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INVESTMENT BANK OF KOZHIKODE
INDIAN HEALTHCARE SECTOR
SURYA GUNIN
KAMALIKA GANGOLY
RINKESH SHAH
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EXECUTIVE SUMMARY
Ministry of Statistics and Programme Implementation, the Indian
economy has registered a growth of 7.4 per cent in 2009-10 and tuned topost a growth rate of 8.2% for 2010-11
The healthcare industry has registered a growth of 9.3 per cent in 2000-
2009.
It is projected to grow at a CAGR of 23% by 2012
The public sector contributes to the tune of only 15-20% and a huge
business potential exists for corporate India.
Combined sales of prescription drugs and over-the-counter (OTC)
medicines are forecast to increase from INR 739.3bn in 2009 to INR
837.7bn in 2010. This equates to year-on-year (y-o-y) growth of 13.3%.
The Indian pharmaceutical market is 14th largest in terms of value, but
the third largest in terms of volume.
It has the fourth largest pharmaceutical market in terms of value in the
Asia Pacific region, behind Japan, China and South Korea.
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0 50 100 150 200 250 300 350 400 450 500
US
Japan
France
Germany
Italy
UK
Spain
Canada
China
Mexico
Brazil
South Korea
Turkey
India
Top 14 Pharmaceutical Markets
2015 (US$ Bn) 2005 (US$ Bn)
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THE DIFFERENT SECTORAL ANALYSIS
PHARMACEUTICALS
The Indian Pharmaceutical grew from INR 862.48bn(US$18.81bn) in 2010 to INR 1,008bn (US$21.72bn)in 2011
HEALTH CARE
The Indian Healthcare grew from INR 2,699bn(US$58.85bn) in 2010 to INR 2,956bn (US$63.70bn)in 2011
MEDICAL
The Indian Medical Devices grew from INR 132.43bn(US$2.89bn) in 2010 to INR 152.31bn (US$3.28bn) in2011
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Prescription Drug Market Forecast
Indias prescription drug market represents oneof the most significant growth opportunities inthe global pharmaceutical industry.
Prescription drugs account for the majority ofIndias pharmaceutical market, which we defineas sales of OTC medicines plus prescriptiondrugs.
A key driver of prescription drug sales in India isthe modernization and expansion of thehealthcare sector.
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910 11
1213
15
18
22
25
30
35
40
44
48
52
0
10
20
30
40
50
60
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Prescription Drugs Sales (US$ Bn)
PRESCRIPTION DRUG MARKET FORECAST
2005 - 2019
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Patented Drug Market Forecast Patented medicines will remain a marginal
player in the overall market.
International players will remain the leadingsuppliers of novel and hi-tech drugs, but
some larger local companies will increasinglyinvest in their own R&D activities.
Sales of more advanced medicines, such as
those to treat cardiovascular diseases,diabetes and cancer-related conditions willbe key drivers.
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0.750.85
1
1.21.3
1.6
1.8
2
2.2
2.7
3.3
4
4.4
5
5.3
0
1
2
3
4
5
6
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Patented Drug Sales (US$Bn)
PATENTED DRUG MARKET FORECAST
2005 - 2019
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Generic Drug Market Forecast
Indias INR592.9bn (US$12.55bn) generic drugmarket is characterized by healthy growth, lowpack prices, medicines that would be termed
patented in most other countries, and very fewforeign players.
The major driver of the countrys generic drugmarket is the patent regime, which does not
meet international standards. One of the most promising sales outlets are part
of the Jan Aushadhischeme.
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810
1112
1314
16
19
22
27
31
37
41
45
48
00
10
20
30
40
50
60
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Generic Drug Sales (US% Bn)
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Key Trends & Developments
GlaxoSmithKline (GSK) hopes to outpace the market in2011 after underperforming in 2010, according toMehernosh Kapadia, senior executive director, inFebruary 2011.
To achieve this goal, GSK will launch new patentedand branded generic drugs and expand its sales andmarketing network.
Despite growing domestic resistance to acquisitions of
local pharmaceutical companies by foreign firms, UK-based household products giant Reckitt Benckiser saidit would acquire India' s Paras Pharmaceuticals forINR32.6bn (US$724mn) in December 2010.
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SWOT ANALYSIS OF
PHARMACEUTICAL INDUSTRY
STRENGTH Massive pharmaceutical market growth potential
Strong local manufacturing sector with leading domestic players
Low-cost but skilled English-speaking labour force.
Swift market approval times.
WEAKNESSES Among the least-developed pharma markets in Asia with
extremely low per capita consumption.
Underdeveloped healthcare infrastructure. Vast regional disparities in healthcare coverage
Many multinationals already selling their products at reducedprices
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OPPORTUNITIES Robust generic and OTC drug market growth
Large and growing population boosting pharmaceutical and medical
demand Underdeveloped market for chronic illnesses and diagnostics
Increasing research and development (R&D) activity by domesticfirms
Global expansion of larger local companies
THREATS Failure to properly enforce World Trade Organization (WTO)-
compliant patent legislation for drugs.
Considerable counterfeit drug industry
Government failure to revise its opaque and discriminatorypricing and reimbursement policy.
Need for overhaul of healthcare delivery structures hamperingbetter access to medicines
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PESTLE
POLITICAL LANDSCAPE
The country is led by the UPA govt. with the IndianNational Congress (INC) party at the front.
India continues to rank high on corruption Lacks the political will to implement tough policies.
ECONOMIC LANDSCAPE
According to Data monitor estimates, Indian economy
is expected to grow at more than 8% during 201013. The fiscal deficit is believed to have been around 6.9%
during 200910, the highest in 16 years.
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SOCIAL LANDSCAPE
Indias progress on the social front continues to beslow despite focus on sustained improvement inquality of life.
The gender ratio in India is improving.It is at 936females per 1,000 males as per the 2001 census.
TECHNOLOGICAL LANDSCAPE
In the prevailing education system, most science andengineering graduates require further training beforethey can begin work.
The 11th five-year plan prioritizes R&D by increasing
opportunities in science and expanding R&D inuniversities.
The Indian internet access market generated totalrevenues of $3 billion in 2009
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LEGAL LANDSCAPE
The expansion of the tax base has improved the
availability of resources to the central government andindividual states.
The lack of a single regulator for the financial sector hasresulted in limited growth in this area, as inter-linkageshave not been fully exploited.
ENVIRONMENTAL LANDSCAPE
India is a poor performer on the Environmental
Performance Index (EPI). In an EPI study carried out in2010, India was ranked in the 123rd position out of 163countries.
Indias dependence on thermal energy, mainly coal-based,has resulted in a host of environmental problems.
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INDIA MARKET SUMMARY
India is the fourth largest market in the Asia Pacific region, behind Japan,
China and South Korea.
However, US$14 per capita spending is among the lowest in the world,
similar to the levels of Pakistan and Vietnam.
Generic drugs will continue to account for the vast majority of drugconsumption in India (at around 75% of total spending), largely owing to
the low cost and limited purchasing power of most of the population.
A substantial amount of the Indian generic drug market comprises
illicit products, due to the countrys lax patent laws. However,
conditions are quickly changing for the better. Traditional and ayurvedicmedicines are very popular
India accounts for almost 10% of global drug production by
volume and is increasingly focusing on indigenous R&D.
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1813
1288
12551
Pharmaceutical Market (by sub-section in US$ bn) 2009-10
OTC Medicine
Patented Drugs
Generic Drugs
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HEALTHCARE SECTOR
Healthcare services are provided by public and private sectors, the
latter having developed in the latest decades when India
embraced privatization.
Private healthcare boasts of superior quality and facilities. It
accounts for more than 65% of primary care and more than 40%of hospitals, resulting in personnel shortages in the public sector.
The large geographical size and growing population numbers
traditionally have hampered adequate access to medicines and
medical services in the sub-continent.
As per The Federation of Indian Chambers of Commerce and
Industry (FICCI) it would cost approximately US$200bn over the
next five years to solve the crisis in Indian healthcare.
To address the funding shortfall, the federation has proposed a
five-pronged public-private-partnership (PPP) model.
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COMPANY ANALYSIS
RANBAXY LABORATORIESSTRENGTHS
Largest domestic pharmaceutical company and a leading global generic
drugs player.
Exports accounting for majority of sales, thereby insulating the company
from fluctuating domestic market conditions.
Considerable overseas presence.
WEAKNESSES
Harsh government pricing policy with the state keen to keep a
downward pressure on prices. Considerable legal costs relating to numerous cases with multinationals,
and most recently with US drug major Pfizer.
Authorized generic drugs will affect anticipated sales from first-to-file
opportunities in the US.
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OPPORTUNITIES Development of generic drugs market presence in Europe and other
markets following key acquisitions and the establishment of whollyowned subsidiaries.
Increasing focus on the high-growth area of generic pharmaceuticals bydivesting its non core businesses.
Growing research-based product pipeline.
Rising local demand for generic drugs, especially in rural areas.
Synergies expected from the involvement of Japanese major DaiichiSankyo.
THREATS Increasingly competitive nature of both the domestic and global generic
drugs market.
Share price continues to fluctuate under pressure from alleged
manufacturing wrongdoings. Increasing foreign competition in the domestic market.
Governments failure to revise its opaque and harsh pricing policy.
Governments plan to impose price controls on all essential medicines.
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PIRAMAL HEALTHCARE LIMITED
STRENGTHS Indias second-largest generic drugg manufacturer with a strong
product portfolio.
Strong and numerous alliances with international drugdistributors and research-based manufacturers such as
AstraZeneca. Tradition of expansion through acquisition of facilities abroad.
WEAKNESSES Significant reliance on the tough Indian market.
Lack of R&D division prevents company from enjoying the highmargins that patented
drugs bring.
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OPPORTUNITIES
Strength in drug-delivery systems implies potential in Asian drug
markets, where demand for hospital-use products is positive. Rising regional and global demand for cardiovascular products.
Development of new therapeutic strengths, including anti-
diabetes products.
THREATS Failure by the Indian government to revise its harsh price controls policy.
Continued threat from counterfeit industry.
Competition from larger local rivals.
Piramal Healthcare, formerly known as Nicholas Piramal India (NPIL), is
one of Indias leading healthcare companies. It is the flagship company
of the INR25bn (US$550mn) Piramal Enterprises (PEL), one of Indias
largest diversified business organizations.
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DR. REDDYS LABORATORIES
STRENGTHS Leading Indian generic drugs manufacturer.
Diverse and prominent global presence, including thedeveloped Western markets.
A significant number of recent product launches.
WEAKNESSES
Exposed to increasingly tough generic competition in the
US in the key product lines. Undergoing costly restructuring in an attempt to boost
R&D and increase generic filings with the US FDA.
Authorized generic drugs will affect anticipated sales fromfirst-to-file opportunities in the US.
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OPPORTUNITIES
New ANDA financing potentially boosting development pipeline.
Authorized generic drugs likely to deliver new opportunities in the US.
Heavy R&D spending potentially yielding new drug discoveries. Rising regional demand for cheaper generic products amid cost-
containment pressures.
Focus on fast-growing diabetes segment and partnership with Novo
Nordisk likely to boost revenues in the medium to longer term.
The acquisition of Betapharm in Germany to boost short-term revenue
growth.
THREATS
Limited room for expansion in mature European generic drugs markets
threatening this high-growth area. Unstable environments in Russia and Latin America threatening
development in those parts of the world.
Governments failure to revise its opaque and harsh pricing policy.
Governments plan to impose price controls on all essential medicines.
Anticipated price cuts on some 8% of all medicines sold in the country.
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