Pharmaceutical and Healthcare Sector Overview

1. Market Overview -
a. The Indian pharmaceutical sector was valued at USD 33 Bn in 2017 and is expected to
grow at 22.4 % CAGR to reach USD 55 Bn by 2020.
b. Indian pharma sector contributes to 50 % of global vaccines market with exports worth
USD 19.14 Bn in 2018-19 and it is expected to reach USD 20 Bn by 2020.
c. It is expected that the Indian healthcare market will exceed USD 372 Bn by 2022 by
being one of the fastest-growing sectors.
d. The two major segments include Active Pharmaceutical Ingredients (APIs) / Bulk drugs
and Formulations, which are further broken down to branded and generics.
e. Generic drugs contribute 70% of market share (accounts for 20% of the global generic
drug exports), followed by Over the Counter (OTC) medicines (21%) and patented
drugs (9%).

2. Market leaders:

Company Revenue (INR Cr)

(FY19)
Sun Pharma 28,686
Cipla 12,951
Aurobindo Pharma 12,367
Lupin 11,647
Dr. Reddy’s Labs 10,863

3. Strategies Adopted:
a. Cost Leadership: Sun pharma has vertically integrated its complex API division by
training their existing employees to scale up and lower its cost.
b. Differentiation: Some pharma companies try to offer different innovative products by
heavily investing in their R&D facilities (Eg: Sun Pharma (300 Mn), Lupin (225 Mn) and
Cipla (173 Mn)).
c. New Market Identification: Lupin started exporting to Russia, Latin America and other
Easter European countries while Sun Pharma has focused on specialty and chronic
therapies.
d. Mergers and Acquisitions:

Year Parent Company Acquired

Company
2019 Zydus Wellness Heinz India Pvt.
Ltd

Credits: IBEF, FICCI Trends & Opportunities for Indian Pharma, Company Website, TechSci Research and Assocham
 2018 Cipla Avenue
Therapeutics
2016 Advanced Enzyme JC Biotech
Technologies

4. Growth Drivers -
a. Demand Side:
i. The acceptability of medicines has increased as patients tend to self-medicate
themselves using OTC medicines.
ii. With the rise in population, new diseases and lifestyle changes, the patients are
expected to increase by 20% by the next ten years.
iii. With schemes like Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) and
government plans for providing free generic medicines to 50% of the population,
medicines will become more affordable, leading to a rise in demand.
iv. Medicines would become more accessible with the addition of 1,60,000 hospital
beds by the next decade.
b. Supply Side:
i. The cost of production of medicines in India is approximately 33% lower than
that of the USA.
ii. The medical device industry is growing at a CAGR of 15.2 % and is expected to
reach USD 50 Bn by 2025.
iii. The hospital market size would be USD 200 Bn by 2024 and there would be an
increase in the number of chemists.
iv. The expected patent release count will be 120 for the next ten years.
v. Pharma companies increased their spending in the rural market to gain the rural
market.
c. Policy:
i. India will be a major hub for an end to end drug discovery as per Pharma Vision
2020
ii. Government has allocated Rs 62,659 crore to the Ministry of Health and Family
Welfare
iii. The National Health Mission Scheme will benefit approximately ten crore low-
income families by providing them a health cover of Rs 5 lakh per family per year
in the impanelled hospitals across India
iv. FDI norms are planned to be relaxed by the government
5. Key Trends -
a. Research and development:
i. Indian pharma companies are spending around 8 to 13% of their turnover in
R&D.

Credits: IBEF, FICCI Trends & Opportunities for Indian Pharma, Company Website, TechSci Research and Assocham
 ii. In FY 18, Lupin is leading the R&D expenditure chart, followed by Cipla.
iii. Rising cost and regulatory pressure have been forcing many global pharma
companies to cut down their R&D and manufacturing costs and turn to Contract
research and manufacturing services (CRAMS).
iv. India is emerging as a potential destination for these companies. India’s CRAMS
sector is known for its high-end services and low R&D cost. It is the fastest-
growing sector and is estimated to reach US$ 20 billion by 2020.
b. Increasing exports:
i. India is currently exporting 50% of its total production of pharmaceuticals.
Exporting to around 200 countries across the world.
ii. India is the largest provider of generic medicines and accounts for 20% of global
generic export in terms of volume.
iii. India exported pharma products worth US$ 19.14 billion in 2018-19 and US$
5.17 billion in 2019 till august.
iv. The US is the biggest export destination and most lucrative market for India; it
accounts for about 30% of India’s total shipment. Africa follows it at 19.4% and
European union at 15.9%.
c. Joint Ventures:
i. Over the last three years, the pharmaceuticals segment has accounted for more
than 70 percent of M&A and JVs deals.
ii. Indian companies like Cipla, Aurobindo Pharma, Dr. Reddys and Sun pharma are
seeking Chinese partners for JVs, which is the second-largest drug market.
iii. In July 2019, Strides Pharma has also entered into a joint venture with Sun Moral
International subsidiary of Sihuan Pharmaceutical Holdings Group.
d. Expansion by Indian players abroad:
i. Eyeing revenue growth from the US market, domestic companies like Mankind
entered the US market in 2018.
ii. Cipla, which entered late in the US, generated 21% of its revenue from the
market in 2019.
iii. Lupin is also planning to launch 20 products and is expecting double-digit growth
from the US market.
iv. One of Sun Pharma’s subsidiary has also entered the China market by coming
into an agreement with China Medical System holdings.
6. Important News -
a. Mylan, a multinational drug company, has announced a $ 1 billion investment on
CAPEX in India in the next 5 to 6 years.

Credits: IBEF, FICCI Trends & Opportunities for Indian Pharma, Company Website, TechSci Research and Assocham
 b. Mumbai pharma company Macleods Pharmaceuticals gets licence to develop and
commercialise a breakthrough TB drug (Pretomanid). It will be the 2nd company
after mylan to get the license for india.
c. Dr Reddy’s also recalls ranitidine tablets from US retail counters followed by GSk
after US FDA found presence of the carcinogen a cancer causing impurity above
levels.
d. The government of Telangana is looking to create a $ 100 billion industry in the
pharmaceutical and life science sector. Through its initiative called Hyderabad
pharma city.
e. Govt plans to employ multi sectoral & community let approach to eliminate TB by
2025. It also announced to increase the funds for TB programme by four times.
f. Due to the sluggish US market, domestic companies have registered negative
growth in Q1 FY20.
g. Indian pharma exports are likely to touch $ 22 billion in FY 20 and export stand at $
5 Billion in Q1 FY 20.
7. Prospects/ Opportunities -
a. India is among the top global leaders in the clinical trial market. India has the potential
to attract huge investments to its clinical trial market, which has increased to 400% in
2017.
b. A sizeable rural market is still untapped by pharma companies. With 70% of India’s
population living in rural areas, there has been a sharp growth in demand for generic
medicines in the rural market.
c. There has also been a growing demand for high-end drugs in India and it is expected to
rise with the rise in population.
8. Past Recruiters - Abbott, Cipla, Dr. Reddy's, Episource, Fresenius Medical Care

Credits: IBEF, FICCI Trends & Opportunities for Indian Pharma, Company Website, TechSci Research and Assocham