Indian Pharmaceutical Industry:

Industry Analysis and Strategies

Interim Report
Strategy Implementation and Control
Submitted BY
Group 6: Akhil, Harshitha, Jagjot, Pankaj

Indian Pharmaceutical Industry:

Industry Analysis and Strategies
Introduction
The pharmaceutical industry is the worlds largest industry due to worldwide revenues of approximately
US$2.8 trillion. Pharma industry has seen major changes in the recent years that place new demands on
payers, providers and manufacturers. Customers now demand the same choice and convenience from pharma
industry that they find in other segment.
Indian Pharmaceutical Industry is poised for high consistent growth over the next few years, driven by a
multitude of factors. Top Indian Companies like Ranbaxy, Dr Reddys, Lupin and Sun Pharma have already
established their presence. The pharmaceutical industry is a knowledge driven industry and is heavily
dependent on Research and Development for new products and growth. However, basic research (discovering
new molecules) is a time consuming and expensive process and is thus, dominated by large global
multinationals.
The Indian pharmaceutical industry is estimated to be worth USD 21.5 billion1 as of 2009-10 and is expected to
grow at a CAGR of 16-18 percent during 2009-2010 to 2014-15 to reach USD 43-46 billion.

Trends
In terms of scale, the Indian pharmaceutical market is ranked 14 th in the world. By 2015, it will rank among the
top 10 in the world, overtaking Brazil, Mexico, South Korea and Turkey. More importantly, the incremental
market growth US$14 billion2 over the next decade is likely to be third largest among all markets.

1
2

KPMG Report: Indian pharma Outlook

McKinesey&Company Report: Indian Pharma 2015

2013 Outlook: Indian Pharmaceutical3

2013 Outlook of Indian Pharmaceutical Industry is stable having more profitable value driven growth. Key
aspects of outlook are discussed below:

Stable Outlook: The credit and liquidity profiles of large pharma companies are likely to improve. However,
mid to small-size players may face challenges in managing competitive pressures.

Revenue Growth: Top players of the sector will continue to grow strongly in 2013 (over 20% pa), primarily
led by exports.

Rise in Generic Spending: As per IMS Health, global generic spending is expected to increase to USD400bnUSD430bnby 2016 from USD242bn in 2011.

Rising R&D Spends: R&D spends will likely continue to increase in 2013 as Indian players have started
targeting complex chemistry products.

Product Pipeline Monetisation: Robust product pipelines may bear fruit in 2013 on commercialization.
Pick Up in M&A Activity: Many large Indian pharma companies have made small, niche acquisitions for
product augmentation/geographical expansion.

India Ratings & Research 2013 Outlook Report

Business Models in India

Usually four business models, explained below, are followed by Multinational companies in Indian
pharmaceutical sector. Each is serving specific level of market presence and revenue aspiration. For example if
the aspiration is to be among the leading players in the market, then the approach needs to be indigenized.

Global Demand Drivers4

Growing and aging global population

Growing sick population
Rising incidence of non-communicable & Infectious diseases
Improved access to healthcare
Higher affordability

: CII Pharma Summit 2012

Each has been explained in below diagram.

Growth Drivers in India

Active
participation by
foreign

Exports to
regulated and
semi

pharma
companies

regulated
markets

Changing
disease profile
and
favorable
demographics

Growing
alliances in
emerging

Growth
Drivers

markets

Growth in the market has been driven by following factors:

Changing disease profile and favorable demographics: In India, socio-economic changes and
urbanization along with sedentary lifestyle are leading to rapid epidemiological transition. As a result,
the Indian population is becoming affluent, living longer and increasingly suffering from lifestylerelated ailments such as obesity, heart disease, stroke, cancer and diabetes. The number of Indian
people suffering from these diseases is set to double by 2020. This change in patient demographics will
fuel the demand for quality and affordable treatment in the domestic market.
Active participation by foreign pharma companies: Over the years, foreign pharma companies
have tapped the Indian pharma market through a series of major acquisitions, launches of new
products (especially in the branded segment with India-centric pricing) and expansion of field force.
Further, MNCs have adopted Indiacentric strategies such as differential pricing strategy to strengthen
their presence in India and address the issue of affordability.
Growing alliances in emerging: Indian companies have also been partnering with MNCs in
emerging markets. Such alliances benefit from the R&D (formulation development) and manufacturing
capabilities of the Indian partners and the extensive marketing and distribution footprint of the MNCs
in those markets. There is also an increasing trend among MNCs for partnering in the domestic market,
where marketing and distribution footprint of Indian companies and the product portfolio of MNCs is
being leveraged upon.
Exports to regulated and semi regulated markets: Exports have made significant contribution
to Indian pharma industrys growth story, with the critical market of US generics driving the growth.
148 billion USD worth of patent expiries are expected between 2012 and 2018. In addition, the
healthcare reforms initiated by the US government, aimed at reducing healthcare spending and
covering a larger proportion of population under public healthcare, are also likely to provide impetus
to growth in the generics market. Apart from the developed markets, the Indian pharma companies
have strengthened considerable presence in some of the other fast-growing semi-regulated markets of
Russia, South Africa and some in Latin American countries (Brazil, Mexico, etc.) and South-East Asia.

Key Strategies of Indian Pharmaceutical Enterprises

Outward Greenfield
Foreign Direct Investment

Brownfield Overseas
Investment

Key Strategies
Contract Manufacturing
and Strategic Alliances

Raising Resources Abroad

Competitive advantages of the Indian pharmaceutical industry also critically hinges upon the types of
strategies adopted by its firms. Internationalization strategy that tends to complement and upgrade the
technological strength of Indian pharmaceutical companies can be very crucial for sustaining and enhancing
their competitive position in the world market. For example, as large number of Indian pharmaceutical firms
lack technological capabilities for product development, acquiring overseas business enterprises with new
product portfolios, technology and skills can allow them to emerge as global players.
A Few strategies are discussed below:

Outward Greenfield Foreign Direct Investment: A growing number of Indian pharmaceutical firms are
undertaking outward FDI to diversify their business overseas. The number of joint and whollyowned ventures
undertaken by Indian pharmaceutical companies has consistently increased from just 1 in 1990 to a peak of 31
in 1997. Between 1990 and 2000 their total numbers stood at165 joint and whollyowned overseas ventures
involving about $243 million. The number of outward investing firms has increased from 1 in 1990 to 11 in
1995 to 14 in 2000. A total of 52 pharmaceutical firms are observed to have been engaged in overseas green
field investment activities during 19902000. It is interesting to note that outward FDI activity of Indian
pharmaceutical industry is not entirely confined to the largesized firms alone. Rather a number of
mediumsized firms like Parenteral Drugs, Ace Laboratories, Max India, Claries Life Sciences, Gufic Ltd., etc.,
are also active in such overseas investment activity.

Brownfield Overseas Investment: Last ten years or so have seen Indian pharmaceutical firms
progressively adopting brownfield investment as an alternative strategy for transborder growth through
acquisitions of business enterprises abroad. The number of investments for overseas acquisitions increased
significantly from just 1 in 1995 to 21 in 2005. Between 1997 and 2005, the amount of consideration involved
in overseas acquisitions has increased by 71 times from just $7.5 million to reach $532.9 million.

Contract Manufacturing and Strategic Alliances: Very recently contract manufacturing emerged as a
new growth strategy for many Indian pharmaceutical companies, besides offering contract services like
marketing, research, clinical trials, data management and laboratory services to global pharmaceutical
companies The process of outsourcing brings substantial economic gains to large global firms as they contract
the production of their products to those who can work cost effectively and qualitatively and thus relieve
them to focus on their core competencies and high valueadded operations like research and marketing.
Indian pharmaceutical companies with their low cost manufacturing capabilities meeting international
regulatory standards, expertise in process research and easy availability of qualified workforce in India are
better placed globally to get real boost from this global trend of outsourcing. For Indian firms, outsourcing and
strategic alliances not only provide additional sources of revenues, but also access to new technologies,
marketing networks and best business practices abroad. A large number of Indian companies diversified into
the business of contract manufacturing in the 1990s. A few names can be mentioned like Ranbaxy
Laboratories, Lupin Laboratories, Nicholas Piramal, Dishman Pharmaceutical, Divis Laboratories, Matrix
Laboratories, Shasun Chemicals and Jubilant Organosys. Ranbaxy Laboratories was one of the first Indian
companies to adopt the strategy of contract manufacturing, licensing and collaborative research to strengthen
its competitive strength in India and overseas markets. It entered into a joint venture with Eli Lilly of USA in
1992 to market selected Lilly products in India and in 1993 Eli Lilly started sourcing Cefaclor intermediates
from Ranbaxy.

Raising Resources Abroad: In 1990s, Indian pharmaceutical firms have increasingly drawn on the global
avenues of financing for their growth. As increasing number of Indian firms are setting up subsidiaries abroad
or going for inorganic growth through overseas acquisitions, they need to raise resources for these purposes.
In true sense of internationalization, their financeraising activities have spilled over the national boundary. A

large number of firms have raised resources abroad by issuing Foreign Currency Convertible Bonds (FCCBs)
and from foreign capital markets like Luxembourg, New York, London, and Singapore by sponsoring GDRs
(Global Depository Receipts) and/or ADRs (American Depository Receipts). Since Indian pharmaceutical firms
already have good business record and brand image in the regulated markets, tapping the global financial
markets becomes easier for them. A good number of firms including Ranbaxy Laboratories, Dr Reddys
Laboratories, Matrix Laboratories, Sun Pharmaceuticals, Nicholas Piramal India, Cipla, Jubilant Organosys,
Strides Arcolab, Lupin, Glenmark Pharmaceuticals, Cadila Healthcare, Wockhardt Ltd, Biocon, Dishman
Pharmaceuticals and Torrent Pharma have been observed to have raised resources abroad in recent years.

Name of Company
Ranbaxy Laboratories Limited
Lupin Limited
Sun Pharmaceutical Industries Limited
Dr. Reddys Laboratories Limited

Ranbaxy Laboratories Limited

Company Profile:
Ranbaxy is a leading Indian pharmaceutical company, with a strong international business complementing its
leading presence in India. Ranbaxy is also one of most integrated companies with backward integration into
APIs.

Sales in over 150 countries

2012 Sales: over $2.3 Bn
~80% International
Ground presence in ~40 countries
Indias first New Chemical Entity (NCE),
SynriamTM, a synthetic anti-malarial drug
launched in India
R&D
Strength in technology
1,100+ R&D Personnel with over 75% are
qualified scientists
14 Brands of Ranbaxy featured in the Top 300
list in India
Growth focus:
(1) Focus on building Branded Generics
business, worldwide
(2) Leverage Ranbaxy's strong presence in,
growing Emerging Markets
(3) Continue to create niche/ exclusive
opportunities197 Filings made across various
global markets

Shareholding Pattern:

Revenue mix by segment

Strategic Focus of Ranbaxy:

Contract
manufacturing,

Outward
investment as a
strategy to
become a
global player

licensing and
collaborative
research

Strategic
Synergies
:Daiichi Sankyo
Partnership.
Innovator and
Generic
Pharmaceutical
Powerhouse

Strategic
Focus

Outward investment as a strategy to become a global player: Ranbaxy pursued outward investment
as a strategy to become a global player. It has about46 subsidiaries and one joint venture covering
important regions across the world. The international operations now account for about 80 per cent of
the total sales of the company. The business model of the company is based on twin objectives of
innovation for drug delivery and discovery and of expanding geographical presence in world generics
business.
Contract manufacturing, licensing and collaborative research actively pursue acquisitions in the
American region: Ranbaxy Laboratories was one of the first Indian companies to adopt the strategy of
contract manufacturing, licensing and collaborative research to strengthen its competitive strength in
India and overseas markets. It entered into a joint venture with Eli Lilly of USA in 1992 to market
selected Lilly products in India and in 1993 Eli Lilly started sourcing Cefaclor intermediates from
Ranbaxy. In 2002 Ranbaxy entered into two overseas agreements for reverse outsourcing and this
contract manufacturing has been one of the core strategies for Ranbaxy till date.
Strategic Synergies: Daiichi Sankyo Partnership. Innovator and Generic Pharmaceutical Powerhouse:
In 2008, Ranbaxy (generic company) partnered with Daiichi Sankyo (innovator company) forming a
Hybrid business model to explore synergies between the two companies across areas of their expertise
right from R&D, manufacturing capabilities and marketing & distribution network. To begin with,
Daiichi Sankyo has started out licensing select branded products from its portfolio to Ranbaxy for
launch in markets where Ranbaxy has strong distribution presence. Strategic combination created an
Innovator and Generic Pharmaceutical Powerhouse.

Lupin Limited
Company Profile:
Lupin Limited, established in 1968 is one the fastest growing generic formulations company with major
presence in India, United States, Japan and some of the other emerging generic markets such as South Africa,
Australia and Philippines. The company has a strong focus on research, manufacturing and commercialization
of pharmaceuticals.

8th largest Market Cap amongst Global

Generic Companies ~$5.7 billion
Revenues > $ 1.74 billion
3rd largest Pharmaceutical company in
India
Onshore presence in 10 countries
R&D expenditure @ 7.5% of net sales
Vertically integrated
12 manufacturing sites
NDTV Business Leadership Awards
Pharma Company of the Year 2012
5th largest and fastest growing generic
player in the US by prescriptions
7th largest and the fastest growing
generic player in Japan
Evolved into a multinational company
with >70 % of turnover from outside
India

Shareholding Pattern:

Strategic Focus of Lupin:

Actively pursue
acquisitions in
the American
region

Multi-pronged
strategy
to improve its brand
image, increase
revenues, and
expand its product
and service portfolio

Increase in R&D
expenditure
and strategic
investments

Strategic
alliance Partners

Strategic
Focus

Increase in R&D expenditure and strategic investments: Lupin has focused on R&D throughout its
growth phase. The company has improved its stature in the international market by developing various
innovative processes, products and technologies. In FY 2006, Lupin increased its R&D expenditure and
strategic investments to US$ 24.24 million. It owns considerable intellectual property and has filed
more than 40 ANDAs in the American market.
Actively pursue acquisitions in the American region: Lupin has plans to actively pursue acquisitions in
the American region. The company has raised US$ 100 million through FCCBs to fuel its acquisitions in
this market to build a stronger product portfolio. It also plans to acquire some established brands in
the pharmaceutical segment to gain market share as well as develop a strong brand presence in the
American market.
Multi-pronged strategy to improve its brand image, increase revenues, and expand its product and
service portfolio: Lupin has established a multi-pronged strategy to improve its brand image, increase
revenues, and expand its product and service portfolio in the market. Lupin has been very active in
developing innovative products in the pharmaceutical segment. The company has undertaken various
initiatives for tapping future growth prospects. Its various initiatives could be categorised under a
product approach and a market approach.
Product Approach: The Company has undertaken some major initiatives to secure future growth. It has
identified innovation as a key driver and plans to increase its focus on R&D. Further, it plans to:

Aggressively launch novel high-value pharmaceutical products

Improve manufacturing capability and offer products in the emerging life style pharmaceutical
segment
Pursue innovation in the delivery and packaging of its pharmaceutical products
Utilise extensive promotional mediums for its products and services
Market Approach: The Company has plans to expand its presence in various pharmaceutical markets
across the globe. To increase the global credibility of its products and services, the company plans to
enter into strategic alliances.

Strategic alliance partners: Lupin plans to increase its focus on developing strategic alliance partners
to market its products in an aggressive manner. The company also has plans to:

Venture into advanced pharmaceutical markets such as the EU, Japan, Australia and the USA
Explore opportunities in the new therapies and business segments
The company has plans to make strategic investments in the new product pipeline for the American
market for its generic business and specialty products segment.

Sun Pharmaceutical Industries Limited

Company Profile:
Sun Pharmaceutical Industries Limited Indian global pharmaceutical company headquartered in Mumbai,
Maharashtra that manufactures and sells pharmaceutical formulations and Active Pharmaceutical Ingredients
(APIs) primarily in India and the United States.
The company offers formulations in various therapeutic areas like cardiology, psychiatry
cardiology, psychiatry, neurology, gastroenterology and diabetology. It also provides APIs such as warfarin,
carbamazepine, etodolac, and clorazepate, as well as anticancers, steroids, peptides, sex hormones, and
controlled substances.
The company offers formulations in various therapeutic areas like cardiology, psychiatry
cardiology, psychiatry, neurology, gastroenterology and diabetology. It also provides APIs such as warfarin,
carbamazepine, etodolac, and clorazepate, as well as anticancers, steroids, peptides, sex hormones, and
controlled substances.

Revenue Mix5

Strategic Focus of Sun Pharmaceutical:

5
6

Sun Pharma Investors Presentation 2013

Sun Pharma Investors Presentation 2013

Shareholding Pattern6

 Create Sustainable Revenue Streams: Sun Pharma predominantly focuses in manufacturing drugs that
are meant for chronic therapies and ailments. It differentiates itself from other players by
manufacturing technically complex products. It also reduces the amount of friction between having an
idea and bringing it to the market, thus saving out on time and also builds up the momentum of the
company.
Seek Cost Leadership: Sun Pharma follows a vertical integration strategy wherein it expands its
business into areas that are at different points on the same production path such as owning its
suppliers and distributors. By adopting this strategy it helps the company to reduce its cost and further
improve its efficiency by decreasing transportation expenses and reducing turnaround time.
Balance Profitability and investments for future: Sun Pharma follows a Greenfield strategy wherein it
acquires foreign lands and starts a new venture by constructing its new operational facilities from the
ground up. Furthermore Sun Pharma differentiates itself from other competitors by manufacturing
complex generics.

Dr. Reddys Laboratories Limited

Company Profile:
Founded as a small firm in 1984 by Dr Anji Reddy, Dr Reddys laboratories has grown to become the 2 nd largest
Pharmaceutical Company following a series of acquisitions and strategic alliances.
There have been several reasons behind the success of DRL, but the major driving forces were its position as a
first mover in introducing new products, getting listed in the New York stock exchange, obtaining patents and
combating legal battles in India and abroad.
Its operations span across three segments, namely; Global generics, Pharmaceutical services and active
ingredients and propriety products. The revenue earned from India operations was INR 14.6 billion. Revenue
has been increasing at a compounded annual growth rate of 14% from FY 2009 to FY 2013. As of 2013, the
consolidated revenue was INR 116 billion. This growth was primarily driven by North America and Emerging
markets in global generics.

Strategic Focus of Dr Reddys laboratories:

High quality portfolio: Dr Reddys has around 150 products in its portfolio. The Company is a leading
player in the oncology market with a strong branded generics portfolio including Capiibine
(capecitabine), Docetere (docetaxel) and Cytogem (gemcitabine). The oncology portfolio registered a
growth of 13.6% in FY2013.
Service Level Excellence: Dr Reddys aims at continued strong engagement with strategic customers.
Revenues grew by 29% to Rs 30,702 million from Rs 23,812 million in FY2012. This growth was largely
driven by new product launches to generic customers and improved customer orders.
Steady growing business: Dr Reddys has a strong presence in highly regulated markets such as the
United States, the United Kingdom and Germany, as well as in other key markets such as India, Russia,
Venezuela, Romania, South Africa and certain countries of the former Soviet Union.

High Quality
portfolio :Mix of
limited competition
and complex
generics products
to significantly
enhance

Service Level
excellence:
Continued strong
engagement
with strategic
customers

Strategic
Focus

Steady growing
business : 12-15
new launches
annually with
launch-year

References
1.
2.
3.
4.
5.
6.
7.

http://www.ranbaxy.com
http://www.drreddys.com
http://www.lupinworld.com
http://www.sunpharma.com
http://indiaratings.co.in/upload/research/specialReports/2013/1/29/fitch29Pharmac.pdf
http://www.cii.in
http://www.mckinsey.com