Challenges & Implications

7/31/2019 Challenges & Implications

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Spotlight on India
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0utline

Anam Jamali(53)

Introduction: AUnique Market

Vipul Newaskar(52)

Growth Drivers

Akarsh Daga(04)

Opportunities

Neel Talati(28)

Challenges andimplications
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Introduction Increasing interest of global pharmaceutical

industry in India:High economic growth

Healthcare reformsPatent legislations

Healthcare market has grown considerably:

Increased consumer spending on healthcareModest healthcare reformsRising prevalence of lifestyle diseases


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Indian pharmaceutical market-doubled in six years

0

1

2

3

4

5

6

7

2000 2002 2004 2006

CAGR

CAGR

CAGR10.2%

3.43.9

4.6

6.1

US $ billion


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Outsourcing to India

Foreign companies are increasingly outsourcing manufacturing and R & D activities inIndia due to low cost structure.

MNCs are building manufacturing and R & D facilities through their IndianSubsidiaries.

For e.g. J & J set up a new 6.5 million euroR & D facility in Mumbai in 2009 andGSK started a new 2,30,000 euro vaccine

production plant in India


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Indian Pharmaceutical Market-14 th in world

274.4

64

34

32

21

20.5

16

15.4

13.4

10.9

10.6

9.1

7.4

7.3

USA

Japan

Germany

France

Italy

UK

Spain

Canada

China

Brazil

Mexico

South Korea

Turkey

India

Sales USD (Bn)Sales USD (Bn)


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A Phased Evolution


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A Unique Market-Features

Dominance of branded generics: 80% of Indian retail market, remainder being pure generics &

OTC products Makes sales coverage and marketing skills very important Share of branded generics higher in India as compared to other

emerging markets

A strong local industry: Competition of large and mid-sized players with multinationals 8 out of 10 companies in India are local as compared to China

and Russia Example: Atorvastatin- 85 local brands


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Local players dominate the IndianPharmaceutical Market

Poland

Russia

Brazil

China

India

79

77

64

26

22

21

23

36

74

78

Chart Title

MNC Local

7.3

13.4

10.9

6.4

5.1


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Features (cont) Low pricing levels 10-12% of U.S prices Prices below the ceiling price mandated by DPCO Intense competition e.g. ciprofloxacin-100 brands Prices may vary due to different reasons Level of molecule specialization- prime driver

Mass products (2-10 %), specialty products (8-35%) &super specialty products (25-50%)

Rapid growth of combination therapies Fixed dose combinations- 44% of Indian market which

is much higher than other markets like Japan, U.S,Germany, etc Important across a wide range of therapeutic areas Reason: Incremental innovation, extension of product

life cycles e.g. Vytorin (simvastatin and ezetimibe)


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INDIAN MARKET BY 2015

$20 bn market by 2015 at growth rate of 12.3 %annually Medical infrastructure, facilitating diagnosis and

treatment 20% Health insurance penetration- 15% Shift in disease profile- 10%

Population growth- 15%Affordability and Medical Infrastructure will Drive75% of demand growth


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Six Trends Will Drive Growth

Expanding income and urbanization will increase healthcarespending's

Chronic disease will make there presence felt

Medical infrastructure will expand

Healthcare insurance coverage will rise

A product patent regime will boost multinational duringlaunches

Aggressive new local competitors will hold their advantage


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1. Expanding income and urbanization willincrease healthcare spending's

Significant rise in INCOME


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High Affordability and Urbanization


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2. Chronic disease will make therepresence felt


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3. Medical infrastructure will expand

Increase in number of beds

Increase in number of doctors

Increase in spending on infrastructure for chronic diseases

Increase in health insurance

Increase in tourist patients 300% rise

Increase in diagnostic laboratory service


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4. Healthcare insurance coverage willrise

Cover 20 % population 220 mn benefited

Rise in Social insurance and employerprovided insurance


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5. A product patent regime will boost

multinational during launches

6. Aggressive new local competitors will hold

their advantageEg. Mankind, Intas, MacleoidsRisen 20% annually

Exploited white space in class II to IV towns and ruralareas


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Uncertainties and Market scenarios

Successfulimplementat

ion of patentregime

Thepenetration

of healthinsurance

Theevolution of

pricing

Thedevelopment of medicalinfrastructur

e

The rise of organized

retail


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OPPORTUNITIES/ STRATEGIES


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Patent laws

inorganic route

pricing strategyRural-centric

health of patients

Biological Products

Tier 1 and Tier 2

Generics

Biosimilars

NDDS

Indiancompanies

MNCS


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Biological Products

Reach 1.4 billion $ Problems- difficulty in synthesis, quality

control, consistency and scale up.


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Tier 1 and Tier 2 market

Mass therapy and speciality therapy Tier 1- $5.7 mn and us $5.5mn

Tier 2 - $ 8.8 billion


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Generics

Constitute 20 per cent of the global genericsmarket by value.

Patent expirations Branded drug prices Price control by Governments


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Biosimilars

US$243 million in 2010 to US$3.7 billion in 2015. Problem

Due to their complexity, cost, and development risks

biosimilar limited to only a handful of pharmacompanies. Drivers

Growing use of biologicalsThe need for more cost-effective treatments

Biocon , Dr. Reddys Laboratories, Intas, LG LifeSciences,Ranbaxy, Reliance LifeSciences, Sandoz, Teva, andWockhardt.


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Novel Drug Delivery System

World pharma market - $500 billion and 15percent ($75billion) is the NDDS market.

In India, the pharma market is about Rs 20,000 crore of

which around five percent is the NDDS market. Driving force

PatentClinical advantages


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Increased patented drug launched inIndia

Product patent 2005 Increased investments 35 per cent market

share of the market by2017 compared with 28per cent.


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Adopting inorganic route to enhancepresence

Acquisitions

Infrastructure

Distributionnetworks

Managementcapabilities

Licensingagreements

Ready basketof genericproducts

Informationtechnology

Cost-effectivemanufacturing


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Differential pricing strategy tostrengthen market reach

Launching patent-protected drugs in India atrelatively low price points than those in developedmarkets.

Diovan (Novartis) Januvia (Merck Sharp & Dohme) Galvus (Novartis)


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Rural-centric initiatives to enhancemarket access

70 per cent of all Indian households and closeto 40 per cent of the total consumption pie.

Pfizer-ITC 9 - Pfizer will sell its over-the-counter products through ITC channels in ruralareas.


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Improve the health of patients

Sanofi- Aventis Saath 76 Consultation todiabetic patients.

J&Js Mobile Health for Mothers - Mobilehealth initiative for expectant mothers.


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Challenges & Implications


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The Changing scenario

MNC

Domination

IndianIndustries

Domination

Round of

M&As


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MID-sized & domestic Companiesoutperformed the market

Successful in identifying & exploiting theuntapped opportunities in the TIER 2 market

MNCs

Midsize &

DomesticCompanies

MNCs


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Rural India Large Population 83 crores Rising prosperity Growth in consumption Change in lifestyle Rural marketing is cheaper Growing faster than the urban markets Remoteness not a problem..Good

transportation


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Challenges

Low literacy rate Dispersed markets Lack of skilled personnels Lack of infrastructure Lack of awareness

Lack of faith in the allopathic system of medicine


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LOOKING FORWARD

Smaller Players

Continue their growthPioneer Market creation

Mankinds, Macleodss , Intas

MNCs

Launch of patentedproducts

Larger Players


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Indian Companies

Shift focus from Market capture to marketcreation

Adopt differentiated strategies & businessmodels

Ensure continued access to products Oncology(31%) & neuropsychiatry(48%)

Strengthen sales & marketing capabilities


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MNC share Sector wise

96

96

83

37

30

20

7

0 20 40 60 80 100 120

Carbonted beverages

tobacco

Auto mobiles

Consumer Durables

FMCG

Pharma

Retail Banking

MNC Share


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MNCs

Clarify Aspirations Align Business Model Invest in local organization


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Clarify Aspirations

Be Among top 10MNCs in India Maintain presencethrough oldproducts or

outlicensing

Be among thetop 5- 6 MNCs Be among the

20-25 players inthe market

Be amongthe top 10players inIndia Be amongtop 3 MNCs Be amongleaders in 2-3 specialitytherapyareas

Be among thetop 5 players inIndiaLeadership inmultipletherapy areas


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Total Pharma 53,803 100.00 +15

Rank CompanyValue

(Rs cr.) M.S. %Growth

+/-%1 Abbott 3,855 7.16 +202 Cipla 2,723 5.06 +123 Ranbaxy 2,524 4.69 +164 GSK 2,166 4.02 +95 Sun Pharma 2,100 3.90 +226 Zydus Cadila 1,970 3.66 +13

7 Mankind 1,815 3.37 +238 Alkem 1,795 3.34 +169 Pfizer 1,719 3.20 +16

10 Lupin 1,449 2.69 +1411 Mcleods 1,350 2.51 +4312 Intas 1,306 2.43 +2813 Sanofi 1,283 2.38 +16

14 Aristo 1,199 2.23 +715 Emcure 1,127 2.09 +1816 Dr Reddys 1,091 2.03 +817 Torrent 1,079 2.00 +1618 Wockhardt 1,075 2.00 +1619 USV 979 1.82 +2420 Micro Labs 949 1.76 +15

Company rankings 2011


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MARKET STRATEGY FOR MNCs

Level Of indigenizationof businessmodel

Level Of aspiration from India Business

Build onlegacy

Global

Mirroring

TherapyLeadership

MarketLeadership

LOW MEDIUM HIGH

NARROW

BROA

D

Legacymassmarketproducts Fewproducts

Therapy &productsmirror globalportfolio

Therapydominationthrough strongprescriber &patient

relationships

Extensiveportfolio Localisedapproach


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Retail Pharmacy

Organized retail Less than 1 % in India Organized retail in other countries

Countries % of Pharmaceuticalmarket

Brazil 30

Mexico 36Russia 36

China 50


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POLICY MAKERS

Emphasize access through health insurance Ensure smooth implementation of patent laws Support capability building in pharmaceuticals

R&D Improving public health infrastructure


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Challenges & Implications

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