per cent in exports during the year ended March 2006 to Rs 220 crore from Rs 126 crore. The company has taken a conscious decision not to be present in early-to-market generics. It plans to grow its global sales primarily by entering into long-term custom manufacturing agreements with innovator companies. It made huge investments in the custom manufacturing business. The company entered fresh agreement with multinational companies like AstraZeneca and Pfizer International, LLC.
Torrent
Torrent Pharmaceuticals (TPL) has developed a strategy and built infrastructure and capabilities focused on tapping new opportunities in the generic segment. The manufacturing facilities are upgraded to meet stringent quality assurance standards of the highly regulated developed countries; at the same time maintaining the competitive cost advantage. Its international operations are focused on five thrust areas: Brazil & Latin America, Russia & CIS countries, Europe, North America and Rest of the World.
Cipla
The export earnings of Cipla, the second largest Indian pharma company, has taken quantum jump during year 2005-06 to Rs 1,513 crore from Rs 1,053 crore in the previous year, a growth of around 44 per cent. This constitutes 50 per cent of total sales and it currently exports to nearly 170 countries. It has a strong presence in the developing countries. The company is following business strategies of collaborations with its international business partners to develop and supply products to the regulated and developed markets.
Dr Reddy's
Dr Reddy's Laboratories (DRL) is spreading its wings by acquisition in the foreign countries and its international operations accounted for 66 per cent of its revenues in 2005-06. The company completed the acquisition of the Betapharm Group in Germany, a fourth largest generics pharmaceutical company, for a total consideration of Euro 483 million. Betapharm has a portfolio of 145 marketed products and several more in the pipeline. This gives a strong foothold in the large German Generics market.
Orchid
Orchid Chemicals & Pharmaceuticals, with world-class facilities for development and manufacture of APIs and finished dosage forms, pushed its exports earning by 19.4 per cent to Rs 621 crore during 2005-06 from Rs 520 crore in the previous year. The company achieved a higher trajectory of growth with revenues and profits posting significant increases. Entry into the US generics market with premium cephalosporin finished dosage forms was a key growth driver.
Glenmark
Glenmark Pharmaceuticals is present in over eighty countries across the globe, with some of its subsidiaries and representative offices in USA, UK, Switzerland, Brazil, South Africa, Nigeria, Russia, Philippines and Malaysia. In addition the company markets its APIs in over fifty countries across the globe. The company is entering new tie-ups with strong regional and global players for the development and approval of its NCEs and generating licensing revenues. It has recently concluded two deals for Oglemilast (GRC 3886) with Forest Laboratories, Inc. for North America and Teijin Pharma Ltd for Japan and outlicensed a diabetes drug to Merck KgaA.
Sun Pharma
Sun Pharmaceuticals consolidated its position in the International market by acquiring a 170 acre site in Tiszavasvari, Hungary, from Valeant Pharma for vertical integration. Further, it also acquired Cranbury, NJ USA to manufacture controlled substance dosage forms and a site at Bryan, Ohio, USA to make semi-solids, pastes and liquids. The company filed new products in international markets to offer a pipeline that supports its current product basket. The number of active registrations stood at 463, with 730 products being marketed. The company is looking out for more acquisition in the US and other international markets in the current year.
Some of these international filings are for complex delivery system based products, like the anticancer liposomal doxorubicin lipodox, and lupride, the one and three-month depot injectable used in cancer and fertility treatments. The company has demerged its innovative part of its R&D in to a separate company and is likely to step up its investments in the current year.
Aurobindo
Aurobindo acquired UK based Milpharm Ltd, the generic formulation pharma company engaged in marketing generic formulations mainly in the UK market. Milpharm is holding over one hundred marketing authorizations approved by UK MHRA for various segments - CNS, CVS, GI, diabetology, anti-fungal, anti-bacterial, oncology, macrolides, cephalosporins and SSPs, anti diabetic, NSAIDS and others.
The company also acquired cGMP and US FDA approved facility in Dayton, New Jersey, USA, for US $ 19 million. This facility has fully integrated state-o-the-art facility with R&D capabilities and or manufacture of formulations and distribution. The company is exploring more acquisition in US and Europe in the coming years.
Ranbaxy
Ranbaxy Laboratories, a highest exporter of Indian pharma products and one of the top 10 global generic player, suffered setback on export front during 2005-06 mainly due to lower export earnings from US due to fierce competition. Its exports on FOB basis declined by 4.7 per cent to Rs 2,224 crore from Rs 2,335 crore in the previous year with adverse pricing pressure.
Ranbaxy entered into new markets, such as Canada & Italy, and increase its stake in its Japanese Joint Venture during 2005-06 from 10 per cent to 50 per cent. It has also realigned and strengthened its business units, and is actively pursuing various options to augment its global operations. The company is also looking at in-licensing, co-marketing and research collaborations in NDDR to boost its operations.
Wockhardt
Wockhardt Ltd consolidated its export market by acquiring units in foreign countries. It acquired Wallis Laboratory during 1998 in UK, the second largest generic market in Europe. This was followed up with the acquisition of CP Pharmaceuticals in Wales during 2003. In 2004 the company acquired Esparma GmbH in Germany. With these acquisitions, Wockhardt's export to Europe accounted for 41 per cent of its sales during 2005.
The company's sales to USA accounted for 11 per cent of its total sales. Its formulation sales in US improved by 50 per cent during the year ended December 2005. The company is selling 11 products in the US and also started marketing products for other companies. It filed 16 ANDAs, nine of them for injectables. It improved its market share in several key products in the US and entered the OTC segment for the first time.
Lupin
Lupin Ltd invested funds for building capacities and infrastructure with major thrust on R&D during last couple of years. The company has created its presence in several markets through a combination of own supply, subsidiaries, partnerships and alliances. Its basket of products, including APIs, intermediates, formulations and branded drugs covers many important and growing therapeutic segments. While making strong inroads into certain life-style segments, the company continues o be a well-recognised global leader in the anti-TB and anti-infective segments.
The company's exports on FOB basis increased by 40.5 per cent to Rs 761.10 crore during 2005-06 from Rs 541.81 crore. Its sales of finished dosages in US market, through its subsidiary - Lupin Pharmaceuticals, Inc, increased to Rs 223 crore in 2005-06. Its Suprax brand received good response in the US market. Lupin has continued its focus on the CIS region and strengthens its position in countries such as Russia, Belarus, Ukraine, Kazakhstan, Uzbekistan and Azerbaijan..