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Indian PharmaceuticalsMarket

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Indian Pharmaceuticals Market(IPM)

 Third largest in the world

Size – FY09 – US$ 21 bn (Domestic – 12 bn, Exports – 9

bn)

Growing at a CAGR of 14 % over last 5 years

PwC report estimates size at US$ 50 bn by 2020Astonishing demand for drugs

Country with most heart patients

40 million+ people with diabetes

5.1 million HIV/AIDS patients

14 million tuberculosis patients

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Industry Classification

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Confidential | Copyright © Larsen & Toubro Infotech Ltd. 4

Industry Analysis – Porters 5 ForcesModel

SU PPLIER PO W ER

 Low to M od erate

 H ig h n o o f su p p lie rs ,A t tim e s u se o f sin g le su p p lie r a s so le

 so u rce fo r p a rticu la r m a te ria l

 D ela y in su p p lyin g m a te ria ls h a m p e rs th e ir a b ility to d e live r prod u cts

B U Y E R P O W E R

 M o d e rate to H ig h

•  For g e n e rics an d O TC d ru g s its hig h

• ’N ee d to ke e p b u ye r s satisfie d o th e rw ise w ill risk to lo se to co m p e tito rs

•  For som e of the pa ten ted an d Life saving drug s b u ye r po w er w illb e m od erate

 B A R R IE R S T O E N T R Y M o d e ra te to H ig h

• .H igh no O fleg alp roced ures

 an d lice n ce s

•  H ig h ca p ita lre q u ire m e n t fo r, & &m fg su p p ly c h a in R D

• &Low success ratio in R D

•  Pa te n t issue s

•  B a rrie rs a re m o d e ra te in&case of ge ne rics as R D

 exp en ses are low

•  E xp o rts re q u ire h ig h

 re g u la to ry cle a ra n ce s

 TH RE AT O F SU BS TITU TE S A N D C O M P L E M E N T S

 M o d e rate to H ig h

• &For R D in ten sive d ru gs th re a t is m o d e ra te

•  For ge n erics a n d off p aten t d ru g s th rea t is

 ve ry h ig h

•  A lte rn a tiv e m e d icin e s like,auy rveda U na nip osing

 threat

C O M PE TITIO N

– , - &V e ry H ig h G e n e ric s V e ry Lo w R DIn te n siv e

•  H ig h co m p e titio n a cro ss co m p a n ie s fo r g e n e rics

•  V e ry le ss d iffe re n tia tio n p o in ts ing e n e rics

•  Price d isco u n tin g a n d m argin p re ssures in g e n e rics

•  For p ate n ted d ru g s it acts a lm ost asm o no po ly

•

4

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Generics Continued

• Key growth drivers

 – Significant patents expires through2011

 – Government priority to rationalizehealthcare costs

 – Cost Competitiveness

• Key Challenges – Foreign currency fluctuations

 – Incresaing costs and cost of capital

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Bulk Drugs (APIs)

• Major players : Ranbaxy, Cipla, DrReddy’s, Lupin, IPCA Labs

•

( )US$bn Increasing share in DMF

Lisitings Indian API Exports

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APIs Continued

• Key growth drivers – Increasing share in DMF listings

 – Contract manufacturing opportunities

 – 2nd highest US FDA approved facilities

 – Cost competitiveness

• Key Challenges – Maintain the pace of new drugs in pipeline

 – IP Competence – Faster turnaround time

 – Research facilities

 –

 –

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Confidential | Copyright © Larsen & Toubro Infotech Ltd. 9

Industry Analysis – Porters 5 ForcesModel

SU PPLIER PO W ER

 Low to M od erate

 H ig h n o o f su p p lie rs ,A t tim e s u se o f sin g le su p p lie r a s so le

 so u rce fo r p a rticu la r m a te ria l

 D ela y in su p p lyin g m a te ria ls h a m p e rs th e ir a b ility to d e live r prod u cts

 B U Y E R P O W E R

 M o d e rate to H ig h

•  For g e n e rics an d O TC d ru g s its hig h

• ’N ee d to ke e p b u ye r s satisfie d o th e rw ise w ill risk to lo se to co m p e tito rs

•  For som e of the pa ten ted an d Life saving drug s b u ye r po w er w illb e m od erate

 B A R R IE R S T O E N T R Y M o d e ra te to H ig h

• .H igh no O fleg alp roced ures

 an d lice n ce s

•  H ig h ca p ita lre q u ire m e n t fo r, & &m fg su p p ly c h a in R D

• &Low success ratio in R D

•  Pa te n t issue s

•  B a rrie rs a re m o d e ra te in&case of ge ne rics as R D

 exp en ses are low

•  E xp o rts re q u ire h ig h

 re g u la to ry cle a ra n ce s

 TH RE AT O F SU BS TITU TE S A N D C O M P L E M E N T S

 M o d e rate to H ig h

• &For R D in ten sive d ru gs th re a t is m o d e ra te

•  For ge n erics a n d off p aten t d ru g s th rea t is

 ve ry h ig h

•  A lte rn a tiv e m e d icin e s like,auy rveda U na nip osing

 threat

C O M PE TITIO N

– , - &V e ry H ig h G e n e ric s V e ry Lo w R DIn te n siv e

•  H ig h co m p e titio n a cro ss co m p a n ie s fo r g e n e rics

•  V e ry le ss d iffe re n tia tio n p o in ts ing e n e rics

•  Price d isco u n tin g a n d m argin p re ssures in g e n e rics

•  For p ate n ted d ru g s it acts a lm ost asm o no po ly

•

9

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 ATEGIC GROUPS IN THE INDIAN PHARMA INDUSTR

&pplied R D &asic R D

 ocal Branding

 lobal Branding

CIPLA

Torrent

 NOVONORDISK

 GlaxoSmithklin

e

-SANOFIAVENTIS

.R’EDDY S

LAB

RANBAXY

Generics

In  ternational Formulation

 Domestic Formulation

TORRENT

CIPLA

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Dr. Reddy’sLaboratories Ltd

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 The Company

OriginEstd. Feb ‘84

Founder: Dr. Anji ReddyDr.Reddy’s under Dr. AnjiReddy

Pioneer and Trendsetter inIndian Pharmaceuticalindustry

 –  Turned around Indian BulkDrug industry

 – Indian Bulk Drug industry

Indian Bulk Drug Industry

 – Mid-80s: Import-dependent

 – Mid-90s: Self-reliant

 – 2000 on wards: Export-oriented industry

Global Presence• Focus on US, Germany, India

and Russia• Wholly-owned subsidiaries in

the USA, UK, Russia,Brazil, New Zealand, Turkey and Mexico

•  Joint Ventures in China,South Africa and Australia

• Representative Offices in 16countries

• 3rd party Distribution setupsin 23 countries

 First Indian Pharmaceutical Company to take up   r u g D i s co ve r y

r e s e a r c h

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Revenue distribution

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Purpose: Providing affordable &innovative medicines forhealthier lives

Strategy: Leaverageindustry-leadingscience & technology, product

offering and customer service withexecution excellence

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Shareholding Pattern

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Competitor Analysis

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RanbaxyIncorporated in 1961

Ranked among the top 10 generics companies in the world

Ground operations in 49 countries and manufacturingoperations in 11 nations

Exports contribute to around 80 per cent of the total

revenues

 The company’s net profit in first quarter of 2008 was US$ 39million.

Aspires to become a research based pharmaceutical

company with revenues of US$ 5 billion by 2012Envisions being in top five global generics players by 2012

 TC presence: Anti-infectives, CVS, diabetes, dermatological,neuro-psychiatry, Pain management, GI and Nutritional

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CIPLASet up in 1935

World’s largest manufacturer of cost effective anti-retroviraldrugs

Cipla’s products are bought by over 170 countries across allthe continents

Partnerships with nine companies for over 125 products

Recorded a turnover of US$ 800 million in 2009

Exports account for over 50 per cent of the overall sales

Over 100 Drug Master File (DMF) registrations in the US andover 85 in Europe

Presence across most of the therapeutic category

•

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GSK 

 Two manufacturing units in India, located at Nasik and Thane

2000-strong fieldworkers and a countrywide network of over4000 stockists

Net sales of the pharmaceuticals business segment was US$326 million, which constitutes 92 per cent of the company’s

total sales

It exported bulk drugs and formulations worth US$ 7.1 million

 Two R&D centers which are approved by the Department of Scientific and Industrial Research, Government of India

 TC presence: Anti-infectives, CVS, diabetes, dermatological,pain management, CNS, GI, nutritional, gynaecological,respiratory, sera and immunoglobulin, hormones

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Peer Comparision

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SWOT Analysis

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Management DiscussionAnalysis

FY 11 Guidance : RoCEof 18 – 22%. FY13 Goal : Revenues $3bn & RoCE of 25%

Strong & sustained cash flows expected from productopportunities suchas Omeprazole Mg OTC, Fondaparinux &

Fexofenadine pseudoephedrine

Attractive Emerging Markets presence with stronghold in twokey ‘BRIC’

Markets – India & Russia

Strategic alliance with GSK for Emerging Markets

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Key priorities

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DRL Businesses

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Business Model

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APIs

Active Pharmaceutical

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Active PharmaceuticalIngredients

Acquisitions in Mexico and UK Services

Ø Process research

Ø Product development

Ø Pilot scale manufacture

Ø Product regulatory support

Large Client base

•

Active Pharmaceutical

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Active PharmaceuticalIngredients

Adds strategic value to the Finished Dose business75% of global Generics requirement sourced

internally

High degree of Vertical Integration and Costadvantage

Servicing more than 800 customers spread over100 countries and Six continents

Active Pharmaceutical

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Active PharmaceuticalIngredients

%CAGR of 22

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Global Generics

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 Global Generics

Deepening market presence

Widening scope of portfolio offering

Achieving supply chain excellence

Addressing the need for infrastructure / capacityincrease

Focus on emerging markets

Global Generics North

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Global Generics- NorthAmerica

Portfolio of 50+ products with 3/4th

of the portfoliovertically integrated

Sumatriptan contributed 36% of total NorthAmerica revenue

FDA approved manufacturing facilities in India andShreveport, USA

Supply chain excellence

•

•

Global Generics North

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Global Generics- NorthAmerica

•

•

•

%Growthof 53

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 Global Generics - Germany

Acquisition of Betapharm in 2006 The emerging trend – Increasing tender activities

by State Health Insurers

Long term planØ Focus on increasing market share, increased

scale and growth

Ø Launch of new products and higher shelf space

 –

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 Global Generics - Germany

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 Global Generics - Russia

Portfolio of 22 brandsOTC segment contributes 11% of total sales

High growth potential with attractive margins

80% of products vertically integrated

Market Rank

ØPharma – 16th 

ØGenrics – 7th

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 Global Generics - Russia

. %Growth of 20 8

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Global Generics - Russia

Improve Coverage

Ø Improve market share in Moscow & St Petersburg

Ø Expand hospital coverage

Portfolio

Ø Focus on cardiovascular & oncology

Ø Expansion in OTC segment

Supply chain excellence

Ø Improve availability

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Proprietary Products

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 Proprietary Products

Biologics, Differentiated Formulations and NewChemical Entities

1st Indian Company to fully develop a Biosimilar in-house

Rituximab launch proved to be a large success inIndia

Expect to launch 2 products in FY10 and thereafter1 product every year

Capacity Expansion ongoing for large scalemammalian cell culture plant

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India Business

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India Business

7 brands among Top 300 brands

Omez achieves sales of Rs 100 crs per annum

Emerging leadership presence in niche areas

Ø Dental, oncology & dermatologyRural markets provide a huge opportunity

di i

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India Business

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profitability

E i M k t i t

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Emerging Markets in nextdecade

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Strategic Issues &Recommendations

St t i I

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Strategic Issues

Betapharm (Germany) needs to turn profitable

Increasing market share in Northern andEastern parts of India

 Too much dependence on US and EU markets

Need to find new marketsRural markets in India provides hugeopportunity which needs to be tapped

Increased regulations and change in

government policies can prove detrimental asin case of Germany

R d d t t i

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Recommended strategiesRecommended strategies for Indian markets

Ø Focus on Chronic therapy market since the growth inchronic therapy is approximately 20%

Ø Identify merger and acquisition opportunities withrobust product pipeline

Ø Increase presence in the rural markets – Hugeopportunity

Recommended Strategies for Overseas market

Ø Focus on markets other than the US

Ø Emerging markets like Africa provide a huge

opportunities

Ø Tie up with other players to reach these emergingmarkets

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Market Strategy

Emerging Markets Regulated Markets Aggressive alliancing efforts

. ’outside core Dr Reddy s territories to leverage sole

 generic position

 Regulatory clarity is emerging though market dynamics will take

 some time to mature

 Variable approval pathways and patent situation means that

 potential of pipeline will begin to be evident from FY12

 Emerging markets strategy will“ ”create clinically proven full

 width portfolio of biosimilarproducts

, -Vertically integrated India based development and manufacturing create a high

. ’margin portfolio for Dr Reddy s

 Retain strategic flexibility to-alliance for detailing driven;market dynamics prepare for

-substitution driven price competition

R f

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References

• Marketing Intelligence report – IMS ORG

• Annual report 2009-10 Dr. Reddy’s

• http://www.drreddys.com

• Dr Reddy’s Investor presentations

• http://www.ibef.org/economy/ruralmarket.aspx

• Indian pharmaceutical report-Yes Bank

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THANK YOU !!