FINAL PROJECT REPORT ON “STUDY OF TOP 10 PHARMACEUTICAL COMPANIES IN INDIA” A report submitted to Ishan Institute of Management & Technology, Greater Noida as a partial fulfillment of full time Post Graduate Diploma in Business Management. UNDER GUIDENCE OF DR. RAKESH SHARMA SUBMITTED TO: SUBMITTED BY: Dr. D.K. GARG Ashish Kr. Chhaperia CHAIRMAN ENR- MMR 4085 IIMT, Greater Noida. Anima Kumari ENR- MMR 4083 Batch: 15 th PGDM (MARKETING)
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FINAL PROJECT REPORT
ON
“STUDY OF TOP 10 PHARMACEUTICAL COMPANIES IN INDIA”
A report submitted to Ishan Institute of Management & Technology, Greater Noida as a partial
fulfillment of full time Post Graduate Diploma in Business Management.
UNDER GUIDENCE OF
DR. RAKESH SHARMA
SUBMITTED TO: SUBMITTED BY:
Dr. D.K. GARG Ashish Kr. Chhaperia
CHAIRMAN ENR- MMR 4085
IIMT, Greater Noida. Anima Kumari
ENR- MMR 4083
Batch: 15th PGDM
(MARKETING)
ISHAN INSTITUTE OF MANAGEMENT &TECHNOLOGY
1A, KNOWLEDGE PARK - I, Greater Noida, Distt. GB Nagar (U.P)
It is the great pleasure to have this opportunity for the preparation of this project. We have highly
obliged by Ishan Institute of management & Technology for giving the opportunity of this
dissertation. I take the opportunity to express our gratitude to all of them, who in some or the
other way helped us to accomplish this project. A large number of individuals have contributed
directly or indirectly in this project. I am thankful to all of them for their help and
encouragement.
I take an opportunity to acknowledge my indebted to Dr. D. K. Garg (Chairman, IIMT), Dean
Sir Prof. M.K. Verma, and all the staff of the PGDM department for making available all
facilities in fulfilling the requirement for the reasonable work.
I wish to acknowledge my thanks to my guide Dr. Rakesh Sharma for their valuable co-
operation and efforts for the preparation of this project.
Last but not least, We also very much thankful to our parents, brother and sisters for their
continuous encouragement and moral support during this project and other people who helped us
in preparing this project knowingly and unknowingly.
Date: - Ashish Kumar Chhaperia
Place:- Enr- MMR 4085
Anima Kumari
Enr- MMR 4083
Batch: 15th PGDM
(Marketing)
DECLARATION
The final project report on “Study on top 10 pharmaceutical companies in India” under
guidance of Dr. Rakesh Sharma is the original work done by me. This is the property of the
Institute and use of this report without prior permission of the institute will be considered illegal
and actionable.
Date: Signature
Name: Ashish Kumar Chhaperia
ENR –MMR 4085
Anima Kumari
ENR –MMR 4083
Batch: 15th
PGDM
(MARKETING)
TABLE OF CONTENTS PAGE No.
CHAPTER-1- INTRODUCTION 6-39
Industry Profile
Objective of the study
Present scenario
CHAPTER-2- GROWTH OF PHARMACEUTICAL INDUSTRY IN INDIA 40-68
CHAPTER-3- REGULATORY ENVIRONMENT OF INDIAN PHARMACEUTICAL
INDUSTRY 69-103
The Patent Act
Drug price control
Patent (Amendment Act)
CHAPTER-4- RANBAXY PHARMA 104-
145
History (Mission, Vision)
Products
Organization structure
Marketing mix
R and D activities
Promotional strategies
CHAPTER-5- DR. REDDY’S LABS 146-165
History (Mission, Vision)
Products
Organization structure
Marketing mix
R and D activities
Promotional strategies
CHAPTER-6- CIPLA PHARMA 166-
210
History (Mission, Vision)
Products
Organization structure
Marketing mix
R and D activities
Promotional strategies
CHAPTER-7- SUN PHARMA INDUSTRIES
211-241
History (Mission, Vision)
Products
Organization structure
Marketing mix
R and D activities
Promotional strategies
CHAPTER-8- LUPIN LABS
History (Mission, Vision)
Products
Organization structure
Marketing mix
R and D activities
Promotional strategies
CHAPTER-9- AUROBINDO PHARMA 298-303
History (Mission, Vision)
Products
Organization structure
Marketing mix
R and D activities
Promotional strategies
CHAPTER-10- GLAXO SMITHKLINE PHARMA
History (Mission, Vision)
Products
Organization structure
Marketing mix
R and D activities
Promotional strategies
CHAPTER-11- CADILA HEALTHCARE
History (Mission, Vision)
Products
Organization structure
Marketing mix
R and D activities
Promotional strategies
CHAPTER-12- AVENTIS PHARMA
History (Mission, Vision)
Products
Organization structure
Marketing mix
R and D activities
Promotional strategies
CHAPTER-13- IPCA PHARMA
History (Mission, Vision)
Products
Organization structure
Marketing mix
R and D activities
Promotional strategies
CHAPTER-14- SCOPE OF PHARMACEUTICAL INDUSTRY
Contract research and manufacturing
Outsourcing and other services
Research and development
CHAPTER-15- SWOT ANALYSIS OF INDIAN PHARMACEUTICAL INDUSTRY
CHAPTER-16- FUTURE PROSPECT
Conclusion
Finding
Suggestion
BIBLIOGRAPHY 304-305
ANNEXURE 306-309
CHAPTER-1
INTRODUCTION
Industry Profile
Recent globalization and the development of the information superhighway have brought the
countries of the world closer. From a business perspective, the world is one marketplace. The
American pharmaceutical industry has played a pioneering role in the development of the drug
industry through in-depth, timely, and useful research and bulk manufacturing of drug products.
Although the US pharmaceutical industry is enjoying the leadership position, it can no longer be
content to focus only on the US, Japanese, and European markets.
India, being the second largest country in the world in terms of population, is also attracting
attention for future business potential. The purchasing capacity of approximately 300 million
middle-class individuals cannot be easily overlooked by global pharmaceutical companies. This
market potential will be increased by Indian officials’ decision to honor international patent laws
by 1 January 2005. After having made a similar move, the Korean pharmaceutical industry grew
tremendously, and the doors to foreign investments swung open. This article analyzes the current
information available about the Indian pharmaceutical industry (IPI). It discusses the IPI’s
preparation for 2005 so that it will not lose market share after multinational companies enter the
Indian pharmaceutical market. It also discusses some strategies that the American
pharmaceutical industry may choose to ensure smooth entry into the IPI.
The pharmaceutical industry in India is going through a major shift in its business model in thelast few years in order to get ready for a product patent regime from 2005 onwards.This shift in the model has become necessary due to the earlier process patent regime put inplace since 1972 by the Government of India. This was done deliberately to promote andencourage the domestic health care industry in producing cheap and affordable drugs. As prior tothis the Indian pharmaceutical sector was completely dominated by multinational companies(MNCs). These firms imported most of the bulk drugs (the active pharmaceutical ingredients)from their parent companies abroad and sold the formulations (the end products in the form oftablets and capsules, syrups etc.) at prices unaffordable for a majority of the Indian population.
This led to a revision of Government of India’s (GOI) policy towards this industry in 1972
allowing Indian firms to reverse engineer the patented drugs and produce them using a differentprocess that was not under patent. The entry of MNC’s was also discouraged by restrictingforeign equity to 40%. The licensing policy was also biased towards indigenous firms and firmswith lesser foreign equity1. All these measures by GOI laid foundations to a strongmanufacturing base for bulk drugs and formulations and accelerated the growth in the IndianPharmaceutical Industry (IPI), which today consists of more than 20,000 players1. As a result theIndian pharmaceutical industry today not only meets the domestic requirement but has startedexporting bulk drugs as well as formulations to the international market.
Currently the main activities of Indian pharmaceutical industry are broadly restricted to producing(i) bulk drugs and (ii) formulations with very few companies risking investing in primary research aimed at developing and patenting new drugs. The bulk drug business is essentially a commodity business, where as the formulation business is primarily a market driven and brand oriented business. Multinational companies which have entered the Indian market have mostly restricted themselves to formulation segment till date. The domestic pharmaceutical industry (MNC’s and Domestic) meets about 90% of the country’s bulk drug requirement and almost the entire demand for formulations. The economics of bulk drug business and that of formulation business are quite different. Since a majority of the Indian companies are producing both bulk as well as formulations, these are considered together for the purpose of the present study.
The Changing Environment
During the early 1990s, markets were opened by removing restrictions on imports and in 1994licensing was abolished for producing bulk drugs and formulations. Other than this FDI restrictions into this sector have been modified to allow 74% foreign equity through the automatic route. More favorable conditions are to follow in future particularly for MNCs as soon as ‘Product Patents’ and ‘Exclusive Marketing Rights’ (EMRs) are permitted.In a situation like this, there is a lot of speculation that the indigenous companies that have been the mainstay of the Indian pharmaceutical industry2 over the past couple of decades finally becoming a formidable part of Indian economy and a major source of foreign income might be facing uncertain market conditions in the future. It may also come down to a state where most of the small scale companies have to close down, with the multinational companies dominating and monopolizing the industry once again.There is a justified reason for this, and that is, so far Indian companies have made use of the cheap labor and the reverse engineering skills under the favorable conditions of process patent regime and developed generic replicas to drugs that were under patent in developed countries, which then were sold in the domestic markets and exported to other unregulated markets elsewhere in the world. This generic business enabled them to compete with multinational companies in India and abroad and resulted in good revenues. However, once the product patent regime gets implemented from the year 2005, one is not allowed to reverse engineer drugs that are patented after 1995, and the revenues from this business will suffer. Whereas, the multinational companies in India, which have an impressive new product portfolio will get exclusive marketing rights to sell their products at higher prices and will be in a position to dictate the terms.Given the above, survival of Indian companies depends on producing generics of drugs whose
patent has lapsed and export the same to regulated markets4. This is possible only if these firms are able to formulate these products at much lower prices allowing then to face competition fromestablished players in the international markets. Other than this, avenues like contract research and manufacturing for multinational companies have become popular business models for many small scale and medium scale firms. Given this situation it is highly likely that individual firms adopt different strategies for growth. These strategies are dependent more on the management’sperception of the individual firm’s strength in terms of finance, manpower and material in relation with the other firms within the industry for a given environmental context. Some of these strategies may end in failure due to unexpected changes in the environment or bad judgment on the part of the management. The main question for which we try to provide an answer is ‘Do internal efficiencies have any role to play in the growth of a firm irrespective of the individual growth strategies adopted in a dynamic environmental context’.
The above question becomes very important for firms which operate in a transition economy. This is particularly true if the transition is aimed towards being a part of the global economy. This would create an environment where firms are faced with a completely new opportunity set in terms of investment and growth. These opportunities encourage firms to adopt high growth strategies at the cost of immediate returns. The success or failure of any such strategies is dependent on the nature of competition faced by these firms over time. Therefore it would be very reasonable to assume that a firm’s internal efficiencies may become the crucial deciding factor in dictating the survival and growth of these firms in various segments of pharmaceutical industry. We concentrate on the role of internal efficiencies in the growth of these firms independent of the individual marketing strategies and long term visions adopted at the firm level.
The following paragraphs try to analyze the role of internal efficiencies in fostering growth usingDEA. Three models of DEA have been used namely the CCR, BCC and AR models not only toascertain the relevance of the parameters used for fostering growth but also to throw light on theefficiency of these models in isolating the better firms irrespective of the individual growthstrategies used.
Cost Structure/Performance indicators of Indian pharmaceutical industryThe pharmaceutical industry is characterized by low fixed asset intensity and high working capital intensity (ICRA 2002). The Material cost, Marketing and selling cost and Manpower Costconstitute the three major cost elements for the Indian pharmaceutical industry, accounting forclose to 70% of the operating income. In the past 6-7 years, material costs, which account foralmost 50% of the operating cost have declined owing to the decrease in prices of bulk drugs andintermediates, increase in exports which enabled procurement of raw materials in large quantitiesand hence at low prices and finally due to increase in production efficiencies. On the other hand,the marketing and selling expenses, comprising of promotional expenses, trade discounts,advertising and distributing costs; and freight and forwarding costs have increased in the past few years owing to the increase in emphasis on sales of formulations. This increased focus onmarketing partly lead to the increase in the manpower costs of pharmaceutical companies duringthe last decade. The other factor for the increase in the manpower costs, at least in case of a few
companies might be due to an increase in R&D efforts, which requires quality research personnel.
Data Envelopment Analysis as a measure of efficiency
Efficiency of a firm can be defined as the maximization of a set of outputs (Output-oriented) given a set of inputs or minimization of a set of inputs (Input-oriented) for a given output. Most DEA applications in the literature are Input-oriented and this is attributed to a general lack of suitable multiple-output datasets. Traditional industry reports (e.g., ICRA2) on the trends in costs, margins and returns generated by IPI analyze the industry with the help of various performance indicators like operating profit margins, net profit margins, fixed asset turnover, working capital intensity and inventory holding period etc. However, parameters like margins, returns and debt ratios can only describe various performance characteristics in isolation as only one input and one output can be taken at a time. Comparison of these parameters in isolation across firms for a given industry might provide a biased picture of a firm’s efficiency vis-à-vis other firms in the same industry. This problem with this kind of analysis can be overcome by defining or developing a performance indicator using the various parameters with suitable weights to come up with a composite index comparable across firms. This strategy would also limit the interpretation of the results due to the static nature of the weights so assigned.
Data Envelopment Analysis (DEA), one of the more recent and a highly popular tool amongresearchers overcomes this problem by simultaneously analyzing multiple inputs and outputs tocome up with a single scalar value as a measure of efficiency. DEA has been used to successfullymeasure relative efficiencies of DMUs in various public and private sector industries like banks,computer industry, health care sector, pharmacies, car manufacturing industry, fisheries and search engines on the internet etc since its development in 1978 (Charnes et al. 1978). In the Indian context Saha et al3 used DEA to measure the relative efficiencies of Indian banks, in a changing environment of financial sector reform initiatives by the Indian government since the early 1990s.
One of the instances where DEA was used in the financial analysis of pharmaceutical companieswas by Smith4, who used financial statements of 47 firms producing pharmaceutical products toshow the advantages of DEA to the traditional ratio analysis in describing the multivariate natureof firms5. The objective of DEA application in the current study is to see if there are any bestpractices developed in IPI that are not influenced by the external environment.
The Methodology of Data Envelopment Analysis
Data envelopment analysis offers several characteristics that are quite unique and useful incomparison to traditional financial analysis methods like ratio analysis or regression analysis.Although all these techniques have their own advantages and disadvantages, one of the mostimportant feature of DEA is the ability to compare many parameters simultaneously and come upwith a scalar measure of overall performance. DEA provides the relative efficiency of each of thefirms (which usually are called Decision Making Units (DMUs)) in a given set of firms. TheseDMUs are assumed to be in the business of producing various outputs by consuming a set of
inputs. In general several inputs are required to produce one or more outputs for a DMU.
However, in DEA only a few inputs and outputs are chosen depending on how critical theircontribution is to the effective performance of the DMU, in order not to dilute the efficiencyanalysis with too many parameters. The selection of inputs and outputs is of paramountimportance in any DEA calculations as the results of the study can vary with different sets ofinputs and outputs. These vary from industry to industry, and even within an industry dependingon the objective of the efficiency analysis being carried out. It always helps to begin with 2-3inputs (outputs) and slowly build up the number noting down the effect of each additional input(output) on the efficiency scores.
Another unique feature of DEA is that the type of units used for all the inputs and outputs doesnot have to be the same, as long as same set of inputs and outputs are used for all DMUs, and themeasure of efficiency becomes “units invariant”. This gives a tremendous flexibility in choosing the inputs and outputs, and a convenient way to compare relative efficiencies of DMUs. Data Envelopment analysis, first proposed by Charnes, Cooper and Rhodes in 1978, is a nonparametric method which assumes the production function is unknown. DEA involves solving a linear programming (LP) problem where the solution provides a numerical description of a piecewise linear production frontier. Since the formal introduction of DEA, the basic concepts and principles have developed into four types of DEA models6. Those are the CCR ratio model, BCC returns to scale model, additive model and multiplicative model. In a comparative study Ahn et al proved theoretically that the results in the form of efficiency or inefficiency are robust, even though different models are applied.
Here we give a brief description of one of the most basic DEA models, the CCR model,proposed by Charnes, Cooper and Rhodes in 1978. We use the following notation: xi, j → ith input of DMU j where i = 1,…,m and j = 1,…,n. yi, j → ith output of DMU j where i = 1,…,s and j = 1,…,n.ui → ith weight corresponding to output yi,o where i = 1,…,s and o = 1…n is the DMU that isbeing evaluated.vi → ith weight corresponding to input xi,o where i = 1,…,m and o = 1…n is the DMU that isbeing evaluated.
In the above notation, we are assuming n DMUs, with m inputs and s outputs. The CCR model ofDEA can be expressed in terms of the following linear programming model5.Max o s so = u1 y1 +L+ u y θ (1)Subject to 1 1 1 + + = o m mo v x L v x (2)u1y1 j +L+ us ysj ≤ v1x1 j +L+ vmxmj j = 1,..., n (3)v1,v2 ,Lvm ≥ 0 (4)u1,u2 ,Lus ≥ 0 (5)θ gives the efficiency of the DMU O. Since there are n companies, we will have n optimisationsto measure the efficiency of each DMU. DMU O is CCR-efficient if θ * = 1 and there exists atleast one optimal solution (v*,u*) with v* > 0 and u* > 0 , where (θ * , v* ,u* ) is the optimalsolution to the LP (1) – (5). Otherwise, DMU O is CCR-inefficient. In case of inefficient DMU,DEA also gives the degree of inefficiency and benchmarks a corresponding reference set ofefficient DMUs, also called peer group. The peer DMUs are the efficient units closest to it and
are observed to produce the same or higher level of outputs with the same or less inputs inrelation to the inefficient DMU being compared.
This enables the inefficient DMUs to know if there is excessive wastage of inputs and/or if there is any scope for improvement in outputs. The above-mentioned Constant Returns to Scale (CRS) DEA model implies that the size of a DMU should not matter for the efficiency. To facilitate ease of calculations, the dual of the LP model (1)-(5) was developed, where a virtual DMU, which is the linear combination of all the DMUs of the sample, is compared with each DMU under evaluation, to calculate the efficiencies as follows:Where j λ are the multipliers corresponding to each of the DMUs in the linear combination ofthe virtual DMU, and therefore the weights of inputs and outputs of the virtual DMU. subject to the constraints,DMU is compared with the virtual DMU to see if it can produce equal or more output than thevirtual DMU with the same or lesser input. If it can, then that particular DMU is efficient andforms a part of efficient frontier with = 1, = 1 and = 0,∀j ≠ 0 o j θ λ λ . If not, it is inefficient andthe degree of inefficiency depends on the efficient companies on the frontier.Banker, Charnes and Cooper8 (BCC) developed a DEA-model that calculates “pure” technicalefficiency, which is consistent with a maintained hypothesis of Varying Returns to Scale (VRS).The BCC model is given by the dual of CCR model (6)-(9), with an extra constraint on jλ , givenbelow by equation (10), which restricts the feasible region to a convex hull and at the same timeensuring the varying returns to scale.1 (10) 1 2 + + + = nλ λ λ LIn fact, an efficiency score obtained using the CCR-model is called Technical Efficiency, whichcomprises of both Scale Efficiency and “pure” Technical Efficiency. In a case where a DMU isfound to be inefficient, one can decompose this total inefficiency to see in what degree this is dueto scale inefficiency or technical inefficiency.At this point, one should note that the resulting weights assigned by the DEA, in CCR and BCCmodels are not necessarily the correct weights as management or the analyst might assign sincethe weights are designed to place the organization under evaluation in the best light possible.DEA provides a conservative performance evaluation and gives the DMU the best weightingpossible whether or not the weightings represent the balance of outputs and inputs desired bymanagement or an analyst. For example, a DMU producing a high level of operating income andlittle operating cash flow may not be considered by an analyst to be as healthy as a DMU with amore balanced production of financial outputs. However, it is possible for this less-healthy DMUto receive a higher DEA score. To avoid a situation, where unfair amounts of weights are beingas signed to any input and/or output, Assurance Region model was developed. In this model,weights of any two inputs/outputs may be controlled with the help of upper/lower limits.
Application of DEA to Indian Pharmaceutical Industry
In the present study we have considered a sample of 44 pharmaceutical companies, whose data isavailable throughout the period 1992 - 2002. The main reason for choosing this sample is the factthat we have continuous availability of data for a common sample, which enables measurementof various performance characteristics of those pharmaceutical companies that have survived at
least 11 years or more. A point to note here is that the selection of such a sample in itself gives aset of companies that have successfully survived at least the last 11 years, and includes most ofthe market leaders on the top and the companies that are struggling to make ends meet in thebottom. Thus we hope that the sample is representative enough to include all kinds of firms witha history of 11 years or more, except the ones, which have started after 1992, and the ones thathave closed down or got merged before 2002.
Indigenous Companies 29 65.91%Multi National Companies 15 34.09%Bulk & Formulations 21 47.73%Only Formulations 22 50%Big (Turnover ≥ 300 Crores) 15 34.09%Small(Turnover < 300 Crores) 29 65.91%The composition of the sample is given which is differentiated under different criterion, first in terms of origin: indigenous versus multi nationals, secondly in terms of business: Bulk & Formulations versus only Formulations and finally, size wise: big versus small.
Our aim is to see how the companies in different categories will fare in terms of efficiencyratings. The DEA analysis on this sample would give relative efficiencies of these 44 firms with respect to each other and not with respect to all the 20,000 companies of Indian pharmaceutical industry. This means, there might be other efficient/inefficient companies, with better/worse practices in the larger population, that are not included in this sample, and whose inclusion mightreduce/increase the respective efficiencies of the firms in the present sample. However, for now,we restrict ourselves to the present sample and focus on their best practices and try to analyse theemerging trends in Indian pharmaceutical industry.
Inputs and outputs for the Data Envelopment Analysis
The choice of the inputs and outputs is very crucial for the relative efficiencies to be useful inarriving at meaningful conclusions. For any given firm in an industry, performance or efficiencyis purely relative. There can be no predefined efficiency indicators given the general constraintthat the sum total of output should always be greater than the sum total of input. Given thisrelative efficiency depends on the firm’s capability or to be precise the management’s capabilityin utilizing the given resources better than the competition. This will provide these firms withsurplus output or slack, which can be used to face market uncertainty and take advantage of anynew opportunities thus enhancing the growth of the firm.
This is also true in case of Indian pharmaceutical industry, which is faced with a major period of uncertainty and an unprecedented opportunity for growth. Most of the parameters fostering growth are external in nature like demand in external markets etc. The one factor which is internal and under the direct control of the management are the costs expended for a given output. The major cost elements, which contribute towards 70% of the operating income2 of a pharmaceutical firm in India are chosen as inputs for the application of DEA in the current paper, as follows:
(i) Cost of Production and selling(ii) Cost of Material and
(iii) Cost of Manpower. (iv) The outputs are (i) Profit margin (ii) Net Sales and (iii) Exports.
As the objective of our study is to look at the internal efficiencies of pharmaceutical companies,the natural choices for outputs are net sales and profit margin, which explicitly state theperformance of the firm. Even though exports are part of net sales, it is taken separately as thethird output, as a representative of a firm’s export business, which is going to play a very crucialrole in a firm’s ability to survive and grow in a post product patent regime.
Results of the DEA Analysis
We used both CCR and BCC models in order to find scale efficiency and pure technicalefficiencies of the 44 companies in our sample. We also used Assurance Region model withrestrictions on weights of the inputs according to the ratio 7:5:1 respectively, which are derivedfrom the past trend in the cost structure of these inputs in the Indian pharmaceutical industry, asdiscussed in the previous section. We have divided the results of the sample into three groups,the group-I consisting of top efficiency ranking firms, group-II consisting of medium efficiencyrankings and finally group-III consisting of the least efficient companies. Table 2 gives the top 8companies in terms of CCR efficiency ratings from the sample. Columns 2 and 3 and 4 give thenumber of times each company in column 1 has come as efficient, using CCR, BCC andAssurance Region (AR) models during the Financial Years (FY) 1992-2002. Finally column 5gives the Compounded Annual Growth Rate of these companies during the period 1992-2002and the last two columns give the net sales of these companies in the years 1992 and 2002respectively.
Group-I companies, as is evident from Table 2 is an interesting mix of 5 small and 3 bigcompanies. However, out of 8 companies, there are 7 Indian companies and 1 MNC; and 6companies are in the business of Bulk & Formulations. Another interesting observation is thatthe Compounded Annual Growth Rate (CAGR) of these companies is quite high with MorepenLaboratories Ltd (MLL) which is BCC-efficient throughout the 11-year period and CCR efficientin 10 out of 11 years, topping the CAGR score. The average CAGR of Group-I companies is26.1%, which is much higher than the industry average.Looking at the scores of the above 8 companies a pattern can be observed. Out of these 8companied 4 companies MRR, Aarti, Organon and Gujarat Themis are both CCR and BCCefficient but fail to score in the AR-model. In the remaining four, 3 companies Bharti, Neulandand Dr. Reddy’s are found to be efficient in all the three models. Ranbaxy was found to behighly BCC efficient but failed to score in both CCR and AR models.It is interesting to note that this discrepancy in terms of model efficiencies seems to be dependenton the growth strategy adopted by these firms. These growth strategies also define the nature andrelevance of the various internal factors used in the analysis. It is evident that these firms havevery high growth rates. The four firms which have not been found to be AR efficient have onething in common in spite of vast differences in the size of the firms. All the four firms are bulkdrug manufacturers. Bulk drug business is characterized by relatively low risk and is more costdriven but requires very low marketing and selling expenses. The low marketing and selling
expenses of these firms have precluded them from scoring in the AR-model. Since the AR-modelpredefines the limits of the parameters used in the model.
In case of three companies which have been found efficient in all the three models their productsrequire more marketing and selling costs. Whereas in case of Ranbaxy which was found to beonly BCC efficient it is interesting to note that inspite of the high growth figures the growth isdriven by low margins. This is possible as Ranbaxy is focusing on increasing its market presenceglobally using pricing as its main strategy which is reflected in its reducing margins.
Best Practices of Efficient Companies in Group I
As discussed earlier, the DEA methodology tries to show every DMU in its best possible light,by giving more weighting to those inputs that are lowest and those outputs that are at the highestfor the DMU under evaluation. Thus, an in-depth analysis of the weights can reveal thoseresources that were more efficiently utilized by an efficient DMU, and hence resulted in a fullefficiency score. A close look at the weights of CCR-scores, for Group-I companies shows thatall the 7 indigenous companies have got maximum weighting to Cost of Manpower, consistentlyfor all the years (total of 74 instances), except in 3 instances. Ranbaxy got more weighting toCost of Material in the year 1999, whereas, DRL got more weighting to Cost of Material in theyear 2000, and to Cost of Production and Selling in the year 2002. However, the only MNC,Organon got more weighting to Cost of Material throughout the sample period (9 out of 11instances), except for 1995 & 2002, where Cost of Manpower got more weighting. Thus, it isclear that the best practice for the indigenous companies is the efficient management of their lowcost Manpower, whereas those MNC’s, which are managing the Raw Material well can fare wellin the efficiency ratings. Perhaps, Organon being in the business of both Bulk & Formulations, in a position to utilize its Raw Material better, and since most of the MNCs are only in thebusiness of Formulations, could not make it to the group of most Efficient companies.
Medium Efficient Companies – Group II
Out of the 12 companies in that are on the CCR-efficient frontier at least in one year, 2are MNCs and the rest are indigenous companies. Exactly 50% of companies in Group II are inthe business of only formulations, and the other 50%, in the business of Bulk drug andformulations, with both MNCs dealing with only formulations. There are 5 companies that havebeen BCC-efficient for 5 or more years, and 9 companies that have come up as efficient with theAssurance Region (AR) model, at least in one year. A point to note here is that the averageCAGR of Group-II companies is 13.04% which is much lower than that of Group-I companies.However, the negative CAGR rate of Duphar-Interfran has contributed to this lower rate to someextent, which otherwise is 14.82% (excluding Duphar-Interfran).
As one can see from Graph I, the top three companies of Group II have achieved a CCR efficiency score of 1 throughout the period 1998 – 2000. In fact Cipla started off its efficiencyjourney, a year early, from 1997 till 2000, and although dipped a bit in 2001-2002, onlymarginally to .95 and .96 respectively. One can see from the graph that the initial period from
1992-1994 was not very good for Cipla, and the CCR-efficiency ratings increased steadily from
1995 onwards. This consistency is reflected in the BCC-efficiency ratings of 0.96 in year 1995and a 1 throughout the 7-year period 1996-2002.
On the other hand, both Torrent and Pfizer started doing well from 1997 on wards, with Pfizer,an MNC achieving full efficiency during 1998-2001 and dipping to lower rate of 0. 94 in 2002.Pfizer has a volatile performance during 1992-1995, after which it has a steady growth in itsefficiency scores. Pfizer has been an outsourcing hub to its global major Pfizer Inc. of the USand also conducts clinical development of new molecules with an R&D base, and has notlaunched many new drugs due to its parent’s policy on patented drug introduction in the Indianmarket. Torrent Pharmaceutical Limited (TPL), an indigenous company, has been BCC- efficientduring 1992-1995 and 1998-2000, dipping only slightly in between; and scale efficient in 1992and during 1998 – 2000, which shows its consistency in being efficient in general, which stayedbetween 0.86 and 1. TPL’s CAGR at 17.26 during 1992-2002 can be attributed to its presence inhigh growth therapeutic segments and introduction of new products in high growth segments likecentral nervous system, gastro intestinal and new molecules in antibiotics.
Novo-Nordisk (India) Limited, to which TPL supplies insulin formulations, ensures a steadymarket for its products. TPL has been focusing on R&D of NCEs and NDDS in recent times,with 6 NCEs in its pipeline and is geared for a post product patent regime, and is also planning tooffer contract research facilities to international as well as domestic players. Duphar-Interfran onthe other hand is an interesting example for a small company, which has stayed efficient evenwith a negative growth that has resulted due to down sizing.Nicholas Piramal India Ltd. and Wockhardt, which rank 5th and 7th in turnover according toFY2002’s figures in the IPI, two of the top league indigenous companies, have a volatile CCR efficiency and a steady BCC-efficiency during the period 1992-2002, as is evident from graph II.However, their performance has been pretty impressive with a CAGR of 25.87 and 23.78respectively, which questions the relationship between growth and efficiency scores. NicholasPiramal India Limited (NPIL), which is in the business of formulations, has been busy expandingand forming alliances with international players like F. Hoffmann La Roche and Boots plc.,which provide NPIL access to their products in niche areas and over the counter (OTC) segment.Thus, even though NPIL has managed to increase its turnover with acquisition of brands and thebusinesses of other pharmaceutical companies, the very investments required for expansion havereduced its internal efficiency scores. Similar arguments hold good for Wockhardt, which has notonly opened subsidiaries in UK, Europe and China, but also invested heavily in the R&D ofLeast Efficient Companies
There are 12 each of indigenous and MNC firms in the least efficient companies, i.e., Group III,as listed in Table 4. These are the companies which never got a full CCR-efficiency score of 1,throughout the period 1992-2002. The minimum and maximum values of their CCR-efficiencyscores are shown in the second and third columns of Table 4 respectively. The average CAGR ofGroup-III companies is 9.84%, which re-instates the lower efficiency scores. There were in total15 companies in the Formulations business and 9 companies in Bulk & Formulations business,highlighting the scale inefficiencies involved in the Formulations business as against Bulk &Formulation business. One can attribute this result to the possibility that companies involved inboth Bulk & Formulation business in general produce at least some of the raw materials requiredfor formulations, and therefore can be more efficient. This may also be one of the reason for the
high percentage of MNCs in the least efficient group, as shown in Table 4, as they are mostlyinvolved in only the Formulation business.
As one can see from Table 4, there are Indian branches of some of the global majors like GlaxoSmithkline Pharmaceuticals Ltd, Aventis Pharma Ltd, Novartis India Ltd and Abbot India Ltdpresent in the least efficient group. Most of these companies have reduced introduction of newproducts in Indian market, as within a short period after introduction of new products, indigenouscompanies come up with reverse-engineered products at much lower prices. After spendingmillions of dollars on R&D of these products, the MNCs can not realize the costs by competingwith the indigenous companies at such low prices. Thus MNCs usually introduce new productsin Indian market, if there are no substitutes, and/or there is sufficient market and there is noimmediate competition and so on.
Objective of the study
India's pharmaceutical industry has been growing at record levels in recent years but now has
unprecedented opportunities to expand in a number of fields. The domestic industry's long-
established position as a world leader in the production of high-quality generic medicines is set
to reap significant new benefits as the patents on a number of blockbuster drugs are scheduled to
expire over the next few years. In addition, more and more governments worldwide are seeking
to curb their soaring prescription drug costs through greater use of generics. These opportunities
are presenting themselves not only in India's traditional wealthy client markets such as the U.S.
and European Union nations but also in emerging economies with vast populations such as
Africa, South America, Asia, and Eastern and Central Europe.
In addition, India's long-established position as a preferred manufacturing location for
multinational drug manufacturers is quickly spreading into other areas of outsourcing activities.
Soaring costs of R&D and administration are persuading drug manufacturers to move more and
more of their discovery research and clinical trials activities to the subcontinent or to establish
administrative centers there, capitalizing on India's high levels of scientific expertise as well as
low wages.
Both multinational and local drug manufacturers could eventually benefit from the market
potential of India's population of over one billion. A large market will likely open up as the result
of a projected boom in health insurance, an area in which the country is currently woefully
underdeveloped. New government initiatives seek to enable the majority of the population to
access the life-saving drugs they need, while even greater opportunities may be presented by the
rise of the new Indian consumer. This group-urban, middle class and wealthy-live fast-paced,
Western-style lives and, as a result, they are beginning to suffer from Western, lifestyle-related
illnesses, for which they want, and can afford, innovative drug treatments.
This untapped domestic market is also highly attractive to the pharmaceutical MNCs, which
recently have returned to India in large numbers (many had left when the regime allowing
process patents only was introduced in the early 1970s). Now, MNCs and domestic companies
are starting to work together, utilizing each other's strengths for their mutual benefit. For the
foreign firms, this includes not only the Indian companies' research and manufacturing
capabilities and their much lower operational cost levels, but also comprehensive marketing and
distribution networks operating throughout India's vast territories.
There are, however, a number of uncertainties, particularly the effects of India's new product
patent system, which was introduced on January 1, 2005. Previously, only process patents were
granted, a situation that led to India's current role as a world leader in the production of high
quality, affordable generics. The new regime may spell the end for the domestic sector's smaller
players, while for others it could represent unprecedented opportunities.
Nevertheless, the domestic industry is still spending far too little on R&D, which must change
quickly if it is even to begin to address these new opportunities and challenges. On the
international front, the industry still has some catching up to do in terms of quality assurance
while, on the local market, pricing remains a problem. There is a need for regulatory reform in
India to encourage leading global players to continue and accelerate the outsourcing of their
R&D activities-beginning with discovery research-to the subcontinent. This is particularly urgent
in the face of the strong competition from India, where the government has been particularly
proactive in encouraging foreign investments in pharmaceuticals and biotechnology.
In India, the industry is now awaiting developments following the January draft publication of
the government's National Pharmaceuticals Policy for 2006. The document contains proposals
for far-reaching initiatives aimed at boosting the domestic industry's global competitiveness, as
well as improving the population's access to medicines. Indian government ministers have also
promised MNCs concrete action soon on speeding the patent approval process and other crucial
issues, such as the definition of patentability and compulsory licensing. Action is required soon,
if India wants to be a significant player in the global pharmaceutical arena.
Characteristics of the pharmaceutical market
The single most important characteristic of the pharmaceutical sector is that it is perhaps the only
class of products in which the consumer – i.e. the patient – has virtually no choice that he/she can
meaningfully exercise. The decision on what medicine must be taken is made by the doctor or, in
some circumstances, the druggist/pharmacist. Thus, the normal dimensions of consumer choice –
product, price and quality – simply do not exist. The only available choice is whether to take the
prescribed medicine or not.
The ‘choice maker’ in this case, whether the doctor or the pharmacist, has no incentive to be
price-sensitive, and indeed may have perverse incentive structures. The doctor’s decision at the
most ethical level would be based on the best treatment of his/her patient, and he/she should
neither be expected to know or even care about the cost of treatment, except in cases where the
patient’s economic condition patently rules out a specific course of treatment. Even in such
situations, the choice is not likely to be between alternative brands of the same active
pharmaceutical ingredient (API), but between alternative APIs within the therapeutic category. It
is not reasonable to expect that the doctor will, or even should, be aware of the various brands of
the same API available in the market, let alone keep him/her updated on the market prices of the
huge range of formulations across the various therapeutic categories. In this situation of limited
information, it is rational to expect prescriptions to be driven by the promotional efforts of the
drug companies, whether ethical or not. Since the intensity of such promotions is resource-
driven, they are likely to be positively correlated to the price of the drug or to the resource base
of the company.
However, there is evidence that in India there is distinct market segmentation between different
brands of the same API, usually on a vocational basis, with prescription behavior in terms of
brand selection being driven by the economic status of the patients in the catchment area.
Although there is no rigorous research which conclusively proves a positive correlation between
average incomes and the price of the most commonly prescribed brand, there is sufficient
anecdotal evidence. This makes perfect economic sense since new companies coming into a
particular API are likely to position themselves to address a target population which has been
excluded by the incumbents. Indeed, there is also evidence that the same company may market
more than one brand of the same API at very different price points. This kind of behavior,
whether by incumbents or by new players, in essence transfers the bulk of the “consumer’s
surplus” to the producers or marketers.
This, in itself, is not necessarily a bad thing, since first of all it provides space for new entrants.
Second, it ensures that a drug is available to a much wider range of patients than would have
been the case if only a single price point were to be used in all markets across the country. The
available data suggests that the range of prices within which different brands of the same API are
currently marketed can be anywhere between 2:1 and 10:1. However, the downside is that such
segmentation can never be perfect, and consequently it may well be the case that a large number
of poor patients may be prescribed a drug which is either beyond their economic capacity or
therapeutically inferior. It is, therefore, of the highest importance that doctors are provided with
information support systems which will enable them to prescribe in the most case-sensitive
manner possible. Whether they do or not would of course depend upon their ethical standards,
but lack of information should not be the cause.
As far as the pharmacist is concerned, who is expected to know the prices of different brands, the
incentive structure is actually perverse since it is rational to push brands which have higher
margins. Even in the case where retail margins are fixed as percentage of the price, a higher price
will be associated with a higher absolute margin. Thus, controls on retail margins are unlikely to
serve the purpose of moderating prices, and may in fact push lower priced products out of the
market. This is not a phenomenon peculiar to drugs, and a retail margin-driven marketing
strategy has been effectively used in a range of products where quality differentiation is an
important factor in consumer choice. However, in most cases where consumer sovereignty
exists, such strategies tend to be short-lived since there is other equally, if not more, effective
ways of affecting consumer behavior. In the case of drugs, such alternatives are not available
and, therefore, there is a tendency for such strategies to be perpetuated for extended periods of
time.
Secondly, the prevailing system for drug certification is completely opaque as far as the
therapeutic quality and effectiveness of different brands are concerned, certainly for the patient
and also possibly for doctors. The Indian Pharmacopoeia (IP) certification, or its equivalent in
other countries, only attests to the quality of the API in most cases, and not to the ‘quality’ of the
formulation, which is what the patient actually purchases. In fact, the significance of the IP mark
is lost to all but the most discerning due to the lack of any active consumer awareness programe.
However, since different formulations of the same API are perceived to have different levels of
effectiveness, perhaps quite rightly since there are usually differences in the excipients or the
drug delivery technology, the lack of adequate information and awareness may lead to ‘adverse
selection’ behavior, whereby a higher price is associated with better ‘quality’. Active brand
promotion by the drug companies contributes to this process in no small measure, and the
government has done practically nothing in this regard. The introduction of good manufacturing
practices (GMP) through Schedule M is eminently desirable in itself as it addresses the issue of
consistency and assurance of quality. However, the level of regulatory enforcement of GMP
through intensive GMP audits as well as the level of competence of GMP inspectors varies
considerably in the country. Its main focus is also consistency rather than assurance of
therapeutic effectiveness.
The reduction in prices of drugs observed over time appears to arise partly from price
competition between alternative brands of the same API, but also from two other sources. First,
competition between alternative APIs within the same therapeutic category, whereby the
emergence of newer, more ‘effective’ alternatives force drug companies to reposition their older
products to cater to a lower income category. Second, growth in incomes can possibly change the
price elasticity of demand sufficiently to justify addressing a larger market segment by lowering
of prices. It should be noted, however, that the latter effect depends critically upon the
distribution of income growth between different income segments. In fact, if growth leads to an
increase in income disparities, drug prices may go up rather than down. In the Indian context, for
instance, historically there has been a reduction in income inequalities, which may have been a
major cause of the observed low drug prices in the country. In recent years, however, there is
evidence that the trend has changed, and income distributions are worsening. The rapid growth in
the size and incomes of the Indian middle-class in recent years permits significant increase in
drug prices without running into affordability and market size issues, which existed in the past.
The role of the introduction and diffusion of newer and better drugs as perhaps one of the prime
mover in lowering drug prices has implications which need to be considered carefully in the
Indian context. Until now, in the absence of product patents, new drugs could be introduced at
considerably lower prices, which then had strong knock-on effects on the prices of existing APIs
in the same therapeutic class. In the future, this process is likely to be much weaker since the
newer patented drugs should be expected to follow market skimming strategies, which has been
the trend in the rest of the world. Consequently, the prices of existing drugs may not experience
the kind of pressure as earlier unless the entry point price is pitched at an appropriate level.
Although drug companies are expected to be sensitive to price-income considerations prevailing
in the specific market, the likelihood of an affordable entry price will depend largely upon
whether the company concerned already has a significant presence in that particular therapeutic
category. In all probability, new APIs will be introduced by relatively large, multi-product firms,
which will not be inclined to poach on their existing client base and will, therefore, tend to
follow a high price-low volume approach, at least initially. This would be particularly true of
MNCs, which would have to be sensitive to their international reference price and third country
repercussions.
On the other hand, the impetus given to domestic research and development (R&D) by the
product patent regime may accelerate the pace of discovery and introduction of new molecules
by companies which do not need to worry about the international dimensions of their pricing
strategy, but this is likely to take time and cannot entirely be relied upon, since the innovator
may perceive the external market as being more important to his interest than the domestic.
Nevertheless, in this context, the processes for grant of patents and for drug approvals in the
country are of the highest importance, and it is necessary that these be streamlined to minimize
time delays. In fact, the immediate danger is that most Indian companies may come under severe
pressure and their resource availability for R&D may get eroded until such time as they
reconfigure their product portfolios. It is; therefore, important to ensure that the pricing and
marketing regime consciously takes into account both R&D needs as well as the transitional
arrangements that may be necessary.
The diffusion of new drugs, or even new formulations, is as important as their introduction, and
requires considerable expenditure in educating the medical fraternity about the product
characteristics and points of differentiation from existing alternatives. It is quite natural,
therefore, that the promotional expenditures of drug companies are significantly higher than that
of most other products, and which serve a very important function. However, there is a very thin
line between legitimate promotion, on the one hand, and market manipulation or anti-competitive
behavior, on the other.
It should be clear, therefore, that in the market for drugs and pharmaceuticals, consumer
sovereignty, which is at the heart of all competition-based policy, simply does not exist and the
role of price competition is, therefore, very limited indeed. In this respect, if no other, the
pharmaceuticals sector is completely different from practically all other commodities, and thus
the strategies and policies normally used to promote industrial activity in other sectors simply do
not apply in this context. It is little wonder then that almost all countries, at one time or another,
have found overt price controls to be the most attractive, and indeed the most effective, method
for ensuring the availability of drugs at affordable prices. There is no doubt that a well designed
price control mechanism can not only moderate the prices of critical drugs, but actually increase
their supply as well. Nevertheless, price controls appear to have fallen out of favor in recent
years due to the increasing complexity of the pharmaceuticals sector and the need to provide
drug companies the flexibility to meet emerging market challenges.
However, it needs to be recognized that intense competition in the Indian Pharma sector, which
is basically multi-source in nature, has in the past responded to the general paying capacity of
Indian population, with the consequence that the prices of drugs manufactured and marketed in
India have remained among the lowest in the world. Although this may change in the coming
years, for reasons that have already been discussed in the preceding chapter, the strategy to
moderate drug prices in the country would have to take cognizance of this fact.
Comparison with the U.S. Market
The Indian biotech sector parallels that of the U.S. in many ways. Both are filled with small start-
ups while the majority of the market is controlled by a few powerful companies. Both are
dependent upon government grants and venture capitalists for funding because neither will be
commercially viable for years. Pharmaceutical companies in both countries have recognized the
potential effect that biotechnology could have on their pipelines and have responded by either
investing in existing start-ups or venturing into the field themselves. In both India and the U.S.,
as well as in much of the globe, biotech is seen as a hot field with a lot of growth potential.
Developing the Domestic Indian Pharmaceutical Market
Satish Reddy of Dr Reddy's Laboratories applauds the government's draft National
Pharmaceutical Policy for 2006's provisions on increasing access to treatments for life
threatening.
Diseases, but points out those Western lifestyle diseases are currently providing the major
growth in the domestic market. India currently spends 4.5 to 5.0 percent of its GDP on health
care, but public spending accounts for just 0.9 percent, putting the nation among the 20 lowest-
spending countries worldwide. Total health expenditures were $29.3 billion in 2004, with around
83 percent accounted for by private providers. The balance of spending is also iniquitous; while
the poorest 20 percent of the population has double the mortality rates, malnutrition and fertility
of the richest quintile, the latter group receives about three rupees for every one rupee spent on
the former. Two-thirds of what the government spends on health care goes to secondary and
tertiary care rather than basic services. Ninety-four percent of all private health spending is out of
pocket, mostly at the time of the incident, and more than 40 percent of hospitalized people
borrow money or sell assets in order to cover their expenses. The remaining 6 percent of
spending is provided by insurance -3.7 percent social, 1.6 percent employer-sponsored and 0.7
percent private insurance. Just 15 percent of the population has some form of insurance; an
estimated 800,000,000 people in India have none. The health insurance market was opened up to
the private sector in 2000 and, since then, growth has been fast, with nearly 10.3 million policies
sold in 2003-04 compared to 7.5 million in 2001-02. A 40 percent compound annual growth rate
(CAGR) is forecast for the health insurance sector over the coming years, making it a significant
driver of the domestic health care market, which analysts at McKinsey believe could be worth
$40 billion by 2012.
National health policy goals By
Achieve zero growth of HIV/AIDS 2007
Eliminate kalar-azar 2010
Reduce by 50 percent mortality due to TB, malaria and other
Vector- and water-borne diseases 2010
Reduce prevalence of blindness to 0.5 percent 2010
Source: Sustaining Health with Innovative R&D and Health Infrastructure; presentation for the
Commission on Intellectual Property Rights, Innovation and Public Health (CIPIH) in New
Delhi, India, November 4, 2004
Rising levels of population and incomes, plus the arrival of new products, will continue to grow
the domestic market around 10 percent a year, but there will be no dramatic change unless there
is help to improve people's access drugs.
In 2003, medicines accounted for just 15 percent of India's total health care spend and patented
drugs currently represent fewer than 5 percent of the national market. The prices of essential
drugs in India are among the world’s lowest, with market growth coming mainly from volume in
urban markets. Turning to the domestic market, forthcoming privatization of health insurance
and India's fast-growing middle class will certainly boost consumption. India's fastest-growing
product segments last year were for lifestyle-related diseases and the MNCs can produce
innovative, patented treatments for these conditions, as well as develop treatments for
developing-world diseases such as malaria, TB and HIV/AIDS.
Novartis's own Institute of Tropical Diseases in Singapore, where such research is being done,
should have been cited in India, but the timing was wrong-before the Patent Act was passed. He
feels that Novartis is unlikely to bring such research to India soon, although in February 2006 the
firm opened a global R&D centre for OTC medicines at Thane, on the outskirts of Mumbai.
Ranjit Shahani applauds the National Pharmaceuticals Policy's proposal of public/private
partnerships (PPPs) to tackle life-threatening diseases such as cancer and HIV/AIDS, but stresses
that, in order for them to work, they should be voluntary, and the government should exempt all
life-saving drugs from import duties and other taxes such as excise duty and VAT. He is,
however, critical about a proposal for mandatory price negotiation of newly patented drugs. He
feels this will erode India's credibility in implementing the Patent Act in a fair and transparent
manner. To deal with diabetes, medicines are not the only answer; awareness about the need for
lifestyle changes needs to be increased, he adds. While industry leaders have long called for the
development of PPPs for the provision of health care in India, particularly in rural areas, such
initiatives are currently totally unexplored.
However, the government's 2006 draft National Pharmaceuticals Policy proposes the
introduction of PPPs with drug manufacturers and hospitals as a way of vastly increasing the
availability of medicines to treat life-threatening diseases. It notes, for example, that while an
average estimate of the value of drugs to treat the country's cancer patients is $1.11 billion, the
market is in fact worth only $33.5 million. “The big gap indicates the near non-accessibility of
the medicines to a vast majority of the affected population, mainly because of the high cost of
these medicines,” says the Policy, which also calls for tax and excise exemptions for anti-cancer
drugs.
Another area for which PPPs are proposed is for drugs to treat HIV/AIDS, India's biggest health
problem. Official estimates put the number of Indians living with the disease at 5.1 million in
2003, with up to 40 percent being women and children, but others say the total is closer to 8
million. 50 Moreover, of the world's 150 million diabetic population, 33 million are in India.
Among the Policy's other proposals are a 2 percent tax that would generate an estimated $1.45
billion a year to provide free medicines under health insurance schemes for the poorest Indians
and also establish at least 25 “pharma parks” over the next five years: a renegotiation pricing
mechanism for patented drugs; reduced prices for bulk public drugs purchases; promoting
generics by removing them from the price control regime; ceiling prices for 314 drugs to be fixed
based on the weighted average price of the top three brands of each product by value at April 1,
2005; rebranding of prescription drugs with clear evidence of market dominance, defined as a
market share over 70 percent; halving excise duty on all medicines from 16 percent to 8 percent;
a 15 to 35 percent cap to be introduced on the wholesale and retail trade margins of unbranded
drugs that are not price controlled: the annual revision of the list of essential drugs; and moves to
strengthen the drug regulatory system and computerize the National Pharmaceutical Pricing
Authority. The Ministry of Chemicals and Fertilizers is also reported to be estimating production
costs for 374 essential drugs, so that their prices can be fixed, and drawing up a list of life-saving
drugs that could be brought under price control. Many of the measures intended by the
government contradict the industry's wishes for further deregulation of the Indian pharmaceutical
market. The challenge remains to provide access to life-threatening diseases and, at the same
time, create price incentives for the R&D investments.
Present scenario
Pharmaceutical products consist of two main components— the active pharmaceutical ingredient
(API) or bulk drug and the formulation (i.e., a suitable final dosage form). Generally, APIs are
either produced by chemical synthesis or are of plant, animal, or biological origin. Patents are
critical aspects in the development and marketing of pharmaceutical products. A patent can be
obtained for a new drug molecule, a new indication for an existing molecule, or for a new drug
delivery system of an existing product. The World Trade Organization (WTO) has decided to
enforce a product patent life of 20 years in all countries. In other words, if drug development and
FDA approval takes approximately 10 years from the first disclosure of the molecule, a
pharmaceutical company gets only 10 years of exclusivity to market the formulation. The
excessive cost of drug development forces drug prices to remain high while the drugs are
protected by patents. In addition, not every project leads to a marketed product,
so successfully marketed products must cover the costs incurred for the failed projects. The
current pharmaceutical market is worth more than $317 billion (4). The major contributing
regions are the United States, Japan, and Europe. GlaxoSmithKline, Pfizer, and Merck are the
top three companies in the pharmaceutical market, with annual sales of $23.5, 22.6, and 20.2
billion, respectively. Pfizer has the largest R&D budget, which is hovering at $4.4 billion .Most
of the major US pharmaceutical companies showed double-digit growth in 1999 (4).Drug prices
vary from country to country. Citizens of developing countries cannot afford expensive
medicines that are under patent. Multinational companies (MNCs) must either choose to sell a
product at a low price in these countries or face the challenge of piracy or parallel trade. Types of
diseases in Third World countries may vary from those in developed nations. However, because
of the lack of sizable profits from distributing pharmaceutical products in Third World countries,
MNCs are reluctant to conduct research to develop new drug molecules to treat these diseases.
Growth Scenario in 2010
India's pharmaceutical industry is now the third largest in the world in terms of volume. Its rank
is 14th in terms of value. Between September 2008 and September 2009, the total turnover of
India's pharmaceuticals industry was US$ 21.04 billion. The domestic market was worth US$
12.26 billion. This was reported by the Department of Pharmaceuticals, Ministry of Chemicals
and Fertilizers. As per a report by IMS Health India, the Indian pharmaceutical market reached
US$ 10.04 billion in size in July 2010. A highly organized sector, the Indian Pharma Industry is
estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually.
Leading Pharmaceutical Companies
In the domestic market, Cipla retained its leadership position with 52.7 per cent share. Ranbaxy
followed next. The highest growth was for Mankind Pharma (37.2%). Other leading companies
in the Indian pharma market in 2010 are
Sun Pharma (25.7%)
Abbott (25%)
Zydus Cadila (24.1%)
Alkem Laboratories (23.3%)
Pfizer (23.6 %)
GSK India (19%)
Piramal Healthcare (18.6 %)
Lupin (18.8 %)
Future Prospects
The Indian pharmaceuticals market is expected to reach US$ 55 billion in 2020 from US$ 12.6
billion in 2009. This was stated in a report title "India Pharma 2020: Propelling access and
acceptance, realizing true potential" by McKinsey & Company. In the same report, it was also
mentioned that in an aggressive growth scenario, the pharma market has the further potential to
reach US$ 70 billion by 2020
Due to increase in the population of high income group, there is every likelihood that they will
open a potential US$ 8 billion market for multinational companies selling costly drugs by 2015.
This was estimated in a report by Ernst & Young. The domestic pharma market is estimated to
touch US$ 20 billion by 2015. The healthcare market in India is to reach US$ 31.59 billion by
2020. The sale of all types of pharmaceutical drugs and medicines in the country stands at US$
9.61 billion, which is expected to reach around US$ 19.22 billion by 2012. Thus India would
really become a lucrative destination for clinical trials for global giants.
There was another report by RNCOS titled "Booming Pharma Sector in India" in which it was
projected that the pharmaceutical formulations industry is expected to prosper in the same
manner as the pharmaceutical industry. The domestic formulations market will grow at an annual
rate of around 17% in 2010-11, owing to increasing middle class population and rapid
urbanization.
The Indian Pharmaceutical Industry today is in the front rank of India’s science-based industries
with wide ranging capabilities in the complex field of drug manufacture and technology. A
highly organized sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion,
growing at about 8 to 9 percent annually. It ranks very high in the third world, in terms of
technology, quality and range of medicines manufactured. From simple headache pills to
sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now
made indigenously.
Playing a key role in promoting and sustaining development in the vital field of medicines,
Indian Pharma Industry boasts of quality producers and many units approved by regulatory
authorities in USA and UK. International companies associated with this sector have stimulated,
assisted and spearheaded this dynamic development in the past 53 years and helped to put India
on the pharmaceutical map of the world.
The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units. It
has expanded drastically in the last two decades. The leading 250 pharmaceutical companies
control 70% of the market with market leader holding nearly 7% of the market share. It is an
extremely fragmented market with severe price competition and government price control.
The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs,
drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and
injectibles. There are about 250 large units and about 8000 Small Scale Units, which form the
core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These
units produce the complete range of pharmaceutical formulations, i.e., medicines ready for
consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and
used for production of pharmaceutical formulations.
Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the
drugs and pharmaceutical products has been done away with. Manufacturers are free to produce
any drug duly approved by the Drug Control Authority. Technologically strong and totally self-
reliant, the pharmaceutical industry in India has low costs of production, low R&D costs,
innovative scientific manpower, strength of national laboratories and an increasing balance of
trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities,
supported by Intellectual Property Protection regime is well set to take on the international
market.
India currently represents just U.S. $6 billion of the $550 billion global pharmaceutical industry
but its share is increasing at 10 percent a year, compared to 7 percent annual growth for the
world market overall. Also, while the Indian sector represents just 8 percent of the global
industry total by volume, putting it in fourth place worldwide, it accounts for 13 percent by
value, and its drug exports have been growing 30 percent annually. The “organized” sector of
India's pharmaceutical industry consists of 250 to 300 companies, which account for 70 percent
of products on the market, with the top 10 firms representing 30 percent. However, the total
sector is estimated at nearly 20,000 businesses, some of which are extremely small.
Approximately 75 percent of India's demand for medicines is met by local manufacturing.
According to the German Chemicals Association, in 2005, India's top 10 pharmaceutical
companies were Ranbaxy, Cipla, Dr. Reddy's Laboratories, Lupin, Nicolas Piramal, Aurobindo
Pharma, Cadila Pharmaceuticals, Sun Pharma, Wockhardt Ltd. and Aventis Pharma. Indian-
owned firms currently account for 70 percent of the domestic market, up from less than 20
percent in 1970. In 2005, nine of the top 10 companies in India were domestically owned,
compared with just four in 1994. India's potential to further boost its already-leading role in
global generics production, as well as an offshore location of choice for multinational drug
manufacturers seeking to curb the increasing costs of their manufacturing, R&D and other
support services, presents an opportunity worth an estimated $48 billion in 2007.
CHAPTER-2
GROWTH OF PHARMACEUTICAL INDUSTRY IN INDIA
Historical background:
India received independence from Britain in 1947. In the early years following that event, MNCs
were allowed to export drugs—mainly low-priced generics and a few high-priced specialty
items. When the Indian government increased pressure against the import of finished products,
MNCs developed formulation units in India and exported only bulk drugs to that country. In the
early 1960s, the Indian government encouraged the indigenous manufacture of bulk drugs. In the
following decade the Indian patent act prevented the granting of product patents for substances
used in foods and pharmaceuticals. Only process patents were allowed for five years from the
date of granting a patent or seven years from the date of filing the patent. Drug price control
order (DPCO) was introduced during the same period to prevent undue profiteering from
essential medicines. MNCs were compelled to reduce their holdings to 40% in their Indian
ventures. In the 1980s–1990s, domestic pharmaceutical companies flourished. As a result, the
market share of MNCs fell to the current 35%, down from 75% in 1971.
Types of drug systems in India:
Ancient civilization allowed India to develop various kinds of medical and pharmaceutical
systems. In addition to the allopathic system, which is prevalent in the United States, Japan, and
Europe, the following types of medical and pharmaceutical systems are used by the Indian
people:
Ayurveda :
Ayurveda translates as the “science of life.” It encompasses fundamentals and philosophies about
the world and life, diseases, and medicines. The knowledge of ayurveda is compiled in Charak
Samhita and Sushruta Samhita. The curative treatment lies in drugs, diet, and general mode of
life.
Siddha :
The Siddha system is one of the oldest Indian systems of medicine. Siddha means
“achievement.” Siddhas were saintly figures who achieved healing through the practice of yoga.
The siddha system does not look merely at a disease but takes into account a patient’s age, sex,
race, habits, environment, diet, physiological constitution, and so forth. Siddha medicines have
been effective in curing some diseases, and further work is needed to truly understand why this
system works.
Unani:
The unani system originated in Greece and progressed to India during the medieval period. It
involves promotion of positive health and prevention of disease. The system is based on the
humoral theory, i.e., the presence of blood, phlegm, yellow bile, and black bile. A person’s
temperament is accordingly expressed as sanguine, phlegmatic, choleric, or melancholic. Drugs
derived from plant, metal, mineral, and animal origin is used in this system.
Homeopathy:
Homeopathy flourished in Germany in the seventeenth and eighteenth centuries. In India, it is
one of the commonly used methods to treat diseases. Physicians in the time of Hippocrates (400
BC) first observed that some substances produce symptoms of conditions that they were then
used to treat. On the basis of this finding, a homeopathic medicinal agent, which can produce
artificial symptoms in healthy human beings, can cure a similar set of symptoms of natural
diseases. It normally uses a single medicine, and the dosage is minimal— just enough to cure the
disease.
Yoga and naturopathy:
Yoga and naturopathy are ways of life. In naturopathy, one applies simple laws of nature. It
advocates proper attention to eating and living habits. It also involves hydrotherapy, mud packs,
baths, massage, and so forth. Yoga consists of eight components: restraint, observance of
austerity, physical postures, breathing exercises, restraining of the sense organs, contemplation,
meditation, and Samadhi Increasing interest exists in revisiting these ancient drug systems. The
Department of Indian Systems of Medicines and Homeopathy was established in 1995 as a
separate department in the Ministry of Health and Family Welfare. One of the organization’s
goals is to prepare standards for ayurvedic, unani, sidhha, and homeopathy drugs. Goods
manufacturing practices for ayurvedic drugs are at the final stage. The department is actively
pursuing a proposal to establish a medicinal-plant board to enhance the availability of quality
raw materials, prepare a database of medicinal plants, and collect information from ancient texts.
India's US$ 3.1 billion pharmaceutical industry is growing at the rate of 14 percent per year. It is
one of the largest and most advanced among the developing countries.
Over 20,000 registered pharmaceutical manufacturers exist in the country. The domestic
pharmaceuticals industry output is expected to exceed Rs260 billion in the financial year 2002,
which accounts for merely 1.3% of the global pharmaceutical sector. Of this, bulk drugs will
account for Rs 54 bn (21%) and formulations, the remaining Rs 210 bn (79%). In financial year
2001, imports were Rs 20 bn while exports were Rs87 bn.
Statistics
In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations
and bulk drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs
were exported, mostly to the United States and Russia. Most of the players in the market are
small-to-medium enterprises; 250 of the largest companies control 70% of the Indian market.
Thanks to the 1970 Patent Act, multinationals represent only 35% of the market, down from 70%
thirty years ago.
Most pharma companies operating in India, even the multinationals, employ Indians almost
exclusively from the lowest ranks to high level management. Mirroring the social structure, firms
are very hierarchical. Homegrown pharmaceuticals, like many other businesses in India, are
often a mix of public and private enterprise. Although many of these companies are publicly
owned, leadership passes from father to son and the founding family holds a majority share.
In terms of the global market, India currently holds a modest 1-2% share, but it has been growing
at approximately 10% per year. India gained its foothold on the global scene with its
innovatively-engineered generic drugs and active pharmaceutical ingredients (API), and it is now
seeking to become a major player in outsourced clinical research as well as contract
manufacturing and research. There are 74 U.S. FDA-approved manufacturing facilities in India,
more than in any other country outside the U.S, and in 2005, almost 20% of all Abbreviated New
Drug Applications (ANDA) to the FDA are expected to be filed by Indian companies. Growth in
other fields notwithstanding generics is still a large part of the picture. London research company
Global Insight estimates that India’s share of the global generics market will have risen from 4%
to 33% by 2007.
Advantage India
Competent workforce: India has a pool of personnel with high managerial and technical
competence as also skilled workforce. It has an educated work force and English is commonly
used. Professional services are easily available.
Cost-effective chemical synthesis: Its track record of development, particularly in the area of
improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides
a wide variety of bulk drugs and exports sophisticated bulk drugs.
Legal & Financial Framework: India has a 65 year old democracy and hence has a solid legal
framework and strong financial markets. There is already an established international industry
and business community.
Information & Technology: It has a good network of world-class educational institutions and
established strengths in Information Technology.
Globalization: The country is committed to a free market economy and globalization. Above all,
it has a 70 million middle class market, which is continuously growing.
Consolidation: For the first time in many years, the international pharmaceutical industry is
finding great opportunities in India. The process of consolidation, which has become a
generalized phenomenon in the world pharmaceutical industry, has started taking place in India.
Patents: As it expands its core business, the industry is being forced to adapt its business model
to recent changes in the operating environment. The first and most significant change was the
January 1, 2005 enactment of an amendment to India’s patent law that reinstated product patents
for the first time since 1972. The legislation took effect on the deadline set by the WTO’s Trade-
Related Aspects of Intellectual Property Rights (TRIPS) agreement, which mandated patent
protection on both products and processes for a period of 20 years. Under this new law, India
will be forced to recognize not only new patents but also any patents filed after January 1, 1995.
Indian companies achieved their status in the domestic market by breaking these product patents,
and it is estimated that within the next few years, they will lose $650 million of the local generics
market to rightful patent-holders.
In the domestic market, this new patent legislation has resulted in fairly clear segmentation. The
multinationals narrowed their focus onto high-end patients who make up only 12% of the
market, taking advantage of their newly-bestowed patent protection. Meanwhile, Indian firms
have chosen to take their existing product portfolios and target semi-urban and rural populations.
Product development:
Companies are also starting to adapt their product development processes to the new
environment. For years, firms have made their ways into the global market by researching
generic competitors to patented drugs and following up with litigation to challenge the patent.
This approach remains untouched by the new patent regime and looks to increase in the future.
However, those that can afford it have set their sights on an even higher goal: new molecule
discovery. Although the initial investment is huge, companies are lured by the promise of hefty
profit margins and the recognition as a legitimate competitor in the global industry. Local firms
have slowly been investing more money into their R&D programs or have formed alliances to
tap into these opportunities.
Small and medium enterprises:
As promising as the future is for a whole, the outlook for small and medium enterprises (SME) is
not as bright. The excise structure changed so that companies now have to pay a 16% tax on the
maximum retail price (MRP) of their products, as opposed to on the ex-factory price.
Consequently, larger companies are cutting back on outsourcing and what business is left is
shifting to companies with facilities in the four tax-free states - Himachal Pradesh, Jammu &
Kashmir, Uttaranchal and Jharkhand.
As SMEs wrestled with the tax structure, they were also scrambling to meet the July 1 deadline
for compliance with the revised Schedule M Good Manufacturing Practices (GMP). While this
should be beneficial to consumers and the industry at large, SMEs have been finding it difficult
to find the funds to upgrade their manufacturing plants, resulting in the closure of many
facilities. Others invested the money to bring their facilities to compliance, but these operations
were located in non-tax-free states, making it difficult to compete in the wake of the new excise
tax.
Over-the-Counter Medicines
The Indian market for over-the-counter medicines (OTCs) is worth about $940 million and is
growing 20 percent a year, or double the rate for prescription medicines. The government is keen
to widen the availability of OTCs to outlets other than pharmacies, and the Organization of
Pharmaceutical Producers of India (OPPI) has called for them to be sold in post offices.
Developing an innovative new drug, from discovery to worldwide marketing, now involves
investments of around $1 billion, and the global industry's profitability is under constant attack
as costs continue to rise and prices come under pressure. Pharmaceutical production costs are
almost 50 percent lower in India than in Western nations, while overall R&D costs are about
one-eighth and clinical trial expenses around one-tenth of Western levels. India's long-
established manufacturing base also offers a large, well-educated, and English-speaking
workforce, with 700,000 scientists and engineers graduating every year, including 122,000
chemists and chemical engineers, with 1,500 PhDs. The industry provides the highest intellectual
The main opportunities for the Indian pharmaceutical industry are in the areas of:
• Generics (including biotechnology generics)
• Biotechnology
• Outsourcing (including contract manufacturing and R&D outsourcing).
Generics
Prescription drugs worth $40 billion in the U.S. and $25 billion in Europe are due to lose patent
protection by 2007-08. Indian firms will likely take around 30 percent of the increasing global
generics market, the Associated Chambers of Commerce and Industry of India (Assocham)
forecast. Currently, the Indian industry is estimated to account for 22 percent of the generics
world market. Low production costs give India an edge over other generics-producing nations,
especially India and Israel, says Assocham's president Mahendra Sanghi. He suggests that it will
be easier for Indian firms to win larger generics market shares overseas than at home,
particularly in the U.S. and Europe. Indian drug manufacturers currently export their products to
more than 65 countries worldwide. Their largest customer is the U.S., the world's biggest
pharmaceutical market. The use of generic drugs is growing quickly in the U.S. due to cost
pressure by payers and the introduction on January 1 this year of the Medicare Part D
prescription benefit, giving seniors and people with disabilities prescription drug coverage for
the first time. With 74 facilities, India has the largest number of U.S. Food and Drug
Administration (FDA)- approved drug manufacturing facilities outside the U.S. Indian firms now
account for 35 percent of Drug Master File applications and one in four of all U.S. Abbreviated
New Drug Application (ANDA) filings submitted to the FDA. Analysts at Credit Lyonnais
Securities Asia say they expect the number of generic drug launches by Indian companies in the
U.S. to increase from 93 in 2003 to over 250 by 2008.
In January 2006, the Indian exporters' representative body, the Pharma Export Promotion
Council (Pharmexcil) said it planned to raise a number of concerns with the U.S. government
over what it sees as barriers to trade with them. One is a U.S. regulation that disqualifies Indian
firms from bidding for government contracts, and another is the requirement Indian drug
manufacturers submit separate applications for each U.S. state (there is no U.S.-wide regulatory
requirement), even when the firms have FDA-approved products and facilities.
Table-1 ANDA Filings for Indian Mid-sized Companies
Company FY04 FY05 FY06Glenmark
Glenmark
-- 7 14
Zydus Cadila
12 13 6-18
Orchid
-- 18 18-30
Wockhardt
5 7 12-13
Aurobindo
2 22 3
Source: Cygnus Consulting & Research. Industry Insights-Pharmaceuticals, November 2004
2006
However, India's traditional lucrative export markets may be becoming a little less secure, for a
number of reasons. For example, generic prices have not been rising in the U.S.; the seniors'
advocacy group AARP (formerly the American Association of Retired Persons) says that, of the
75 generic drugs widely used by older people that it monitors on a quarterly basis, none had had
a change in manufacturer list price during third quarter 2005 and only three had had increases in
list price at any time during January to September 2005.18 Also, new competitive threats have
arrived, such as authorized generics produced by major drug producers, new mid-sized players,
Indian and Eastern Europe manufacturers, and fully integrated generics firms, which are less
reliant on Indian “back-end” businesses.
The U.S. continues to be an attractive market for Indian firms, despite the challenges of price
erosion and the launch of “authorized generics” by innovator companies, says Ranjit Shahani,
vice chairman and managing director, Novartis India Ltd, and President of the Organization of
Pharmaceutical Producers of India. He does not see any increase in nontariff barriers there, and
in fact feels that trade between India and the U.S. is “set to rev up following President George
W. Bush's visit to India on March 1, 2006, with both countries going all out to liberalize market
access.” The major concern of the U.S. FDA appears to be the entry of counterfeit drugs, he says,
but he does not believe this to be an obstacle for reputable Indian manufacturers. Moreover,
while the World Trade Organization (WTO) Doha Trade-Related Aspects of Intellectual
Property rights (TRIPs) national emergency/compulsory license agreement presents an exporting
opportunity for Indian firms, Shahani stresses that the firms must have anti-diversion measures in
place in order to protect their reputation.
“The European generics market,” he says, pointing to Dr Reddy's recent acquisition of
Betapharm of Germany for $570 million, “holds more promise.” Indian companies have acquired
over $1 billion worth of pharmaceutical companies overseas in the past year and a half and
should increasingly look more aggressively at countries like Brazil, Russia and the
Commonwealth of Independent States, and Japan, where the markets are mature and
remunerative, despite some regulatory hurdles, he notes. Also, he says, Indian firms should move
up the value chain to produce innovative “super generics” as the once-a-day Ciprofloxacin
product developed by Ranbaxy and licensed to Bayer, move up from producing “generic
generics” to branded generics.
Relationship between pharmaceuticals and biotechnology
Unlike in other countries, the difference between biotechnology and pharmaceuticals remains
fairly defined in India. Bio-tech there still plays the role of pharma’s little sister, but many
outsiders have high expectations for the future. India accounted for 2% of the $41 billion global
biotech market and in 2003 was ranked 3rd in the Asia-Pacific region and 11th in the world in
number of bioteches. In 2004-5, the Indian biotech industry saw its revenues grow 37% to $1.1
billion. The Indian biotech market is dominated by biopharmaceuticals; 75% of 2004-5 revenues
came from biopharmaceuticals, which saw 30% growth last year. Of the revenues from
biopharmaceuticals, vaccines led the way, comprising 47% of sales. Biologics and large-
molecule drugs tend to be more expensive than small-molecule drugs, and India hopes to sweep
the market in biogenetics and contract manufacturing as drugs go off patent and Indian
companies upgrade their manufacturing capabilities.
The Indian pharmaceutical industry is the world's second-largest by volume and is likely to lead the manufacturing sector of India. India's bio-tech industry clocked a 17 percent growth with revenues of Rs.137 billion ($3 billion) in the 2009-10 financial year over the previous fiscal. Bio-pharma was the biggest contributor generating 60 percent of the industry's growth at Rs.8,829 crore, followed by bio-services at Rs.2,639 crore and bio-agri at Rs.1,936 crore. The first pharmaceutical company are Bengal Chemicals and Pharmaceutical Works, which still exists today as one of 5 government-owned drug manufacturers, appeared in Calcutta in 1930. For the next 60 years, most of the drugs in India were imported by multinationals either in fully formulated or bulk form. The government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970, enabled the industry to become what it is today. This patent act removed composition patents from food and drugs, and though it kept process patents, these were shortened to a period of five to seven years. The lack of patent protection made the Indian market undesirable to the multinational companies that had dominated the market, and while they streamed out, Indian companies started to take their places. They carved a niche in both the Indian and world markets with their expertise in reverse-
engineering new processes for manufacturing drugs at low costs. Although some of the larger companies have taken baby steps towards drug innovation, the industry as a whole has been following this business model until the present.
The Indian pharmaceutical industry (IPo) today
Top 10 Pharmaceuticals in India, as of 2010
Rank CompanyRevenue2010
(Rs crore)
Revenue 2010
(Rs billion)
1 Ranbaxy Laboratories 4,198.96 41.989
2 Dr. Reddy's Laboratories 4,162.25 41.622
3 Cipla 3,763.72 37.637
4 Sun Pharmaceutical 2,463.59 24.635
5 Lupin Ltd 2,215.52 22.155
6 Aurobindo Pharma 2,081.19 20.801
7 GlaxoSmithKline 1,773.41 17.734
8 Cadila Healthcare 1,613 16.13
9 Aventis Pharma 983.80 9.838
10 Ipca Laboratories 980.44 9.8044
In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations and bulk drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs were exported, mostly to the United States and Russia. Most of the players in the market are small-to-medium enterprises; 250 of the largest companies control 70% of the Indian market. Thanks to the 1970 Patent Act, multinationals represent only 35% of the market, down from 70% thirty years ago.
Most pharma companies operating in India, even the multinationals, employ Indians almost exclusively from the lowest ranks to high level management. Mirroring the social structure, firms are very hierarchical. Homegrown pharmaceuticals, like many other businesses in India, are often a mix of public and private enterprise. Although many of these companies are publicly owned, leadership passes from father to son and the founding family holds a majority share.
In terms of the global market, India currently holds a modest 1-2% share, but it has been growing at approximately 10% per year. India gained its foothold on the global scene with its innovatively engineered generic drugs and active pharmaceutical ingredients (API), and it is now seeking to become a major player in outsourced clinical research as well as contract manufacturing and research. There are 74 U.S. FDA-approved manufacturing facilities in India, more than in any other country outside the U.S, and in 2005, almost 20% of all Abbreviated New Drug Applications (ANDA) to the FDA are expected to be filed by Indian companies. Growth in other fields notwithstanding, generics are still a large part of the picture. London research company Global Insight estimates that India’s share of the global generics market will have risen from 4% to 33% by 2007.
Patents
As it expands its core business, the industry is being forced to adapt its business model to recent changes in the operating environment. The first and most significant change was the January 1, 2005 enactment of an amendment to India’s patent law that reinstated product patents for the first time since 1972. The legislation took effect on the deadline set by the WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, which mandated patent protection on both products and processes for a period of 20 years. Under this new law, India will be forced to recognize not only new patents but also any patents filed after January 1, 1995. [3] Indian companies achieved their status in the domestic market by breaking these product patents, and it is estimated that within the next few years, they will lose $650 million of the local generics market to patent-holders.
In the domestic market, this new patent legislation has resulted in fairly clear segmentation. The multinationals narrowed their focus onto high-end patients who make up only 12% of the market, taking advantage of their newly bestowed patent protection. Meanwhile, Indian firms have chosen to take their existing product portfolios and target semi-urban and rural populations.
Product development
Indian companies are also starting to adapt their product development processes to the new environment. For years, firms have made their ways into the global market by researching generic competitors to patented drugs and following up with litigation to challenge the patent. This approach remains untouched by the new patent regime and looks to increase in the future. However, those that can afford it have set their sights on an even higher goal: new molecule discovery. Although the initial investment is huge, companies are lured by the promise of hefty profit margins and the recognition as a legitimate competitor in the global industry. Local firms have slowly been investing more money into their R&D programs or have formed alliances to tap into these opportunities.
Small and medium enterprises
As promising as the future is for a whole, the outlook for small and medium enterprises (SME) is not as bright. The excise structure changed so that companies now have to pay a 16% tax on the
maximum retail price (MRP) of their products, as opposed to on the ex-factory price. Consequently, larger companies are cutting back on outsourcing and what business is left is shifting to companies with facilities in the four tax-free states - Himachal Pradesh, Jammu & Kashmir, Uttaranchal and Jharkhand.[12]Consequently a large number of pharmaceutical manufacturers shifted their plant to these states, as it became almost impossible to continue operating in non tax free zones. But in a matter of a couple of years the excise duty was revised on two occasions, first it was reduced to 8% and then to 4%. As a result the benefits of shifting to a tax free zone was negated. This resulted in, factories in the tax free zones, to start up third party manufacturing. Under this these factories produced goods under the brand names of other parties on job work basis.
As SMEs wrestled with the tax structure, they were also scrambling to meet the July 1 deadline for compliance with the revised Schedule M Good Manufacturing Practices (GMP). While this should be beneficial to consumers and the industry at large, SMEs have been finding it difficult to find the funds to upgrade their manufacturing plants, resulting in the closure of many facilities. Others invested the money to bring their facilities to compliance, but these operations were located in non-tax-free states, making it difficult to compete in the wake of the new excise tax.
Challenges
All of these changes are ultimately good for the Indian pharmaceutical industry, which suffered in the past from inadequate regulation and large quantities of spurious drugs. They force the industry to reach a level necessary for global competitiveness. However, they have also exposed some of the inadequacies in the industry today. Its main weakness is an underdeveloped new molecule discovery program. Even after the increased investment, market leaders such as Ranbaxy and Dr. Reddy’s Laboratories spent only 5-10% of their revenues on R&D, lagging behind Western pharmaceuticals like Pfizer, whose research budget last year was greater than the combined revenues of the entire Indian pharmaceutical industry. This disparity is too great to be explained by cost differentials, and it comes when advances in genomics have made research equipment more expensive than ever. The drug discovery process is further hindered by a dearth of qualified molecular biologists. Due to the disconnect between curriculum and industry, pharmas in India also lack the academic collaboration that is crucial to drug development in the West.
R&D
Both the Indian central and state governments have recognized R&D as an important driver in the growth of their pharma businesses and conferred tax deductions for expenses related to research and development. They have granted other concessions as well, such as reduced interest rates for export financing and a cut in the number of drugs under price control. Government support is not the only thing in Indian pharma’s favor, though; companies also have access to a highly developed IT industry that can partner with them in new molecule discovery.
Labor force
India’s greatest strengths lie in its people. India also boasts of well-educated, English-speaking labor force that is the base of its competitive advantage. Although molecular biologists are in short supply, there are a number of talented chemists who are equally as important in the discovery process. In addition, there has been a reverse brain drain effect in which scientists are returning from abroad to accept positions at lower salaries at Indian companies. Once there, these foreign-trained scientists can transfer the benefits of their knowledge and experience to all of those who work with them. India’s wealth of people extends benefits to another part of the drug commercialization process as well. With one of the largest and most genetically diverse populations in any single country, India can recruit for clinical trials more quickly and perform them more cheaply than countries in the West. Indian firms have just recently started to leverage.
Biotechnology
Unlike in other countries, the difference between biotechnology and pharmaceuticals remains fairly defined in India. Bio-tech there still plays the role of pharma’s little sister, but many outsiders have high expectations for the future. India accounted for 2% of the $41 billion global biotech market and in 2003 was ranked 3rd in the Asia-Pacific region and 11th in the world in number of biotechs. In 2004-5, the Indian biotech industry saw its revenues grow 37% to $1.1 billion. The Indian biotech market is dominated by biopharmaceuticals; 75% of 2004-5 revenues came from biopharmaceuticals, which saw 30% growth last year. Of the revenues from biopharmaceuticals, vaccines led the way, comprising 47% of sales. Biologics and large-molecule drugs tend to be more expensive than small-molecule drugs, and India hopes to sweep the market in biogenerics and contract manufacturing as drugs go off patent and Indian companies upgrade their manufacturing capabilities.
Most companies in the biotech sector are extremely small, with only two firms breaking 100 million dollars in revenues. At last count there were 265 firms registered in India, over 75% of which were incorporated in the last five years. The newness of the companies explains the industry’s high consolidation in both physical and financial terms. Almost 50% of all biotechs are in or around Bangalore, and the top ten companies capture 47% of the market. The top five companies were homegrown; Indian firms account for 62% of the biopharma sector and 52% of the industry as a whole. The Association of Biotechnology-Led Enterprises (ABLE) is aiming to grow the industry to $5 billion in revenues generated by 1 million employees by 2009, and data from the Confederation of Indian Industry (CII) seem to suggest that it is possible.
Comparison with the U.S.
The Indian biotech sector parallels that of the U.S. in many ways. Both are filled with small start-ups while the majority of the market is controlled by a few powerful companies. Both are dependent upon government grants and venture capitalists for funding because neither will be commercially viable for years. Pharmaceutical companies in both countries have recognized the
potential effect that biotechnology could have on their pipelines and have responded by either investing in existing start-ups or venturing into the field themselves. In both India and the U.S., as well as in much of the globe, biotech is seen as a hot field with a lot of growth potential.
Relationship with IT
Many analysts have observed that the hype around the biotech sector mirrors that of the IT sector. Biotech colleges have been popping up around the country eager to service the pools of students that want to take advantage of a growing industry. The International Finance Commission, the private investment arm of the World Bank, called India the “centerpiece of IFC’s global biotech strategy.” Of the $110 million invested in 14 biotech projects investment globally, the IFC has given $43 million to 4 projects in India. According to Dr. Manju Sharma, former director of the Department of Biotechnology, the biotech industry could become the “single largest sector for employment of skilled human resource in the years to come.”[5] British Prime Minister Tony Blair was similarly impressed, citing the success of India’s biotech industry as the reason for his own country’s own biotech opportunities. Malaysia is also looking to India as an example for growing its own biotech industry.
Government support
The Indian government has been very supportive. It established the Department of Biotechnology in 1986 under the Ministry of Science and Technology. Since then, there have been a number of dispensations offered by both the central government and various states to encourage the growth of the industry. India’s science minister launched a program that provides tax incentives and grants for biotech start-ups and firms seeking to expand and establishes the Biotechnology Parks Society of India to support ten biotech parks by 2010. Previously limited to rodents, animal testing was expanded to include large animals as part of the minister’s initiative. States have started to vie with one another for biotech business, and they are offering such goodies as exemption from VAT and other fees, financial assistance with patents and subsidies on everything ranging from investment to land to utilities.
Foreign investment
The government has also taken steps to encourage foreign investment in its biotech sector. An initiative passed earlier this year allowed 100% foreign direct investment without compulsory licensing from the government1. In April, a delegation headed by the Kapil Sibal, the minister of science and technology and ocean development, visited five cities in the U.S. to encourage investment in India, with special emphasis on biotech. Just two months later, Sibal returned to the U.S. to unveil India’s biotech growth strategy at the BIO2005 conference in Philadelphia.
Challenges
The biotech sector faces some major challenges in its quest for growth. Chief among them is a lack of funding, particularly for firms that are just starting out. The most likely sources of funds are government grants and venture capital, which is a relatively young industry in India.
Government grants are difficult to secure, and due to the expensive and uncertain nature of biotech research, venture capitalists are reluctant to invest in firms that have not yet developed a commercially viable product. As previously mentioned, India hopes to solve its funding problem by attracting overseas investors and partners. Before these potential saviors will invest significant sums in the industry, however, there needs to be better scientific and financial accountability. India is slowly working towards these goals, but it will be a while before they are up to the standards of Western investors.
India’s biotech firms share another problem with their pharmaceutical cousins: a lack of qualified employees. Biotech has the additional disadvantage of competing against IT for ambitious, science-minded students but not being able to guarantee the same compensation. An aspiring researcher in India needs 7–10 years of education covering a range of specialties in order to qualify to work in biotech. Even if a student does choose to go on the biotech path, the ineffectual curriculum at many universities makes it doubtful as to whether he will be qualified to work in the field once finished. One estimate shows that 10% of upper-echelon biotech recruits have come from foreign countries. While this is not a problem, per se, it drives up cost in a country whose competitive advantage is based on cheap, high-quality labor. Far from ending with scientists, there is also a shortage of people with a knowledge of biotechnology in related fields: doctors, lawyers, programmers, marketing personnel and others.
While little has been done about the latter half of the employee crunch, the government has addressed the problem of educated but unqualified candidates in its Draft National Biotech Development Strategy. This plan included a proposal to create a National Task Force that would work with the biotech industry to revise the curriculum for undergraduate and graduate study in life sciences and biotechnology. The government’s strategy also stated intentions to increase the number of PhD Fellowships awarded by the Department of Biotechnology to 200 per year. These human resources will be further leveraged with a “Bio-Edu-Grid” that will knit together the resources of the academic and scientific industrial communities, much as they are in the U.S.
Major players
Glenmark
Glenmark is a emerging leader of Indian Pharmaceutical market in sales as well in Research. Soon new chemical entities will hit the market.
Ranbaxy Laboratories
Ranbaxy is the leader in the Indian pharmaceutical market, taking in $1.174 billion in revenues for a net profit of $160 million in 2004. It was the first Indian pharmaceutical to have a proprietary drug (extended-release ciprofloxacin, marketed by Bayer) approved by the U.S. FDA, and the U.S. market accounts for 36% of its sales. 78% of Ranbaxy’s sales are from overseas markets; its offices in 44 countries manage manufacturing in 7 countries and distribution in over 100.
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in the world and that it is the 15th fastest growing company. By 2012, Ranbaxy hopes to be one of the top 5 generics producers in the world, and it consolidated its position with the purchase of French firm RGP Aventis in 2003. Ranbaxy also has higher aspirations, however, “to build a proprietary prescription business in the advanced markets.” To this end, it keeps a dedicated research facility in Gurgaon staffed with over 1100 scientists. They currently have two molecules in Phase II trials and 3-5 in pre-clinical testing. It spent $75 million in R&D in 2004, a 43% increase over its 2003 expenditure.
Arun Puri is the chairman and CEO Brian Tempest is the only non-Indian on the senior management team.
Dr. Reddy's Laboratories
Founded in 1984 with $160,000, Dr. Reddy’s was the first Asia-Pacific pharmaceutical outside of Japan and the sixth Indian company to be listed on the New York Stock Exchange. It earned $446 million in fiscal year 2005, deriving 66% of this income from the foreign market. In order to strengthen its global position, Dr. Reddy acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare. Anji Reddy is the chairman of Dr.Reddy's.
Although 58% of Dr. Reddy’s revenues come from generic drugs, the company was committed to WTO-compliance long before the 2005 bill took effect, and most of these products were already off patent. Dr. Reddy has long been a research-oriented firm, preceding many of its peers in setting up a New Drug Development Research (NDDR) in 1993 and out-licensing its first compound just four years later. Dr. Reddy’s has since outlicensed two more molecules and currently has three others in clinical trials.
Although Dr. Reddy’s is publicly traded, the Reddy family (including founder/chairman K. Anji Reddy, son-in-law/CEO GV Prasad and son/COO Satish Reddy) holds a hefty 26% share in the company.
Nicholas Piramal
The company led by Asish Mishra grossing $350 million per year, Nicholas Piramal started its existence with the 1988 acquisition of Nicholas Laboratories and grew through a series of mergers, acquisitions and alliances. The company has formed a name for itself in the field of custom manufacturing. It cites its 1700-person global sales force as another core strength; with its acquisition of Rhodia’s inhalation anaesthetics business, Nicholas Piramal gained a sales and marketing network spanning 90 countries34.
Nicholas Piramal is well-poised for the challenge of surviving in the aftermath of product patent protection. The company has respected intellectual property rights since its inception and refused to "support generic companies seeking first-to-file or early-to-market strategies." Instead, it decided to make its own intellectual property and opened a research facility last November in Mumbai with hopes of launching its first drug in 2010 at a cost of $100,000.24,33
Cipla is one of the oldest drug manufacturers in India. It is led by Dr. Yusuf K. Hamied, Chairman and Managing Director. Cipla burst into the international consciousness in 2000 with Triomune, an AIDS treatment costing between $300 and $800 per year that infringed upon patents held by several companies who were selling the cocktail for $12,000 per year. Long before this news, Cipla had been building a strong global presence, and it now distributes its 800-odd products in over 140 countries. Privately held Cipla holds a prominent spot in its home country as well; it is the leader in domestic sales, having just unseated GlaxoSmithKline for the first time in 28 years. Revenue in 2004 totaled $552 million (using Rs 43.472 = $1) about 75% of which was derived in India. Cipla did not report having a research program.
|Dr. Kiran Mazumdar-Shaw]] is the Chairman and Managing Director of Bioco Irish chemicals company seeking to break into the Indian market, Biocon is now the leading biotech in India, bringing in Rs 646.36 crore (almost $150 million) in revenue for fiscal year 2004. It initially made its money by producing enzymes, but Biocon recently decided to become a research-oriented company with the goal of bringing a proprietary new drug to market.
The company went public in March 2004, and "its shares were oversubscribed by 33 times on opening day." Eight months later it launched Insugen, a bio-insulin that is its first branded product. Biocon also has two wholly owned subsidiaries, Syngene and Clinigene, that perform custom research and clinical trials.
Serum Institute of India
Serum Institute of India can make the enviable claim that 2 out of every 3 children in the world are immunized with one of their vaccines. It is the world’s largest producer of measles and DTP vaccines, and its portfolio includes other vaccines, antisera, plasma products and anticancer compounds. The Serum Institute earned Rs 565 crore ($130 million) in revenue in fiscal year 2005, selling mainly to UN agencies and to the Indian government. The Serum Institute is part of the Poonawalla Group, whose holdings include a horse stud farm and manufacturers of industrial equipment and components. Dr. Cyrus Poonawalla is the Chairman of the company.
Others
Other important domestic companies
Glenmark Generics Ltd. - Mr. Glenn Saldana, MD
Lupin Ltd : - Dr. Desh Bandhu Gupta, Chairman
Sun Pharmaceuticals : - Dilip S. Sanghvi, Chairman and Managing Director
were issued in conversion of 13.5% debentures. (Final conversion).
1988
A new broad spectrum oral fluoro quinolone of loxacin under the Brand name Zanocin was
launched in the market in April 1990. The Company offered 16,64,775-12.5% secured fully
convertible debentures of Rs 100 each for cash at par aggregating to Rs 16,64,77,500. Of these,
15, 85,500 debentures were offered to the shareholders on rights basis in the proportion 30
debentures: 100 equity shares (all were taken up). The balance 79,275 debentures were offered
to the employees (including Indian working Directors) (all were taken up). Additional 2,49,716
debentures were allotted to retain oversubscription (2,37,825 debentures to the shareholders and
11,891 debentures to the employees).Each debenture was converted into 2 equity shares of Rs 10
each at a premium of Rs 40 per share on 31.3.1989. Accordingly, 38,28,982 equity shares of Rs
10 each were issued. Subject to necessary approvals being obtained, the Company proposed to
issue 13,67,097-12.5% secured redeemable partly convertible debentures of Rs 300 each on
rights basis to the existing equity shareholders in the ratio of 9 debentures for every 100 equity
shares held. Simultaneously, the Company proposed to offer, 68,355 debentures to the
employees/workers of the Company. As per the proposed terms of issue, part-A of Rs 200 of
each debenture will be converted into four equity shares of Rs 10 each at a premium of Rs 40 per
share at the end of 6 months from the date of allotment. The non-convertible part-B of each
debenture will be redeemed at par at the end of 7th year from the date of allotment.
1990
A new plant was set up at Sahibzada Ajit Singh Nagar for the production was commissioned. A
bulk facility to produce newer fluoroquinolones was also being set up at Dewas. On 1st June, the
scheme of arrangement for spinning-off the pharmaceutical plant at Okhla, New Delhi of the
Company to Pharmax Corporation Ltd. was approved by the Honourable high court of Punjab &
Haryana. Tata Hotels Ltd. is a subsidiary of the Company with a holding of 7,500 equity shares
of Rs 10 each out of 7,600 equity shares issued. Since 1990, Tata Hotels Ltd. ceased to be a
subsidiary of the company.
1991
The Company proposed to undertake backward integration into fermentation based products
such as Penicillin and Cephalosporin-C. These were to be implemented at Paonta Sahib in
Himachal Pradesh, a new complex being developed for bulk drugs. 2,250 Pref. shares were
redeemed on 3.9.91. 60, 75,988 bonus equity Shares were issued in prop. 2:3.
1992
The Company offered 13, 67,097-12.5% partly convertible debentures of Rs 300 each on Rights
basis in the proportion of 9 debentures: 100 equity shares held. All were taken up. Additional 2,
05,065 debentures were allotted to retain oversubscription. 68,355 debentures of Rs 300 each
were also issued to the employees' on an equitable basis. (All were taken up). Additional 10,250
debentures were allotted to retain oversubscription. Part A of Rs 200 of the face value of each
debenture was to be compulsorily converted into 4 equity shares of Rs 10 each at a premium of
Rs 40 per share at the end of six months from the date of Allotment of debentures. Part B of Rs
100 of the face value of each debenture was to be redeemed at par at the end of 7 years from the
date of allotment of debentures.RLL has three successful overseas joint ventures in Nigeria,
Malaysia and Thailand. A joint venture recently incorporated in India with Eli Lilly - a leading
original research company in pharmaceuticals
1993
During September the Company offered 24,51,719-12% fully convertible debentures of Rs 300
each on Rights basis in the proportion 15 debs 200 equity shares held (all were taken up) (18611
debs. were kept in abeyance). Another 1, 22,586-12% debentures were offered to the employees
as an equitable basis (all were taken up). Part A of Rs 125 of each debenture was to be converted
into one equity share of Rs 10 each at a premium of Rs 15 per share on the date of allotment.
Accordingly 25, 55,694 equity shares were allotted on 5.12.93. Part B of Rs 175 of each
debenture was to be converted into one equity share of Rs 10 each at a premium of Rs 165 per
share on the expiry of 12 months from the date of allotment. Accordingly 25, 55,690 equity
shares were allotted on 6.12.1994. The Company also offered 40,86,197-15% Non-Convertible
debentures with warrants attached to it on Rights basis in the proportion 25 NCDS with warrants
8,200 equity shares held (all were taken up).Another 2,04,310-15% NCDS were also offered to
the employees on an equitable basis (all were taken up). These would be redeemed in three
installments of Rs 66, Rs 67 and Rs 67 each at the end of 6th, 7th and 8 th year respectively from
the date of allotment debentures. Each NCP carries a warrant entitling the holder to apply for one
equity share of Rs 10 each at a premium of Rs 115 per share at one or more installment as may
be decided by the Board during the period between 36th months and 60th months from the date
of allotment of NCDS at half yearly intervals.
1994
The Expansion and Modernization plant for manufacture of Ranitidine and Amoxycillin and a
pilot plant for R&D at Toansa were commissioned. A new plant for manufacture of
pharmaceutical dosage forms at Paonta Sahib was completed. The company allotted one hundred
thousand warrants without any face value to entities of the management group on 28th July.
Each of such warrants entitles the holder to subscribe to fifty equity shares of Rs 10 each at a
premium of Rs 390 per share within a period of 18 months from the date of allotment.
1995
A Global Alliance Agreement was signed with Eli Lilly and the Company, for marketing of
pharmaceutical products in U.S.A. and other countries. For the purpose of Indian joint venture, a
company under the name Ranbaxy Lilly Company was incorporated. A joint venture in U.S.A.
for marketing of products from the Indian joint venture as also select Lilly and Ranbaxy products
was proposed. For the purpose, a company under the name Lilly Ranbaxy Pharmaceuticals LLC
was incorporated in the state of Indiana, U.S.A.
1996
RLL bought a drug firm in Ireland in Jan.'96. In 1996, it acquire six leading brands from Gufic.
Croslands Research Laboratories, a leading manufacturer of dermatological pharmaceutical
formulations has been merged with RLL. In Oct.'98 it sold off the Glat (Global Alliances and
Technologies) division of Croslands to French pharma major Galderma.
1997
The name of Ranmax Laboratories (Nigeria) Ltd., was changed to Ranbaxy (Nigeria) Ltd. 1,
50,000 equity shares of Rs 10 each (prem. Rs 630 per share) allotted on 12th June, to Ranbaxy
Employees Welfare Society on exercise of rights attached with warrants allotted to the society.
2,23,958 equity shares of Rs 10 each (prem. Rs 115 per share) allotted on 1.8.1997 on exercise of
right attached with warrants allotted along with NCDs of Rs 200 each on rights basis. 6,56,423
equity shares of Rs 10 each (prem. Rs 115 per share) allotted on 1st February 1998 on exercise
of right attached with warrants allotted along with NCDs of Rs 200 each on rights basis.
1998
It has become India's first pharmaceutical company to launch prescription products under its own
name and label in the U.S., the world's largest pharmaceutical market with an estimated 1997
sale of $ 101 billion. The company has entered the U.S. ethical prescriptions market through
Ranbaxy Pharmaceuticals Incorporated (RPI), a wholly-owned subsidiary of the Ranbaxy
Laboratories Ltd. The entry has been made with Cefaclor capsules and suspensions.
1999
Pharma Majors Ranbaxy Laboratories Ltd and Glaxo Ltd announced an agreement for co-
marketing of an advanced dosage form of the antibiotic cephalexin. According to the co-
marketing agreement, Ranbaxy will market the new dosage form as Sporidex AF, while Glaxo
extends its phexin line with its innovated product. Ranbaxy Laboratories Ltd and Cipla have
entered into a strategic partnership to jointly market a select basket of drugs. Ranbaxy
Laboratories Ltd has signed an agreement with Glaxo for the co-marketing of an advanced
dosage form of the antibiotic, Cephalexin.
2000
The Company has filed an investigational new drug application for its new asthma molecule -
Rbx-4638 with the Drugs Controller General of India (DCGI). Ranbaxy is the first company in
the country to file an INDA for such a novel drug compound.- Eli Lilly Ranbaxy, a 50:50 joint
venture between Ranbaxy Laboratories and the US-based Eli Lilly & Co., has introduced
HumaPen, a new ergonimically designed, resusable insulin delivery service.
2001
Ranbaxy Laboratories is set to reap a windfall after existing the joint venture with the billion US
pharma major, Eli Lilly by selling its 50 per cent stake made at an equity investment of Rs 7.2
crore for more than ten times at Rs 78 crore. July 3: The US-based Eli Lilly has bought the 50
per cent stake owned by Ranbaxy Laboratories in the joint venture Eli Lilly Ranbaxy for million.
2002
Ranbaxy subsidiary receives tentative approval for commercialization of Lisinopril + Hydro
chlorothiazine Tablets. Ranbaxy Laboratories’ US subsidiary has received temporary approval
for an anti-hypertension drug, Prinizide, issued by US Food and Drug Administration. Ranbaxy
terminates manufacturing agreement with Eli Lilly Ranbaxy Laboratories has recieved approval
for launching the anti-asthma compound - Montelukast in India. Ranbaxy obtains FDA approval
to launch Ceftin Ranbaxy obtains exclusive marketing rights for Nifedipine-XL from Penwest,
USA. Ranbaxy Laboratories and Wockhardt on March 7th announced a strategic business
alliance for the US, the world's largest market for pharmaceutical products.
2003
Prof Virander S Chauhan and Dr Kanury V S Rao from the International Centre for Genetic
Engineering, and Prof Samir K Brahmachari from the Institute of Genomics and Integrative
Biology, all from Delhi, are the seven scientists who bagged Ranbaxy Research Awards for the
year 2001. Ranbaxy Laboratories has rolled out the GlaxoSmithkline's antibiotic called
Augmentin, in the US market Ranbaxy Launches next Generation Anti-Retroviral for the first
time in India Ranbaxy Laboratories Ltd on February 10, 2003 has announced the launch of a
high end advanced Cephalosporin, Cefprozil, under the brand name Refzil O
2004
Ranbaxy Laboratories Ltd announced that all the necessary formalities and consents required for
the conclusion of the acquisition transaction of RPG (Aventis) SA have been obtained and that
the acquisition is now complete. With this, RPG (Aventis) SA France has now become a wholly
owned subsidiary of Ranbaxy. Ranbaxy receives USFDA approval to commercialise
Minocycline Hydrochloride Tablets USP -Ranbaxy Laboratories Ltd has informed that the Stock
Exchange, Ahmedabad has advised delisting the securities of the Company effective January 15,
2005
Receivs approval from the U.S. Food and Drug Administration, to manufacture and market
Clarithromycin XL 1000 mg tablets. Ranbaxy in alliance with Novavax to step in to biotech
sector Ranbaxy Laboratories Ltd enters into collaborative agreement with National Chemical
Laboratories, Pune and Department of Science & Technology in the area of New Drug
Discovery. On May 24, 2005 launches its approved generic formulation of Clarithromycin
immediate release (IR) tablets, 250 mg and 500 mg, in the US markets.
2006
Ranbaxy Laboratories enters into a strategic alliance with Zenotech .Ranbaxy ties up with Ipca to
tap US market. Ranbaxy signs licensing agreement with Swiss Company Debiopharm, for
NCE Drug in the Gastroenterology Segment .Ranbaxy signs licensing agreement with Swiss
Company Debiopharm, for NCE Drug in the Gastroenterology Segment.
Ranbaxy Appoints Atul Sobti as COO.
2007
Ranbaxy Laboratories Ltd and GlaxosmithKline (GSK) on February 06, 2007 have signed a new
multiyear R&D agreement that modifies and expands the terms of their strategic alliance
established in 2003 to provide the Company expanded drug-development responsibilities and
further financial opportunities.Ranbaxy unveils asthma inhalation capsules Ranbaxy
Laboratories Ltd has received final approval from the U.S. Food and Drug Administration (FDA)
to manufacture and market Amlodipine Besylate Tablets, 2.5 mg (base), 5 mg (base) and 10 mg
(Base).
2008
Ranbaxy Laboratories on July 28 said it has launched the generic version of Omeprazole
capsules, used in the treatment of acid related diseases in the US healthcare system.
2010
Ranbaxy Laboratories Limited (Ranbaxy) has launched a New Chemical Entity (NCE), Lulifin
(Luliconazole), in the Indian Dermatology market. This follows a strategic in-licensing
agreement with Summit Pharmaceuticals International Corporation, Japan (SPI) allowing
Ranbaxy, exclusive marketing rights, for India, 7'he introduction of this NCE, significantly
strengthens Ranbaxy's presence in the Dermatological segment.
Company Profile:
Ranbaxy Laboratories Limited (Ranbaxy), India's largest pharmaceutical company, is an integrated, research based, international pharmaceutical company, producing a wide range of quality, affordable generic medicines, trusted by healthcare professionals and patients across geographies. Ranbaxy today has a presence in 23 of the top 25 pharmaceutical markets of the
world. The Company has a global footprint in 46 countries, world-class manufacturing facilities .
In June 2008, Ranbaxy entered into an alliance with one of the largest Japanese innovator companies, Daiichi Sankyo Company Ltd., to create an innovator and generic pharmaceutical powerhouse. The combined entity now ranks among the top 20 pharmaceutical companies, globally. The transformational deal will place Ranbaxy in a higher growth trajectory and it will emerge stronger in terms of its global reach and in its capabilities in drug development and manufacturing. Ranbaxy Laboratories is quite the rainmaker in India's pharmaceutical business. The company is one of India's largest drug manufacturers and a top global generics producer. Anti-infective amoxycillin (not to be confused with the common antibiotic, amoxicillin) and ciprofloxacin, and cardio drug simvastatin are among Ranbaxy's top sellers; all come in several administration forms. The company also makes treatments for gastrointestinal, musculoskeletal, and central nervous system disorders, as well as diabetes, pain, allergies, and HIV/AIDS. Its R&D focus includes new forms of existing drugs and metabolic disease treatments. Japanese drugmaker Daiichi Sankyo owns a controlling stake in Ranbaxy.
Ranbaxy Laboratories Ltd. is the largest pharmaceutical company in India, and one of the world's top 100 pharmaceutical companies. Long a specialist in the preparation of generic drugs, Ranbaxy is also one of the world's top 10 in that pharmaceutical category as well. Yet, with India's agreement to apply international patent law at the beginning of 2005, Ranbaxy has begun converting itself into a full-fledged research-based pharmaceutical company. A major part of this effort has been the establishment of the company's own research and development center, which has enabled the company to begin to enter the new chemical entities (NCE) and novel drug delivery systems (NDDS) markets. In the mid-2000s, the company had a number of NCEs in progress, and had already launched its first NDDS product, a single daily dosage formulation of ciprofloxacin. Ranbaxy is a truly global operation, producing its pharmaceutical preparations in manufacturing facilities in seven countries, supported by sales and marketing subsidiaries in 44 countries, reaching more than 100 countries throughout the world. The United States, which alone accounts for nearly half of all pharmaceutical sales in the world, is the company's largest international market, representing more than 40 percent of group sales. In Europe, the company's purchase of RPG (Aventis) S.A. makes it the largest generics producer in that market. The company is also a leading generics producer in the United Kingdom and Germany and elsewhere in Europe. European sales added 16 percent to the company's sales in 2004. Ranbaxy's other major markets include Brazil, Russia, and China, as well as India, which together added 26 percent to the group's sales. Ranbaxy posted revenues of $1.18 billion in 2004. The company, which remains controlled and led by the founding Singh family, is listed on the National Stock Exchange of India in Mumbai.
Ranbaxy Laboratories had its origins in the early 1960s when Ranjit Singh and Gurbux Singh, two employees of a Japanese pharmaceutical company operating in India, formed their own pharmaceutical preparations company in Amritsar, in Punjab state. The two merged their names to form the name for their company, Ranbaxy.
Through the 1960s, India's pharmaceutical market remained dominated by foreign drug makers. The domestic pharmaceutical manufacturing industry was limited in large part to the dosage preparation, packaging, and distribution of existing formulations. Like many Indian drug companies of this period, Ranbaxy linked up with a European pharmaceutical company, and began production in 1962.
Ranbaxy's owners sought additional financing and turned to a local moneylender, Bhai Mohan Singh. By 1966, the pair had built up debts to Singh of more than the equivalent of $100,000. When Singh, a native of Pakistan who had arrived in India at the beginning of that decade, came to collect, the Ranbaxy partners offered to turn over their company to him instead.
Singh agreed to the deal and launched the Ranbaxy family on the path toward building one of India's largest business empires. Under Bhai Mohan Singh, Ranbaxy initially maintained its course of preparing and packing existing branded pharmaceutical products for the Indian market. The entry of Singh's eldest son, Parvinder, into the company in 1967, however, set the company on a new course to become a fully independent pharmaceutical company.
Parvinder Singh had just graduated with a PhD in chemistry from the University of Michigan. The younger Singh's background in chemistry complemented his father's business flair. Yet Parvinder Singh himself quickly displayed a talent for business and was credited, in large part, with guiding the company into the ranks of the global pharmaceutical leaders.
Ranbaxy's good fortune came in 1970, when the Indian government passed legislation that effectively ended patent protection in the pharmaceutical industry. Indian pharmaceutical manufacturers were now able to produce low-cost, generic versions of popular, yet expensive drugs, revolutionizing the drug industry in India and in much of the world. The Singhs quickly took advantage of India's large, highly trained, yet inexpensive workforce, building up a strong staff of chemists and chemical engineers.
The company struck pay dirt early on, when it launched Calmpose, a generic formulation of the hugely popular Roche discovery, Valium. Released in 1969, Calmpose immediately placed Ranbaxy on India's pharmaceutical map. The company expanded quickly, and by 1973, Ranbaxy opened a new factory, in Mohali, for the production of active principal ingredients (APIs). This facility enabled the company to expand its range of generic medications and ingredients. To finance its growth, the company listed on the Indian Stock Exchange that year.
Ranbaxy's ability to produce generic medications at far lower cost than its branded competitors placed the company in a strong position for international expansion, especially in less developed markets. The company began its internationalization early on, launching a joint venture in Nigeria. That operation opened a production facility in Lagos in 1977.
Ranbaxy expanded its production at home as well, opening a new state-of-the-art dosage plant in Dewas in 1983. In 1987, the company became India's leading antibiotic and antibacterial producer when it completed a new API plant in Toansa, in Punjab, that year. The Toansa facility backed up Ranbaxy's plans to enter the U.S. market, and in 1988, the Toansa plant received Food and Drug Administration (FDA) approval.
Ranbaxy formulated a new strategy, that of becoming a full-fledged pharmaceutical company. The driving force behind the company's new direction was Parvinder Singh, who was named the company's managing director in 1982. Nonetheless, Bhai Mohan Singh remained in control of the company.
As part of its new strategy, Ranbaxy launched its own research and development center in 1985. The company also stepped up its marketing efforts, launching a new dedicated marketing subsidiary, Stancare, that year. By 1990, the company had a new product to sell, when Ranbaxy was granted a U.S. patent for its doxycycline antibiotic preparation. The following year, the company was granted a U.S. patent for its cephalosporin preparations, and the company built a new state-of-the-art facility for their production in Mohali.
A major milestone for the company came in 1992, when it reached a marketing agreement with Eli Lilly & Co. The companies set up a joint venture in India to produce and market Lilly's branded pharmaceuticals for the domestic market. At the same time, Lilly agreed to begin marketing Ranbaxy's generic medications in the United States. In this way, Ranbaxy gained widescale access, backed by the highly respected Lilly, into the world's single largest drugs market.
Parvinder Singh took over as head of the company--ousting his father in what was described as a family feud--in 1992. By then, Ranbaxy had grown into one of India's largest pharmaceutical companies on the basis of its generics production. Yet as pressure grew on India to begin enforcing international drug patents, the company itself appeared to have reached a crossroads--whether to remain focused on copying generic molecules, or to begin developing new drugs in-house. The company chose the latter, and in 1993 adopted a new corporate mission to announce its reformulated ambitions: "To become a research-based international company."
Ranbaxy made good on its mission--by the middle of the next decade, nearly 80 percent of its sales came from outside of India. As a first step, the company launched a new joint venture, in China, backing its entry into that market with a production facility in Guangzhou. The following year, the company established subsidiaries in London, England, and in Raleigh, North Carolina. In 1995, the company stepped up its U.S. presence with the purchase of Ohm Laboratories Inc., which gave the company its first manufacturing plant in that market. Ranbaxy then launched construction of a new and state-of-the-art manufacturing wing, which, completed that year, gained FDA approval.
This new facility enabled Ranbaxy to step up its presence in the United States, and in 1998 the company began marketing its generic products under its own brand name. That year, in addition, the company filed an application to begin Phase I clinical testing on its first in-house developed NCE. The following year, the company's NDDS efforts paid off as well, when Bayer acquired the rights to market Ranbaxy's single daily-dosage ciprofloxacin formulation.
Ranbaxy's international expansion continued as well, with the launch of marketing operations in Brazil. As the largest pharmaceuticals market in Latin America, that country was the cornerstone of the company's plans to expand throughout the region. Ranbaxy also expanded in Europe, with
the agreement in 2000 to acquire Bayer's Germany-based generics business, Basics. The company also added production plants in Malaysia and Thailand.
Parvinder Singh died in 1999 and longtime righthand man D.S. Brar took over as company leader, naming family outsider Brian Tempest as company president. The new management team continued Singh's expansion strategy, opening a new manufacturing plant in Vietnam in 2001.
Ranbaxy also sought new alliances, and in 2003 the company reached a global drug discovery and development partnership with GlaxoSmithKline. That agreement called for Glaxo to handle the later-stage development process for Ranbaxy created molecules. The company's international expansion also took a major step forward at the end of 2002, when it agreed to acquire RPG (Aventis) in France, that country's leading generic drugs producer.
Ranbaxy's sales had by then topped the $1 billion mark, placing the company not only as the leader in India's pharmaceuticals industry, but also among the ranks of the world's top 100 pharmaceuticals companies. Ranbaxy also boasted a place among the world's top ten generic drugs producers. In addition, the company had advanced a growing number of its own NCE and NDDS molecules into clinical testing. The company's transition into research-based product development was seen as crucial as India announced its intention to enforce international drug patents at the beginning of 2005.
Ranbaxy appeared prepared to meet this challenge, however, and confidently set its sights on boosting its annual sales past $2 billion by 2007 and to more than $5 billion by the beginning of the next decade. International growth remained an essential part of that strategy. The company began negotiations for a major acquisition in Germany at the end of 2004, which was expected to be completed in 2005. The company also launched construction of a new $100 million production facility in Brazil. Meanwhile, Ranbaxy continued to increase its research and development budget, with the goal of generating as much as 40 percent of its revenues from its in-house innovations by the 2010s. Ranbaxy expected to remain India's drug leader into the new century.
Principal Subsidiaries
Basics GmbH (Germany); Gufic Pharma Ltd. (98%); Ohm Laboratories Inc. (United States); Ranbaxy (Hong Kong) Ltd.; Ranbaxy (Malaysia) Sdn. Bhd. (56.25%); Ranbaxy (Netherlands) B.V.; Ranbaxy (S.A.) Proprietary Ltd.; Ranbaxy (UK) Ltd.; Ranbaxy Do Brasil Ltda.; Ranbaxy Drugs and Chemicals Company; Ranbaxy Drugs Ltd.; Ranbaxy Egypt Ltd.; Ranbaxy Europe Ltd. (United Kingdom); Ranbaxy Farmaceutica Ltda. (Brazil; 70%); Ranbaxy Fine Chemicals Ltd.; Ranbaxy France SAS; Ranbaxy Ireland Ltd.; Ranbaxy Nigeria Ltd. (84.89%); Ranbaxy Panama, S.A.; Ranbaxy Pharmaceuticals Inc. (United States); Ranbaxy Poland Sp. z.o.o.; Ranbaxy PRP (Peru) S.A.C.; Ranbaxy Unichem Company Ltd. (Thailand; 88.56%); Ranbaxy USA, Inc.; Ranbaxy Vietnam Company Ltd.; Ranbaxy (Guangzhou China; 83%); Ranbaxy, Inc. (United States); Ranchem Inc. (United States); Ranlab Inc. (United States); RanPharm Inc. (United States); Rexcel Pharmaceuticals Ltd.; Solus Pharmaceuticals Ltd.; Unichem Distributors (Thailand; 99.96%); Vidyut Investments Ltd.; Vidyut Travel Services Ltd.
Principal Competitors
RPG Enterprises; GlaxoSmithKline Consumer Healthcare Ltd.; East India Pharmaceutical Works Ltd.; Dr. Reddy's Laboratories Ltd.; Cipla Ltd.; Concept Pharmaceuticals Ltd.; Khandelwal Laboratories Ltd.; Dabur India Ltd
Mission & Vision
Ranbaxy's mission is ‘To become a Research-based International Pharmaceutical Company’. The Company is driven by its vision to ‘Achieve significant business in proprietary prescription products by 2012 with a strong presence in developed markets’.
R&D
Ranbaxy views its R&D capabilities as a vital component of its business strategy that will
provide a sustainable, long-term competitive advantage. The Company has a pool of over 1,200
R&D personnel engaged in path-breaking research.
Ranbaxy is among the few Indian pharmaceutical companies in India to have started its research
program in the late 70's, in support of its global ambitions. A first-of-its-kind world class R&D
centre was commissioned in 1994. Today, the Company has multi-disciplinary R&D centers at
Gurgaon, in India, with dedicated facilities for generics research and innovative research. The
R&D environment reflects its commitment to be a leader in the generics space offering value
added formulations and development of NDA/ANDAs, based on its Novel Drug Delivery
System (NDDS) research capability. Ranbaxy’s first significant international success using the
NDDS technology platform came in September 1999, when the Company out-licensed its first
once-a-day formulation to a multinational company.
In July 2010, Ranbaxy’s New Drug Discovery Research (NDDR) was transferred to Daiichi
Sankyo India Pharma Private Limited as part of the strategy to strengthen the global Research
and Development structure of the Daiichi Sankyo Group. While NDDR will now become an
integral part of Daiichi Sankyo Life Science Research Center in India, based in Gurgaon,
Ranbaxy will continue to independently develop and later commercialise the anti-malarial new
drug, Arterolane + PQP, which is currently in Phase III trials. Ranbaxy will also explore the
further development of late stage programs developed by NDDR in the last few years, including
the development programs in the GSK collaboration. Within Ranbaxy, R&D of Generics will
now get a sharper focus, as the Company is increasingly working on more complex and specialist
areas.
Products
Using the finest R&D and Manufacturing facilities, Ranbaxy Laboratories Limited manufactures
and markets generic pharmaceuticals, value added generic pharmaceuticals, branded generics,
active Pharmaceuticals (API) and intermediates.
The Company remains focused on ascending the value chain in the marketing of pharmaceutical
substances and is determined to bring in increased revenues from dosage forms sales.
Ranbaxy's diverse product basket of over 5,000 SKUs available in over 125 countries worldwide
encompasses a wide therapeutic mix covering a majority of the chronic and acute segments.
Healthcare trends project that the chronic treatment segments will outpace the acute treatment
segments, primarily driven by a growing aging population and dominance of lifestyle diseases.
Our robust performance in Cardiovascular, Central Nervous System, Respiratory, Dermatology,
Orthopedics, Nutritionals and Urology segments, clearly indicates that the Company has
strengthened its presence in the fast-growing chronic and lifestyle disease segments.
Top 10 Products (2010)
• Valacyclovir
• Simvastatin
• Co-Amoxyclav
• Ciprofloxacin and Combinations
• Amoxycillin and Combinations
• Isotretinoin
• Ketorolac Tromethamine
• Loratadine and Combinations
• Ginseng+Vitamins
• Cephalexin
• Atorvastatin and Combinations
Marketing mix
The company has an organized marketing and sales team to reflect better alignment of
product/field deployment with the therapeutic area concept to bring synergies in marketing
efforts.
Ranbaxy operates in India through its marketing divisions which are as follows:
Pharma
Stan care
Crossland
Rextar
Ranbaxy CV
Super specialty
Dreamland
Maxim
URO
Rexcel
CV life
Asthma
Solus
Promotional strategies
Ranbaxy Laboratories Limited, India's largest pharmaceutical company, headquartered in India, is an integrated, research based, international pharmaceutical company, producing a wide range of quality, affordable generic medicines, trusted by healthcare professionals and patients across geographies. The Company has a ground presence in 46 countries, manufacturing operations in 7 countries and sells products in over 125 countries. The Company has adopted a multi-pronged strategy. Acquisition of generic brands overseas, strong emphasis on brand marketing in the US and Europe, entering high potential new markets with value added product offerings, are the
major thrust areas. Successful business development transactions form a key component of its business strategy.In each of our partnerships, we strive to build enduring, mutually beneficial relationships that can produce positive results for both parties.We are interested in sales and marketing partnerships and product acquisition opportunities in all the markets where we operate. We are exploring opportunities through Licensing and Alliances to draw maximum value from such arrangements. We continue to evaluate opportunities to add to our product basket, enhance our therapeutic presence and expand our distribution reach.
Company growing faster than the market.• One of the largest distribution networks that comprises 2500+ skilled field force. Dedicated task forces for specialised & chronic therapies • A strong player in the NDDS segment. Key brands include Cifran OD (Ciprofloxacin), Zanocin OD (Ofloxacin) & Sporidex AF (Cephalexin)• Strong brand building capabilities, reflected in the fact that around 20 brands feature in the “Top-300 brands of the Industry” list. Leading brands are Sporidex (Cephalexin), Cifran (Ciprofloxacin), Mox (Amoxycillin), Zanocin (Ofloxacin) & Volini (Diclofenac)• A well-built customer interface, with one of the highest customer coverage across India, and an excellent franchise with both Generalists & Specialists. This is proven by Ranbaxy India’s Corporate Image being perceived as ‘Best-in-Class’ by customers (source: AC Nielsen ORG MARG Report, June 2004) • Great emphasis is placed on Knowledge Management and Medico-marketing initiatives such as Advisory Board Meetings, Post Marketing Surveillance Studies and Continuous Medical Education programs. These have resulted in an excellent customer relationship with the medical fraternity. More than 2000 interface programs (Symposia, CME’s) are conducted and about 20 Clinical Papers published annually• With a futuristic approach, the India operations attempt to capitalize on the fast- emerging, high-growth segments with innovative products and services:
CHAPTER-5
DR. REDDY’S LABS
History (Mission, Vision)
1985
The Company was incorporated on 2nd November. The Company was promoted by Dr. K. Anji
Reddy and his associates who were also the promoters of Standard Organics, Ltd. - In May, the
Company issued 7, 50,000 equity shares of Rs 10 each for cash at par linked to 1, 50,000 - 15%
secured redeemable non-convertible debentures of Rs 100 each for cash at par in proportion of
one debenture for five equity shares held including the oversubscription from the public. The
allotment was made as follows:
(i) 12,550 equity shares linked to 2,510 debentures were issued to business associates
(ii) 850 shares linked to 170 debentures were issued to the employees
(iii) 2,80,500 shares linked to 56,100 debentures issued to the non-resident Indians and
1986
10, 06,500 equity shares then issued at par out of which 2, 56,500 equity shares were reserved
and allotted to promoters, etc. The remaining 7,50,000 equity shares were issued linked to
debentures of which the following shares were reserved for preferential allotment:
(i) 15,000 shares to business associates of the Company (only 12,550 shares taken up);
(ii) 37,500 shares to employees of the company (only 850 shares taken up) and 3,00,000 shares
to non-resident Indians (only 2,80,500 shares taken up). The balance 3,97,500 shares along with
the unsubscribed portion of 58,600 shares out of the preferential quota were offered for public
subscription during June.
1988
13,660,500 number of equity shares forfeited. 15 months, a plan was drawn for the expansion
and modernization of formulations division. ICICI and IFCI sanctioned term loans of Rs 198
lakhs and Rs 132 lakhs respectively.
1989
An explosion at the Company's plant resulted in stoppage of production for 2 months. Two new
products namely, a Ciprolet and Enam were introduced by the Company's formulation division
while the Company's bulk drug division commenced manufacture of ciprofloxacin, a new drug.
The Company exported goods such as Methyldopa, Cephalexin etc., worth Rs 2.68 crores.
6,83,125 rights shares issued (prem. Rs. 15 per share; prop. 1:2). Additional 1,02,470 shares
allotted to retain oversubscription. Another 34,155 shares (prem. Rs 15 per share) allotted to
employees.
1990
The Company started manufacturing a new bulk drug by the name Omeprazole which was
launched in the market by the brand name "OMEZ".
1991
10,92,950 bonus equity shares issued in prop. 1:2.
1992
32,78,850 bonus equity shares issued in prop. 1:1.
1993
Subject to necessary approvals being obtained, a separate company in the name of `Dr. Reddy's
Diagnostics Ltd.' was to be set up for the manufacture of diagnostics kits. The Company
proposes to invert to the extent of 60% in the equity capital of the company.
1994
The Company proposed to invest Compact Electric Ltd., which was in the process of setting up a
plant at Chennai for manufacturing energy efficient electric filament/discharge lamps in
Collaboration with Li-Tech Corporation, South Korea. The Company set up subsidiary `Reddy
Hong Kong Ltd.’ in Hong Kong for marketing the Company’s products in Main Land China and
Far East countries. `Reddy Biomed Ltd.' was incorporated as a joint venture between the
Company and a Russian Company `Joint Stock Company of open type named after 1:1.
Machnikov' for manufacturing and marketing formulation in Russia. Effective 1st April,
Standard Equity Fund was merged with the Company. Pursuant to the scheme of amalgamation
2,63,062 equity shares of Rs 10 each of the Company were issued to the shareholders of
erstwhile Standard Equity Fund in the ratio of one equity share of the Company for ten equity
shares of the erstwhile Standard Equity Fund Ltd.
1995
Formulation division launched two new products namely Lanzap, an anti-Ulcerant drug and
Peristil, drug for gastric disorder. The bulk drug division commenced the production of six new
Dr. Reddy's has focused on R&D activities to become a leading global pharmaceutical company.It has established research centers in Hyderabad, India, and Atlanta, USA, with a global R&D team of over 650 scientists, of which approximately 300 are engaged in drug discovery and development. Establishing a research center in the USA helps the company in understanding the disease mechanism and thereby developing treatment molecules. It conducts research on various health diseases such as diabetes, cardiovascular, anti-infectives, inflammation and cancer.The company has five NCEs in clinical development and three in active pre-clinical development.Dr. Reddy's has world-class capabilities in product development, chemistry, intellectual property, and regulatory mechanism. It has established expertise in synthetic and analytical chemistry to develop innovative and cost-effective manufacturing processes.The company has filed 81 patents with USPTO, of which 41 have been granted. It manages all operations across the entire pharmaceutical value chain - developing API, formulations, discovery, research, and custom pharmaceutical services. It has recently become compliant with SOX-404 of the Sarbanes Oxley Act, which ensures that it has best-in-class internal control processesand corporate governance procedures Business Strategies
The company has employed various innovative business and talent recruitment strategies thatstrike the right balance between local marketspecific requirements and global capabilities. Someof these strategies include acquiring products in a market, entering into deals for selling authorized generic versions, entering into alliances with companies that complement its pipeline of products, and entering into acquisitions and joint ventures to accelerate profit growth. The generics market in the USA presents a substantial opportunity since 75 per cent of branded pharmaceutical drugs are going off-patent by 2010, and the government is planning to reducecost on healthcare. The company plans to build a diversified generic and branded business model with the dual purpose of increasing affordability and accessibility for patients through generic drugs, and satisfying unmet medical needs through proprietary branded drugs. It intends to continue its strategy of employing an integrated and diversified business model that operates globally. The company's vision is to become a discovery-led pharmaceutical company and it aspires to be the leading and most profitable pharmaceutical company from India. Dr. Reddy's is committed to achieving these goals while promoting a “triple bottom line” approachfocussing on people (society), planet (environment), and profit (economics) - collectively forming the basis for its sustainable business practices and numerous corporate philanthropy initiatives.
CHAPTER-6
CIPLA PHARMA
History (Mission, Vision)
Cipla is 2nd largest pharmaceutical company in India in terms of retail sales. Cipla manufactures
an extensive range of pharmaceutical & personal care products and has presence in over 170
countries across the world. Cipla's product range includes Pharmaceuticals, Animal Health Care
Products, OTC, Bulk Drugs, Flavours & Fragrances, and Agrochemicals. Cipla also provides a
host of consulting services such as preparation of product and material specifications, evaluation
of existing production facilities to meet GMP, definition of appropriate plant size and
technologies etc.
The origins of Cipla can be traced back to 1935, when Dr Khwaja Abdul Hamied set up "The
Chemical, Industrial and Pharmaceutical Laboratories Ltd", popularly known by the acronym
Cipla, in a rented bungalow, at Bombay Central. Cipla was registered as a public limited
company on August 17, 1935. Cipla's first product was launched into the market in 1937. In
1940, during the Second World War when the drug supplies were cut off, Cipla started
producing fine chemicals. In 1944, Cipla bought the premises at Bombay Central to build a
modern pharmaceutical laboratory. In 1946, Cipla's product for hypertension, Serpinoid, was
exported to the American Roland Corporation. In 1952, Cipla set up first research division for
attaining self-sufficiency in technological development. In 1960, Cipla started operations at
second plant at Vikhroli, Mumbai. In 1968, Cipla manufactured ampicillin for the first time in
India. In 1976, Cipla launched medicinal aerosols for asthma. In 1982, Cipla's fourth factory
became operational at Patalganga, Maharashtra. In 1984, Cipla developed anti-cancer drugs,
vinblastine and vincristine in collaboration with the National Chemical Laboratory, Pune. In
1991, Cipla pioneered the manufacture of the antiretroviral drug, zidovudine. In 1994, Cipla's
fifth factory began commercial production at Kurkumbh, Maharashtra. In 1997, Cipla launched
transparent Rotahaler, the world's first such dry powder inhaler device. In 2000, Cipla became
the first company, outside the USA and Europe to launch CFC-free inhalers. In 2002, Cipla set
up four state-of-the-art manufacturing facilities set up in Goa. In 2003, Cipla launched TIOVA
(Tiotropium bromide), a novel inhaled, long-acting anticholinergic bronchodilator. In 2005,
Cipla set up a state-of-the-art facility for manufacture of formulations at Baddi, Himachal
Pradesh.
History of Cipla Ltd.
Khwaja Abdul Hamied, the founder of Cipla, was born onOctober 31, 1898. In 1935, he set up
The Chemical, Industrial & Pharmaceutical Laboratories, which came to be popularly known as
Cipla. He gave the company all his patent and proprietary formulas for several drugs and
medicines, without charging any royalty. On August 17, 1935, Cipla was registered as a public
limited company with unauthorized capital of Rs 6 lacs. The search for suitable premises ended
at 289, Belasis Road (the present corporate office) where a small bungalow with a few rooms
was taken on lease for 20 years for Rs 350 a month. Cipla was officially opened on September
22, 1937 when the first products were ready for the market. July 4, 1939 was a red-letter day for
Cipla, when the Father of the Nation, Mahatma Gandhi, honored the factory with a visit. He
was" delighted to visit this Indian enterprise", he noted later. From the time Cipla came to the aid
of the nation gasping for essential medicines during the Second World War, the company has
been among the leaders in the pharmaceutical industry in India. On October 31, 1939, the books
showed an all time high loss of Rs 67,935. That was the last time the company ever recorded a
deficit. In 1942, Dr Hamied's blueprint for a technical industrial research institute was accepted
by the government and led to the birth of the Council of Scientific and Industrial Research
(CSIR), which is today the apex research body in the country. In 1944, the company bought the
premises at Bombay Central and decided to put up a "first class modern pharmaceutical works
and laboratory." It was also decided to acquire land and buildings at Vikhroli. With severe
import restrictions hampering production, the company decided to commence manufacturing the
basic chemicals required for pharmaceuticals. In1946, Cipla's product for hypertension,
Serpinoid, was exported to the American Roland Corporation, to the tune of Rs 8 lacs. Five years
later, the company entered into an agreement with a Swiss firm for manufacturing foromycene.
Dr Yusuf Hamied, the founder's son, returned with a doctorate in chemistry from Cambridge and
joined Cipla as an officer incharge of research and development in 1960. In 1961, the Vikhroli
factory started manufacturing diosgenin. This heralded the manufacture of several steroids and
hormonesderived from diosgenin.
1935
The Comp. was incorporated at Mumbai.
1979
The Comp. acquired a plot of land from MIDC at Patalganga in Kulaba district of Maharashtra
State about 55 kms from Mumbai. 18,773 Bonus equity shares issued in proportion 1:1.
1984
The name of Comp. was changed from The Chemical Industrial & Pharmaceutical Laboratories
Ltd., to the present one with effect from 20th July.
1985
37,546 Bonus equity shares issued in proportion 1:1 in January 1986.
1986
During August, the Comp. obtained the consent of Controller of Capital Issues to issue 3,00,000-
15% secured non-convertible redeemable debentures of Rs 100 each aggregating to Rs 300 lakhs
by private placement. The entire issue was subscribed by public financial institutions. They are
redeemable at a premium of 5% during 1993-94.
1987
The Comp. launched several new products viz., Asthalin & Beclate Rotahalers/Rotacaps-dry
powder inhalation devices for asthma, presolar capsules - the first synergistic combination of
beta blocker & a sustained release calcium channel blocker for hypertension, Restyl tablets - the
first anxiolytic-cum-anti depressant, Theo-Asthalin SR tablets - the first sustained release
combination of two widely used bronchodilators, bromolin dry syrup & bromolin-250 capsules -
antibiotic-cum-mucolytic agents, dilgard tablets - a new calcium channel blocker for angina,
ibugesic plus suspension - a non steroidal anti inflammatory & anti-pyretic analgesic for
paediatric use. 75,092 Bonus equity shares issued in proportion 1:1.
1989
The latest drugs introduced during the year were Ciplox tablets [250 and 500 mgs] & infusion
[50 & 100 ml], a broad spectrum fluoroquinolone antibacterial for severe infections, cefadur
capsules [250 and 500 mgs] & syrup [30 ml], a cephalosporin antibiotic, Ulcimax tablets [20 and
40 mgs], a long-acting H2 antagonist for peptic ulcers & theoped syrup, a paediatric
bronchodilator. Sales in the Company `PROTEC' division exceeded Rs 5.50 crores for second
year of its operations.
1990
The Comp. launched several new products viz., Aerocort inhaler, an anti-inflammatory
among these are the antihypertensive Irovel (Rapilin, Pioglit, and Rezult) for antidiabetics and
the erectile dysfunction treatment Edegra. The company, ranked 5th by domestic prescription
product sales, has been consistently adding to market share from 2.47% in November 2000to
2.78% in November 2001 (ORG Retail Chemist Audit, November 2000 and 2001). Forbes
Global, the prestigious international magazine recently rated Sun Pharma among the best 200
global companies for 2002 (turnover less than 0mill).
2002
Caraco Pharmaceutical Laboratories, associate of Sun Pharmaceuticals, has received US Food
and Drug Authority (FDA) preliminary approval for metformin hydrochloride, a molecule used
to treat diabetes.
Currently, the company is in process of merging Pradeep Drug Company (PDC) with itself. The
company shareholders have approved the merger w.e.f. 1 April 2000. The scheme has been duly
sanctioned by BIFR at its meeting held on Jan 2002. Sun Pharma has made an open offer to the
investors in Ahmedabad, Calcutta, Madras, Pondicherry and Delhi stock exchanges to purchase
the shares at price of Rs 600 per share. The offer is limited to those shareholders whose names
are registered as members of the company as on 26/03/2002, the record date. Sun Pharmaceutical
Industries has launched Lupride Depot IM, a novel drug delivery system of prostate cancer drug
leuprolide acetate, which would enable the drug to be injected once in a month as against once in
a day or once in three days drugs. Mr Keki Mistry, Managing Director of HDFC, has been
inducted into the board of directors of Sun Pharmaceuticals Industries Ltd.
The Board of Directors of Sun Pharmaceutical Industries Ltd at its meeting held allotted
18,71,77,232 6% Cumulative Redeemable Preference Shares of Re 1 each as Bonus Shares in the
ratio of 4:1 (Ie 4 Preference Shares of Re 1 each for every one equity shares of Rs 10 each) to the
equity shareholders of the company as on the record date October 10, 2002.
2003
Sun Pharmaceutical Industries Ltd (Sun Pharma) has announced the Buyback of fully paid-up
equity shares of the Company of face value of Rs 10 each and / or Rs 5 each (being face value
and paid up value subsequent to the splitting of the equity shares of Rs 10 into 2 equity shares)
not exceeding 2,000,000 equity shares of Rs 10 each
and/or 4,000,000 equity shares of Rs 5 each i.e. not exceeding equity shares of face value of Rs
20,000,000 being less than 25% of the paid-up equity share capital of the company for an
aggregate amount not exceeding Rs 1200,000,000 upto a maximum price of Rs 750 per equity
share of Rs 10 each or upto a maximum price of Rs 375 per equity share of Rs 5 each from the
existing shareholders and beneficial owners of the shares of the company from open market
through stock exchanges.
Sun Pharmaceuticals Industries Ltd has informed the Exchange that the Board of Directors at its
meeting held on January 30, 2003 accepted the resignation of Shri R K Baheti, Senior Vice
President - Finance and Company secretary of the Company w.e.f 31/1/2003 and the Board
appointed Shri Kamlesh H Shah as the Company Secretary w.e.f. 31/1/2003. Sun
Pharmaceuticals’ US-based associate, Caraco Pharmaceutical Laboratories, has received the
approval from the US Food and Drug Administration (US FDA) to manufacture and market yet
another generic drug, this time for the treatment of mild to moderate cardiac failure, in the US.
The drug, Digoxin, is the generic form of Glaxo Wellcome’s Lanoxin, the company said. Sun
Pharmaceutical Industries Ltd has informed BSE that it has further redeemed 1, 42, 99,833, 6%
Cumulative Redeemable Preference Shares of Re 1 each amounting to Rs 1,42,99,833 in the fifth
lot out of the total paid - up Preference Share Capital of the company. Sun Pharmaceuticals
Industries Ltd has informed the Exchange that the company pursuant to the earlier intimation
about Redemption of Preference Shares, have extinguished /cancelled 3,01,20,608 shares - 6%
Cumulative Redeemable Preference Shares of Re.1/- each consisting of 2,98,37,008 Preference
Shares in demat mode and 2,93,376 Preference Shares in physical mode.
Board approved to close buy back of shares. The company's equity shares will be delisted from
Vadodara Stock Exchange Ltd.
2004
Sun Pharma acquires common stock and options from 2 large shareholders of Caraco, increasing
stake to over 60% from 44% at a total outlay of about million. By 2007, this stake has reached
75% on a diluted basis. The formulation site in Halol, India (the erstwhile MJ Pharma site)
receives approval from USFDA, UK MHRA, South African MCC, Brazilian ANVISA and
Columbian INVIMA. The BT Stern Stewart survey places Sun Pharma among the top 20 wealth
creators in India and among the top 3 wealth creators in the pharma sector. Construction at a
formulation manufacturing site at Jammu is completed. Our first joint venture manufacturing
unit, in Dhaka, Bangladesh is commissioned. This modern site is spread over 25,000 sq. ft.
Two of Sun Pharma's API factories receive USFDA approval, taking the total number of US
FDA approved sites to three. Sun Pharma acquires a Cephalosporin Actives manufacturer, Phlox
Pharma, with European approval for cefuroxime axetil amorphous. By 2007, a formulations
facility to make sterile and non sterile formulations have been built, and the API and non-sterile
sections have been approved by the USFDA.
Niche brands are bought from the San Diego, US based Women's First Healthcare. (WFHC, not
listed). These brands are the gynecological Ortho-Est® (estropipate), and the antimigraine
preparation Midrin®. Forbes Global ranks Sun Pharma in the list of most valuable companies for
2004 (turnover less than bill).
2005
Sun Pharma buys a plant in Bryan, Ohio, US and the business of ICN, Hungary from Valeant
Pharma. Sun Pharma acquires the intellectual property and assets of Able Labs from the US
District Bankruptcy court in New Jersey in December
2005.
Dilip Shanghvi, the CMD, receives the E&Y Entrepreneur of the Year award in healthcare and
life sciences for 2005.
Sun Pharma is selected by Forbes amongst the best 200 companies (sales less than USD 1
billion) in Asia. This is the fourth time in 5 years that the company has been selected.
2006
Announced the demerger of innovative business with pipelines, people, equipment and funding,
into a new company.
2007
Completed the demerger of the innovative business, with requisite legal and regulatory
approvals. SPARC ltd, the new company, is listed on the stock exchanges in India, the first pure
research company to be so listed.
In May 2007, we, along with our subsidiaries, signed definitive agreements to acquire Taro
Pharmaceutical Industries Ltd., (TAROF, Pink Sheets), a multinational generic manufacturer
with established subsidiaries, manufacturing and products across the U.S., Israel, Canada for 4
mill. This all-cash deal is subject to Taro
Shareholder approval and requisite regulatory clearances
2008
Sun Pharmaceutical Industries Ltd on January 30, 2008 announced that it has commercially
launched generic Pantoprazole Sodium Delayed Release (DR) Tablets, 40 mg, which is AB-rated
to Wyeth's Protonix DR Tablets. Sun's product is being sold in the United States by its marketing
partner Caraco Pharmaceutical Laboratories.
In November 2008, we along with our subsidiaries, acquired 100% ownership of Chattem
Chemicals, Inc.,a narcotic raw material importer and manufacturer of controlled substances with
a approved facility in Tennessee. This will offer vertical integration for our controlled substance
dosage form business in the US.
2010
Sun Pharmaceutical Industries Ltd has appointed Shri. Kal Sundaram, as an Additional Director
on the Board of Directors of the Company and as the Chief Executive Officer of the Company
with effect from April 01, 2010.
COMPANY PHYLOSOPHY
Sun Pharma's philosophy envisages working towards high levels of transparency, accountability,
consistent value systems, delegation across all facets of its operations leading to sharply focused
and operationally efficientgrowth. The company tries to work by these principles in all its
interactions with stakeholders, including shareholders, employees, customers, suppliers and
statutory authorities. Sun Pharma is committed to learn and adopt the best practices of corporate
governance.
VISION
The Sun Pharma of tomorrow will have brands registered in major markets of the world, and in
most markets, promoted by a high quality field force. With a strong network and established
company equity, we would be an excellent partner for a company seeking to license out products
across markets.
MISSION
We are an international specialty pharma company, with a presence in 30markets. We also make
active pharmaceutical ingredients. In branded markets, our products are prescribed in chronic
therapy areas like cardiology, psychiatry, neurology, gastroenterology, diabetology and
respiratory. In the time since, we have crossed several milestones to emerge as an important
specialty pharma company with technically complex products in global markets, and a leading
pharma company in India. We are leader in each of the therapy areas that we operate in, and are
rated among the leading companies by key customers. Strengthening market share and keeping
this customer focus remains a high priority area for the company.
Marketing mix
Swot analysis
Strengths:
Sun Pharma is highly regarded for its ability to launch new products with a great amount
of speed and consistency.
The company has only 20% exposure to the DPCO.
The past growth rate of the company has always been double that of the industry as a
whole.
Weaknesses:
Continuous losses of Caraco Pharma are a major concern for Sun Pharma.
The profit margins are declining for the company
Opportunities:
The relaxation of DPCO will be a big boost for the company and this might marginally
improve the profit margin.
The company has already made ANDAs (Abbreviated new drug application) in USA and
it provides a great opportunity for growth for the company.
The company has entered the US market through its subsidiary Caraco Pharma. This
provides a great opportunity for the company to make the
CHAPTER-8
LUPIN LABS
History (Mission, Vision)
Lupin Chemicals Ltd (LCL) was promoted by Lupin Laboratories Ltd. The company was incorporated on 31.03.83 as a Private Ltd company and subsequently converted into a Public Ltd company with effect from 23.12.91. The company does not have any subsidary. The company is setting up a project for the manufacture of 93 tpa of Rifampicin, an essential anti-tuberculosis, anti-leprotic, life saving drug from a very basic stage of fermentation. It is an import substitute product. To finance the project the company is coming out with a PCD issue aggregating to Rs.45.6 crores. 2002
Lupin Ltd has successfully introduced AkuriT, a revolutionary simplified therapy as per WHO's guidelines for treatment of tuberculosis Crisil has upgraded the rating assigned to Lupin's non-convertible debentures from D to BB+. Lupin Ltd has enhanced its capacity of manufacturing various products at its formulations plants at Aurangabad and Manideep in Madhya Pradesh. Lupin receives Final FDA Approval for Trandolapril. Lupin Ltd inducted PricewaterHouseCoopers to implement SAP to faultlessly connect its 28 sales depot. Lupin Ltd has cut down its debt by Rs.20cr . 2003 Lupin Ltd has commissioned its facility at Mandideep near Bhopal, Madhya Pradesh for the manufacture of Lisinopril. Lupin Ltd announces VRS for its employees in a bid to trim its wage bill. Pharmaceutical major Lupin Ltd has divested about 12.55% of its equity holding in the company to CVC International, a private investment arm of the US based financial conglomerate Citigroup. Lupin is closing down its South African Operations and is setting up two subsidiaries in Hongkong and the US. Lupin Ltd has received the appproval of US Food and Drug
Administration for cefuroxime axetil 250 mg and 500 mg tablets Dr.Kamal K Sharma has been appointed as the Additional Director of the company. The company has received USFDA's approval for cefotaxime sterile vials for injection. Secured US FDA nod for generic Claforan marketing Lupin receives USFDA approval for Caftriaxone Sterile Vials for injections Lupin plans to list shares on NYSE. Lupin set up new herbal product division Lupin submits INDA for psoriasis 2004 Launches Ezedoc, a specialty drug for the cholesterol management segment Lupin has appointed Vinod Dhawan as President - Business Development (Latin America, Japan, Australia, and New Zealand). Mr.Dhawan will be responsible for the development of Lupin's business strategy for these markets, with focus on, among others, product selection, entry strategy, marketing and sales, and regulatory compliance. Lupin Limited has informed that at the EGM of the Company held on December 05, 2003, the members of the Company have by means of a special resolution determined to delist shares of the Company, from the following exchanges : 1) The Calcutta Stock Exchange Association Ltd. 2) The Stock Exchange, Ahmedabad, 3) Jaipur Stock Exchange Ltd., 4) The Delhi Stock Exchange Association Ltd.
The Company has initiated action to secure de-listing of the equity shares of the Company, from the aforesaid exchanges. The Equity shares of the Company are listed on the NSE and BSE and will continue to be listed and traded on NSE and BSE. Enters into an agreement with Baxter Healthcare Corporation, a global medical products company headquartered in the United States whereby Baxter will exclusively distribute the Company's generic version of ceftriaxone sterile vials for injection in the USA Floats new division - Lupin Herbal, dedicated to research-based phytomedicines. Unveiled nine herbal products in therapeutic areas, including diabetes, pediatrics, gastro intestinal, pain management and gynaecology 2004 Delists Shares from Ahmedabad Stock Exchange. Lupin Pharmaceuticals, Inc., wholly owned subsidiary of the Company has entered into an agreement with Allergan, Inc. in the United Statesto promote Zymar (gatifloxacin opthalmic solution) 0.3% in the pediatric specialty area. Lupin Ltd has launched its anti-infective product Suprax (cefixime Oral Suspension) in the US market. Shares of Lupin Ltd delisted from the Delhi Stock Exchange. Shares of Lupin Ltd delisted from Jaipur Stock Exchange. Ind Swift Ltd ties up with Lupin Ltd for a Co-marketing pact to launch Nitazoxanide, an anti-diarrhoeal / anti-helmintic drug for the first time in India under the brand name Netazox and Nizonide respectively.
2005 Lupin launches Ceftriaxone vials in the US market Lupin enters into co-operation agreement with Kyowa for Japanese market. Lupin receives USFDA approvals for Cephalexin Oral Suspension. Lupin has entered into an agreement with GSK Philippines tomanufacture and supply the 4 & 2 Drug FDCs for marketing in Philippines. Lupin receives approval for conducting phase II clinical trials of Investigation New Drug candidate LLL-3348 (Desoris) from the Drug Controller General of India. 2006 Lupin joins hands with ItalFarmaco to launch Lupenox in India Lupin receives DCGI approval to conduct Phase II clinical Trials for Psoriasis NCE Lupin & Aspen Pharmacare enters into MoU for establishment of JV Lupin joins hands with ItalFarmaco to launch Lupenox in India Lupin Ltd has announced that the Company has signed a MoU to acquire a 51% equity in Artifex Finance CVA, Belgium, along with its subsidiaries including Dafra Pharma Ltd (Dafra), a Belgian pharmaceutical Company focussed on anti-malaria. Lupin ties up with Italian co 2007 Lupin Receives US FDA Approval for Simvastatin Tablets. Lupin gets MHRA Approval for Lisinopril in UK Lupin Ltd has announced that it has received Euro 20 million from Laboratoires Servier of France for the sale of additional patent rights for Perindopril. Lupin receives DCGI Approval to conduct Combined Phase IIb/III. Clinical Trials for it's herbal Psoriasis NCE Lupin Ltd on April 27, 2007, has announced that the Department of Science and Technology (DST), Government of India and the Company have joined hands for the clinical development of the Company's Migraine and Psoriasis projects. Lupin receives Best New Manufacturer of the Year Award from AmerisourceBergen 2008 Lupin Limited has appointed Mr. R.V. Satam as Secretary & Compliance Officer of the Company w.e.f. May 01, 2008. Lupin enters into agreement for Suprax 400 mg tablets. Lupin Launches SUPRAX ®400 mg Tablets in the US. Lupin expands its product basket in JapanKyowa receives Ten product approvals 2009 Lupin receives USFDA approval for Levetiracetam Tablets. Lupin ties up with leading Institutes for PhD Program Lupin in Equity Partnership with Multicare Pharmaceuticals Philippines, Inc. Lupin Expands Branded Play; Announces Acquisition of Worldwide Rights for its first NDA - AllerNaze 2010 Lupin Limited has launched Ilyalgan® (sodium hyaluronate), an osteoarthritis drug, available in the form of an injectable through leading orthopaedics and physiotherapists across the country.
Hyalgan40 is the original research molecule of the Italian pharma giant I-'IDIA and is the world leader in HA therapy, marketed in over 60 countries globally. Lupin Limited's U.S subsidiary, Lupin Pharmaceuticalss Inc. (LPT) has received the final approval for the company's Abbreviated New Drug Application (ANDA) for its Imipramine Pamoate capsules, 75 mg, 100 mg, 125 mg and 150 mg from the U.S. Food and Drug Administration (FDA). Commercial shipments of the product have already commenced.
In April 2004, Lupin Limited (Lupin) became the first Indian pharmaceutical company to receive an ANDA approval for Cefixime3. The company subsequently launched its first branded product - anti-infective Suprax (Cefixime Oral Suspension) in the US With the launch of Suprax, Lupin was catapulted to a different league, setting it apart from other pharmaceutical companies selling only active pharmaceutical ingredients (APIs) and generics. Headquartered in Mumbai, Lupin is a leading pharmaceutical company in India manufacturing bulk drugs and formulations. In the fiscal 2004-05, Lupin generated sales of Rs. 12,123 million, 4% more than in the previous fiscal and reported net profit of Rs. 844 million as compared to Rs. 987 million in the fiscal 2003-04. About 52% of Lupin's revenues came from the domestic market while 48% came from exports. Anti-TB (tuberculosis) drugs, cephalosporin and cardiovascular contributed to about 89% of its revenues while 11% came from markets such as nutraceuticals and other therapeutic segment.
Founded in 1968 with an initial capital of just Rs. 5000, Lupin witnessed significant growth to become a large, Rs 3 billion plus organization in the early 1990s. The company had grown at an average annual growth rate of 40% since its inception, twice as fast as the growth of the Indian pharmaceutical industry. Lupin too made significant investments in R&D, infrastructure, exports, herbal markets and other therapeutic segments to compete effectively with domestic and global pharma majors. According to Lupin's top management, "As the country switches on to the product regime, radical changes are expected to affect the pharmaceutical sector. A deep-rooted shift in business policy has taken place within the company by placing a strong emphasis on R&D to create proprietary intellectual property.
The budget for this activity was stepped up substantially during the year to ensure that the company has a complete portfolio of products to take on the patent regime. The history of the pharmaceutical industry in India can be traced back in the early nineteenth century. Initially, allopathic11 medicines were brought into India by the British and later these medicines were imported in bulk from Britain. These medicines soon became popular among urban Indians. After the first few decades of their introduction in India, pharma products were being imported from more technologically advanced countries such as Germany. The production of allopathic medicines within India started with the establishment of Bengal Chemical and Pharmaceutical Works in 1901 by Acharya P.C.Ray.
On April 01, 2000, Lupin Chemicals and Lupin Laboratories merged to form Lupin Limited. Lupin derived its name from the 'Lupin flower,' believed to have healing power. The company was a brainchild of Dr. Desh Bandhu Gupta (Gupta), an honorary doctor of philosophy with a master's degree in chemistry. He started his career teaching chemistry at Birla Institute of Science and Technology, Pilani, Rajasthan. Incorporated in the year 1972, Lupin Laboratories set up a formulations unit and an in-house R&D centre in 1980. Lupin's R&D centre received
recognition from the Department of Science and Technology (DST) in the year 1981. In the same year, Lupin was ranked 62 among Indian pharma companies with sales of Rs. 30 million. The company then strengthened its position in the anti-TB market with the introduction of Rifampicin. Several factors contributed to the success of Lupin. Significant among them was the vision and leadership of Gupta, who was actively involved in day-to-day functioning of the company. He envisioned Lupin as an innovation-led transnational company.
From the beginning, Lupin saw great potential for itself in the export markets. After establishing itself as a major bulk drug exporter, Lupin set its sights on the global generics market. The global generics market proved to be a major challenge. Not only was Lupin foraying into unknown territory, but also had to deal with the uncertainties of fluctuating currencies, regulatory issues, patent litigation, unstable political scenarios in some countries and pricing pressures on the generic.
Lupin had two dedicated divisions - AAMLA (Asia, Africa, Middle East and Latin America) and the team for CIS to understand global markets and develop entry strategies. These divisions also identified potential alliance partners within these countries. These divisions identified the US, Europe, CIS (Russia, Belarus, Uzbekistan, Azerbaijan, and Kazakhstan) as the major markets...
The initial growth of the Indian Pharmaceutical Industry (IPI) was extremely slow owing to lack of sufficient funds for pharma research and marketing, few entrepreneurs operating in the industry and lack of government support
Mission
Lupin’s mission is to become a transnational pharmaceutical company through the development and introduction of a wide portfolio of branded and generic products in key markets.
Our Vision Lupin Pharmaceuticals, Inc. is committed to bringing innovative products for the healthcare professional to improve the health and well being of individuals.
Lupin Pharmaceuticals, Inc. is well positioned for growth in the US market. We can capitalize on the strengths of our parent company, Lupin Limited:
Scientific expertise to develop new and improved products and product line extensions; Manufacturing technology, expertise and infrastructure; Financial resources.
Products
Generics
Lupin Pharmaceuticals, Inc. entered the U.S. generic pharmaceutical market in 2003 with the ANDA approval for cefuroxime axetil. Since then we have received more than a dozen FDA approvals. Six of Lupin's 14 ANDA approvals were the first granted by the US FDA, reinforcing our ability to submit high quality dossiers and gain on time approvals.
We are vertically integrated, from process development of the API to the submission of dossiers for finished dosages. This provides control over the supply chain and the ability to offer quality products at the right time and at competitive prices.
Our integrated manufacturing capability provides a portfolio of the highest quality generic products.
Expanding the product portfolio, Lupin Pharmaceuticals, Inc. is geared to file 15 or more ANDA’s per year in some of the following areas:
Oral and injectable cephalosporins;Cardiovascular; Controlled release ANDA’s;Paragraph IV’s.
Our oral and injectable cephalosporin facilities, US FDA approved manufacturing sites and the new tablet and capsule facility in Goa, allow us to file and manufacture a wide range of finished products for the US market.
Specialty
Lupin Pharmaceuticals, Inc. is committed to developing a branded pharmaceutical presence for pediatric practice in the US market. We are committed to identifying, developing and marketing prescription drugs for children of all ages. Lupin has created a dedicated national sales force to call upon pediatricians.
Lupin Pharmaceuticals, Inc., is very pleased to offer Suprax®, an important anti-infective product in pediatric and other physician practices within the United States. Suprax® is now available in tablets and suspension formulations. Lupin Pharmaceuticals, Inc., has an exclusive license in the United States to use the Suprax® trademark.
We plan to expand our family of pediatric products to help meet needs of children. Our focus is on in-house product development with our proprietary oral controlled release and taste masking platforms. Lupin Pharmaceuticals, Inc. is also open to marketing alliances, and to licensing/acquisitions.
API
Lupin is recognized as a leading manufacturer of cephalosporin API’s, with FDA approval to manufacture complex oral and injectable cephalosporins.
Lupin is fast gaining share in the cardiovascular segment manufacturing a wide range of ACE-inhibitors and cholesterol reducing agents. Lupin’s capabilities in sterile processing, synthetic process development and fermentation skills coupled with its intellectual property strengths, puts the company in a very strong position to offer a diverse portfolio of niche API’s to its customers.
Manufacturing / R&D
Lupin Pharmaceuticals, Inc. provides the advanced manufacturing capabilities and processes that create quality specialty and generic products. Lupin is amongst the world's largest manufacturers of products in its chosen therapeutic areas. Lupin has manufacturing operations in 5 cities in India and also a site in Thailand. Our plants are located at Mandideep, Aurangabad, Tarapur, Ankleshwar and Goa, in India.
The new tablet/capsule facility in Goa, India allows Lupin to file and manufacture a wide range of finished products for the US market:
Diverse / Integrated manufacturing capability; Synthetic API’s; Fermentation products;
Oral and injectable finished products.We have cost leadership with large scale, complex products.
Lupin was founded to meet the very basic need for effective treatment of tuberculosis. Our success is tied to continually meeting the need for basic products to promote human health. Our company strives to bring important new products to market each year. We expect our products to come from:
In-house product development; Licensing and acquisitions; Marketing alliances.
Lupin is also seeking to be the partner of choice for product development. Our scientists apply know how and expertise to develop NCE’s or to solve difficult formulation challenges.
We strive for continued growth and are avidly interested in learning about prospective opportunities in the specialty pharmaceutical market. We are also open to collaborating to develop innovative products formulated with Lupin’s drug delivery and taste masking technology. Our API business unit is seeking partners for Lupin developed API's.
Organizational Structure
The Department of Pharmaceutical Services organizational structure serves as a visual representation of managers’ span of control, responsibilities and line of authority. The organizational structure enhances communication, teamwork and decision-making within the Department. It also outlines the formal authority and communication network within the Department. Each employee is encouraged to use this organizational structure to verify that communications, suggestions and/or problems are directed to the individual directly responsible for that area. Employees are encouraged to contact and/or communicate with the person to whom they are directly responsible to address issues or concerns. Any issues that cannot be resolved by an employee’s direct supervisor are directed to the next highest level of the organizational structure.
Vanderbilt University Hospital and Clinics (VUH):
The VUH Department of Pharmaceutical Services is comprised of four (4) service/practice areas, each of which is managed by an individual at the Director level (VUH & Clinic Org Chart) The four Directors report to the Administrator - Pharmaceutical Services, who in turn, reports to the Associate Hospital Director for Professional Services as part of the larger Medical Center.The four (4) Pharmacy service/practice areas are:
Monroe Carell Jr. Children’s Hospital at Vanderbilt (MCJCHV):
The MCJCHV Department of Pharmaceutical Services is managed by the Director of Pharmacy who reports to the Director of Operations for MCJCHV. The Director of Operations reports to the Chief Operating Officer (COO) for MCJCHV. Three service areas are managed by the following individuals: Assistant Director who is responsible for both inpatient and outpatient operations, Manager of the Retail Pharmacy, and Manager of Clinical Services (VCH Org Chart) The three service areas include:
Inpatient OperationsRetail OperationsClinical / Education & Research Services
Corporate Services:
Some pharmacy services are more effectively provided via a corporate services delivery model from a centralized location to more than one facility in the VUMC organization. These services are managed jointly by VUH and MCJCHV. The following are examples of pharmacy corporate
Aurobindo Pharma was born of a vision. Founded in 1986 by Mr. P.V.Ramaprasad Reddy, Mr.
K.Nityananda Reddy and a small, highly committed group of professionals, the company became
a public venture in 1992. It commenced operations in 1988-89 with a single unit manufacturing
semi synthetic penicillins (SSPs) at Pondicherry.
Aurobindo Pharma had gone public in 1995 by listing its shares in various stock exchanges in the
country. The company is the market leader in semi-synthetic penicillin drugs. It has a presence in
key therapeutic segments like SSPs, cephalosporins, antivirals, CNS, cardio-vascular,
gastroenterology, etc. Over the years, the Aurobindo Pharma has evolved into a knowledge
driven company. It is R&D focused, has a multi-product portfolio with multi-country
manufacturing facilities, and is becoming a marketing conglomerate across the world. Aurobindo
Pharma created a name for itself in the manufacture of bulk actives, its area of core competence.
After ensuring a firm foundation of cost effective production capabilities and a clutch of loyal
customers, the company has entered the high margin speciality generic formulations segment,
with a global marketing network.
The formulation business is systematically organised with a divisional structure, and has a
focused team for each key international market. Aurobindo believes in gaining volume and
market share in every business/segment it enters.
Aurobindo has invested significant resources in building a mega infrastructure for APIs and
formulations to emerge as a vertically integrated pharmaceutical company. Aurobindo’s five
units for APIs and four units for formulations are designed for the regulated markets.
1986
The company was incorporated on 26th December as a Private Limited company and was converted into a Public Limited company with effect from 30-4-1992. The company is registered with the Registrar of Companies, Andhra Pradesh at Hyderabad. The chief promoters of the Company are Shri P.V. Ramaprasad Reddy and Shri K. Nityananda Reddy. Aurobindo Pharma Limited is one of the leading manufacturers of life saving anti-biotic bulk drugs in India with excellent track record of profitability and growth. The Company has developed inhouse
technology for manufacture of the bulk drugs as well as formulations. The Company is one of the largest manufacturers of Ampicillin and Cloxacillin in India. 1992 Another unit was also set up for the manufacture of CMIC Chloride, a bulk drug intermediate at Pashamylaram, near Hyderabad. Through another Company namely, Chaitanya Organics Pvt. Ltd., which is now being merged with Aurobindo Pharma Limited. The Company issued Bonus Shares in the ratio of 1:1 in May, in the ratio of 2:1 in June, 1993 and in the ratio of 7:20, in November 1994. The Company follows the Mercantile System of Accounting and recognises Income and Expenditure on Accrual basis. 1993 The Company has set up two more units during the year, viz., i) Bulk drug unit at Bollaram, near Hyderabad. ii) Formulations unit at Kukatpally, near Hyderabad. The Company is setting up a Bulk Drug cum Formulation Plant to produce sterile Bulk Drugs like Ampicillin Sodium (Sterile) IP/BP, Cloxacillin Sodium (Sterile) IP/BP, and cephalosporins (Sterile) Bulk Drugs and Formulations in the dosage forms like sterile powder injectables, small volume parenterals, Capsules and Tablets. 1994 The installed capacity of the Pondicherry Unit of the Company is increased from 204 TPA to 300 TPA during the current year. The Bollaram unit is for the manufacture of anti-biotic bulk drugs, namely Cloxacillin, and Dicloxacillin mainly for exports. During the Year, the Company has upgraded the plant and increased the installed capacity from 78 TPA to 84 TPA. The Company has set up a separate block in the same premises during the current year, 1994-95 for manufacture of high value drugs namely Astemizole, Domeperidone, Famotidine and Omeprazole, with an installed capacity of 9 TPA. The Kukatpally unit is for manufacture of pharmaceutical formulations with an installed capacity of 360 lakhs tablets and 480 lakhs capsules per annum. During the current year the Company has increased the installed capacity of the merged company Chaitanya Organics Pvt. Ltd., from 120 TPA to 144 TPA. Further a new bulk drug intermediate namely DCMIC Chloride is also manufactured in this unit from April. The Company has also expanded the above unit by setting up a separate block for manufacture of Norfloxacillin and Pefloxacillin with an installed capacity of 60 TPA. The Company proposed to acquire two generators of 250 KVA capacity each as standby arrangement. The company has entered into domestic formulations market in 5 States and plans to launch in other states shortly. The Company has agency set-up at Srilanka, Thailand, Russia and Nigeria for marketing its products. It proposes to set up its own marketing offices at Hongkong, Moscow and Nigeria to promote bulk drug sales. The Company has a connected power load of 500 KVA from A.P.S.E.B. In addition, 3 Generators of 125 KVA capacity each have been installed as a stand by arrangement. The Company is a member of Patancheru Effluent Treatment Plant Limited and Jeedimetle Effluent Treatment Plant. All the Assets and Liabilities
of M/s. Chaitanya Organics Pvt. Ltd. will be taken over by M/s. Aurobindo Pharma Ltd. with effect from 1st April, on completion of amalgamation formalities. As per the scheme of amalgamation it is proposed to issue one equity share of M/s. Aurobindo Pharma Ltd. of Rs 10/- each credited as fully paid up for every one equity share of Rs 10/- each fully paid up Held in M/s. Chaitanaya Organics Pvt. Ltd. to the Shareholders of M/s. Chaitanya Organics Pvt. Ltd. 1995 In January, Videocon International and Videocon Appliances sold tranche of Aurobindo shares to the public at a premium of Rs 180. 1997 Glaxo (India), the Indian subsidiary of the UK-based multinational, is understood to be negotiating with the Hyderabad-based Aurobindo Pharma for an alliance to meet its global bulk drug requirements. The annual capacities now stand at 300 million of capsules and 840 tonnes of bulk drugs. The company proposes to manufacture fourth generation cephalosporins such as 7-ACA, cephalexin, cephatoxime and cephazolin. 1998 AUROBINDO Pharma Ltd is setting up two wholly-owned subsidiaries in the US and Hong Kong to increase its presence in the international market. The company is one of the largest bulk manufacturers of semi-synthetic penicillin (SSP) products such as ampicilin and Amoxycillin. It is the world's fourth largest producer of ampicillins and fifth largest producer of amoxycillins. The company has also launched new formulations like auronim Suspension in the paediatric segment. The company has obtained the shareholders permission to invest50 ,00,000 in the share capital of Aurobindo Pharma (Miami) Inc in USA and 60,00,000 in the share capital of Aurobindo Pharma (Hong Kong) Pte Ltd. The company would be launching several new formulations including Roxythromycin, Clarithromycin, Sporfloxocyin, besides Sephradin, a semi-synthetic, in the domestic market. Among sterile products to be launched by the company are Cephazolin, Cehatoxin and Azithromycin. 1999 The Hyderabad-based Aurobindo Pharma had received in-principal approval from the Board of Industrial and Financial Reconstruction (BIFR) in March to buy the plant. APL is today the most cost-efficient producer of SSPs in India and a low cost international producer of other value added bulk drugs and drug intermediaries. Aurobindo currently manufactures three types of drugs including cephalosporin-based formulations, drugs for gastroenterology and pain-related products. The company proposes to deploy the issue proceeds to part-finance its R&D thrust and the growth of its formulations business. APL plans to meet the further funds requirement for its capital expenditure programme, if any, through internal accruals. The board of directors has allotted 5,51,000 equity shares of Rs.10 each at a premium of Rs.480 per share by private
placement on preferential basis to FIIs, FIs, MFs and bodies corporate etc. Aurobindo Pharma Ltd, the largest domestic manufacturer of penicillin-based bulk antibiotics, plans to form joint ventures in Brazil and China by the end of financial year 1999-2000 (April-March). 2000 Aurobindo Pharma Ltd. a major producer of semi-synthetic penicillins in the country, proposes to set up two joint venture companies in the US to manufacture cephalosporins and non-cephalosporins. Aurobindo Pharma is setting up two joint ventures for formulations in the US, with an investment of million. As per the scheme of Amalgamation equity shares of Aurobindo Pharma Limited will be exchanged to the shareholders of Sri Chakra Remedies Limited for every 100 equity shares held by them. 2001 The Company has launched an exclusive anti-viral division – Immunus -- to educate and to provide preventive drug care for HIV/AIDS patients in the country. Hyderabad based Aurobindo Pharma has restructured its management responsibilities in view of major growth initiatives to be taken to create a platform for penetrating attractive global markets. P V Ramaprasad Reddy, former managing director, has been appointed executive chairman, while K Nityananda Reddy, former joint managing director and co-promoter, has been appointed managing director, APL informed the Bombay Stock Exchange on July 4. This new structure is expected to enable the company to concentrate on the strategies of change being pursued by it to achieve the goal of becoming a research and development-based international pharmaceutical company, it said, adding that the changes had received board approval. Aurobindo Pharma Ltd today announced the launch two more drugs-- Efavirenz (Viranz) and Nelfinavir (NELVEX)-- for the treatment of AIDS. 2002 Three existing Directors, Mr Srinivas Lanka, Mr A J Kamath and Mr A Siva Rama Prasad have stepped down from the directorship, thus making room for appointment of independent external directors. Accordingly, their resignations were accepted. While Mr Srinivas Lanka will be considered for reappointment as non-executive independent Director, Mr A J Kamath will assume the responsibility of group financial advisor. Further, it is planned to retain the services of Mr A Siva Rama Prasad for group operations. Aurobindo Pharma to allot further equity shares/warrants to promoters. Srinivas Lanka re-inducted into the Board of Aurobindo Pharma.Sathyamurthy appointed as Additional Director of Aurobindo Pharma. 2003 The Board of Directors of Aurobindo Pharma Ltd has approved the appointment of Dr K A Balasubramanian as an additional director on the Board of Directors of the company. Dr Balasubramanian shall be an independent, non-executive director. Aurobindo informed BSE that Citadel Aurobindo Biotech Ltd, a 50:50 Joint venture company introduced Aztreonam a
Monabactam Betalactam antibiotic for the first time in the Indian Pharma Market with a brand name 'TREONAM'. Aurobindo Tongling (Datong) pharmaceuticals Ltd, China , a JV between APL and Shanxi Tongling Pharmaceuticals co. has set up for manufacture of pharmaceutical products for the local market. With a view to manufacture Pen G, a raw material essential for the production of semi-synthrtic pencillin, Aurobindo has infused Rs 59cr in a flagship Aurobindo(Datong) Pharma Ltd. Aurobindo Pharma has launched second joint venture company in US for the purpose of Research and Development. Allots 950,000 equity shares to promoters/directors by way of conversion of warrants. Aurobindo Pharma has launched second joint venture company in the United States for the purpose of R & D in alliance with Salus Pharmaceuticals. Aurobindo Pharma has filed around 20 patents in the areas of central nervous system, cardio-vascular, and anti-cholesterol segments. Out of this it is able to obtain 2 of them in United States of America. UTI sold 3 pc stake from the company.Board approves the issue on a preferential basis, of an aggregate upto 3,100,000 equity shares of Rs.5/- each at a price of Rs.302/- per equity share (including a premium of Rs.297 per equity share), totalling up to Rs.93.62 cr Company ropes in Merlion India Fund 1, Mauritius, for allotting 31 lakh equity shares on a preferential basis at a price of Rs 302 per share, including a premium of Rs 297 per share, totalling Rs 93.62 crore 2004 Ms P. Suneela Rani, has sold 6,80,000 equity shares of Rs 5 each of the company, constituting 1.4 per cent of equity of its current paid-up equity of Rs 24.2 crore. These shares were sold in the open market from December 23-31 last year Aurobindo Pharma Ltdhas announced that it has received its first Certificate of Suitability (CoS) approval from the European Directorate for Quality Medicines (EDQM) for its product in the therapeutic segment of gastroenterology. Aurobindo Pharma Ltd has informed that the members at the EGM of the Company held on December 26, 2003 have unanimously approved the following special resolution : 'Issue of equity shares under preferential allotment guidelines of SEBI'. Further, the Company has also informed that delisting of securities of the company from Ahmedabad Stock Exchange was approved w.e.f. January 15, 2004. Aurobindo Pharma Ltd has informed that pursuant to the application of the Company, its securities have been removed from the list of the Ahmedabad Stock Exchange (ASE) w.e.f. January 15, 2004. 2005 USFDA part of Department of health and human science approves UNIT VIII facility as a site to manufacture APIs for the US Market. Aurobindo AIDS drug receives US FDA clearance. Aurobindo Pharma gets EDQM approval for Flucloxacillin Sodium Aurobindo Pharma receives approval for Sertraline Hydrochloride Tablets. Aurobindo Pharma receives approval for
Cephalexin Capsules by US FDA Aurobindo's receives final approval of Mirtazapine Orally Disintegrating Tablets 2006 Aurobindo Pharma receives final approval of Mirtazapine ODT 45mg for US marketAurobindo Pharma receives final approval of Mirtazapine ODT 45mg for US market. Aurobindo Pharma Ltd has announced that the US FDA has granted tentative approval for the Company's Simvastatin Tablets USP 5 mg, 10 mg, 20 mg, 40 mg and 80 mg Aurobindo receives US FDA approval for Didanosine (Chewable) Tablets. Aurobindo Pharma Ltd has announced that it has received the marketing authorization approval from Medicines Evaluation Board (MEB), NETHERLANDS for Mirtazapine 15, 30 and 45 mg orally disintegrating tablets containing the active ingredient Mirtazapine. Aurobindo Pharma Ltd has appointed Mr. A.Mohan Rami Reddy as Company Secretary of the Company. Aurobindo Pharma receives final approval for SIMVASTATIN tablets from USFDA. Aurobindo arm acquires Dutch firm Pharmacin. 2007 Aurobindo Pharma Ltd has received one more approval from USFDA for Cefadroxil capsules 500 mg. Aurobindo Pharma Ltd has announced that on June 13, 2007 the Company unveiled their new Logo and Corporate Identity at a ceremony in Hyderabad. 2008 Aurobindo Pharma Ltd has announced that the Company has received an approval from the US Food & Drug Administration to market its 300mg Cefdinir Capsules in the US market. The drug falls under the Anti-bacterial segment and is a generic equivalent of Abbott Laboratories, OMNICEF. Aurobindo Pharma Ltd has appointed Mr. K Raghunathan as an Additional Director of the Company at the Board Meeting held on January 30, 2008. Aurobindo Pharma Ltd has announced that the Company has been awarded ARV contract worth Rs 70 crores for 3 products which are WHO/ USFDA pre-qualified by National Aids Control Organization (NACO). Aurobindo Pharma Ltd has got final clearance from the US Food andDrug Administration (USFDA) to manufacture and market Didanosine Delayed Release capsules in 125 mg, 200 mg, 250 mg and 400 mg. The drug is indicated for treatment of HIV - 1 infections in adults. It is the generic version of Bristol Myer Squibb's Videx EC delayed-release capsules. 2009 Aurobindo Pharma Ltd has received Swissmedic approvals for Amlodipine Besylate Tablets and Metformin Hydrochloride Tablets. 2010
Aurobindo Pharma has received final approval from the United States Food and Drug Administration for its product Ceftazideme injection in different dosages.
Vision:
To become Asia's leading and one among the top 15 generic Pharma companies in the world, by
2015"
Mission:
Aurobindo's mission is to become the most valued Pharma partner for the World Pharma
fraternity by continuously researching, developing and manufacturing a wide range of
pharmaceutical products complying to the highest regulatory standards.
PRODUCTS
THERAPEUTIC
Anti-Allergic
Anti-Diabetic
Anti-Emetic
Anti-Fungal
Anti-Malarial
Anti-Obesity
Anti-Pyretic
Anti-Retoviral
Anti-Viral
Anti-Biotic
Cardiovascular
CNS
GI-Tract
Histamine
Life-Style
Osteoprotic
OTC
Pain Management
Respiratory
Urology
Research & Development
The Company's R & D strengths are in developing intellectual property in the area of non-infringing processes and resolving complex chemistry challenges. In the process, Aurobindo Pharma is developing new drug delivery systems, new dosage formulations, applying new technology for better processes. The APL Research Center, two in Hyderabad covers over 13000 sq meter, and provides a nurturing environment to a multi-disciplinary team of over 700 scientists striving for excellence.
The Centre meets GLP requirements, and is focused on the areas of organic synthesis, analytical research, dosage form development, pharmacology, bio-equivalence studies and drug delivery systems.
The instrumentation and analytical knowledge base at the Centre facilitate..
Process development life cycles of less than three months, even if it involves complex multi step synthesis with multiple hilarity.
Complete impurity profiling in all products developed.
Development of analytical methods and specifications from raw materials, to non-compendia finished products.
In-house synthesis of reagents for analyzing oregano lithium and noble metals.
Accelerated and real-time stability studies.
This reflects the Company’s commitment towards developing innovative technologies and creating a knowledge base in chemical synthesis, high quality generic formulation and development of drug delivery systems.
CHAPTER-10
GLAXOSMITHKLINE PHARMACEUTICALS
History (Mission, Vision)
1924
The Company was incorporated in India on 13th November under the name of H.J.Foster & Co.
Limited as an Agency House for distributing the well-known Baby Food Glaxo of the then U.K.
Company, Joseph Nathan & Co. two years later, the company became a wholly-owned
subsidiary of Joseph Nathan & Co.
1950
On 1st March, the company changed its name to Glaxo Laboratories Ltd.
1956
During the year the first major steps towards basic manufacture was undertaken with the
establishment of vaccine manufacturing facilities.
1960
A milk drying plant was opened near Aligarh, U.P.
1961
During the year a large and highly complex fine chemicals plant making vitamin A, steroids and
other drugs from basic stages was commissioned in Thane.
1962
During the year, the company took over the business of the Indian branch of Allen & Hanburys
Ltd., U.K., as this company was acquired by Glaxo Laboratories Ltd., U.K.
1968
During the year Glaxo group limited acquired the whole capital of BDH Group Ltd. With effect
from 1st July, the company became a Public Ltd. Company and its name was changed to Glaxo
Laboratories (India) Ltd.
The main objects include the manufacture, distribution, sale and export of medicinal, chemical,
biological, immunological, Veterinary and other therapeutic preparations, food for infants and
invalids, dietetic foods, cereals and foodstuffs of all descriptions, all Classes and kinds of
chemicals, cosmetics and diary, farm and garden produce.
During the year, the company diversified the activities of Aligarh Factory, by introducing the
manufacture of other food products viz., Glaxose-D' and Casilan and by the installation of
packing facilities for milk food and Glaxose-D.
The Technical Collaboration Agreement with Glaxo Group, the Company took immediate steps
to establish a Research and Development unit at Thane.
1970
During the year the company acquired Vasant Vijay Mills premises adjacent to its premises at
Worli. During the same period, the new R & D unit was completed at Thane.
1982
Glaxo Group Ltd., U.K., disinvested 28, 00,000 equity shares in the Company. 56, 00,000 No. of
Equity shares issued (prem. Rs. 5 per share) in Jan.
1983
18, 00,000 shares were offered as right (Except to Glaxo Group Ltd. U.K.) in 1:2, 2, 50,000
shares reserved for business associated of the company and 35,50,000 shares offered to the
public. Pref. capital was repaid on 12.4.1983.
1984
In 1984-85, the company acquired the entire shareholding of Glindia Investments Ltd., Sesame
Investments Pvt. Ltd. and Samgir Investments Pvt. Ltd., which thereby became subsidiaries of
the company.
1986
During the year, a new company was registered under the name of K G Gluco Biols Ltd. for the
manufacture of products derived from maize in partnership with the Karnataka State Industrial
Investment and Development Corporation Ltd. Also another company under the name of
Vegepro Food & Feeds Ltd. was incorporated as a joint venture with Pradeshiya Industrial and
Investment Corporation of U P Ltd. For implementaion of the soyabean project.
1987
As at 30th June, Glaxo Group Ltd., U.K., which is a wholly owned subsidiary of Glaxo Holdings
Ltd., held 40% of the paid-up capital of the Company.
The name of the company was changed to Glindia Limited with effect from 11th March.
During the year family product division introduced two new products viz., Farex-Veg and Farex
Egg. The facilities for the manufacture and packing of dextrose monohydrate based products at
Aligarh were modernised and commissioned during the year.
Letters of intent were received for the manufacture of salbutamol, an antii-asthmatic and
labetalol, an anti-hypertensive and their formulations.
1988
The Company launched in the market, `Fortun', a latest generation cephalosprim injectible
antibiotic. Production of the bulk drug `Ibuprofen' had to be stopped due to reduction in its price
by more than 50%.
The company issued 20,00,000 - 14% redeemable secured non-convertible debentures of Rs. 100
each in order to meet normal capital expenditure and for working capital requirements.
1989
With effect from 17th July, the name of the Company was again changed from Glindia Ltd., to
`Glaxo India Limited.'
During the year two new products namely, complan mango and lime sip were manufactured.
1990
During the year three products launched viz., Vitamilk, Minitmilk and Rozana. In July Company
made an issue of commercial paper for Rs.10 crores.
1991
In January, company again issued commercial paper for Rs.9.8 crores.
1992
During the year company received industrial license for expansion of its anti-ulcerant bulk drug
ranitidine to 75 tonnes at Ankleshwar and for manufacture of beclomethasone inhalers at Nasik.
During the same year company sold the trade investment in Vegepro Foods & Feeds Ltd.
During the year company made three issues of commercial paper each for Rs.15 crores.
Despite a prolonged strike at Ankleshwar, it was possible to maintain a limited supply of bulk
drugs manufactured at that factory.
New products launched during the year included MINIT MILK, a dairy whitener, GLACTO I &
II, infant milk food formulae, FAREX RICE and AQUAVEETA an oral rehydration product.
The Company has an R&D Centre which is recognised by the Department of Scientific and
Industrial Research.
1993
During the year a formal agreement was signed with H J Heinz Company of USA for the
disposal of the family product division.
In July, the company issued 40,00,000 equity shares of Rs.10 each at a premium of Rs.55 per
share on rights basis in the proportion of 1:5 and 897,960 equity shares of Rs.10 each at a
premium of Rs.55 per share were issued to Glaxo Group Ltd. UK on preferential basis in the
Ratio 1:5.
Another 2,44,875 equity shares of Rs.10 each at a premium of Rs.55 per share were offered to
the employees and 2,54,865 shares of Rs.10 each at a premium of Rs.55 per share were offered
to Glaxo Group Ltd. UK were offered to maintain their shareholdings at 51%.
The Company allotted 44,89,800 new equity shares of Rs. 10 each for cash at a premium of Rs.
65 per share to Glaxo Group Ltd., U.K. to enable them to increase their shareholding in the
Company from 40% to 51% of the equity share capital.
During the year, the Company made three issues of Commercial Paper, each for Rs. 15 crores
and for 90-day tenure.
The Company has recently received from the Credit Rating Information Services of India Ltd.
(CRISIL) the highest rating of P1+ for its Commercial Paper programme.
The Company has received an Industrial Licence for substantial expansion for its anti-ulcerant
bulk drug Ranitidine to 75 tonnes at Ankleshwar.
The Company has also received a Letter of Intent for manufacture of Beclomethasone Inhalers at
Nashik.
1994
During the year company sold the family product division to H J Heinz India Pvt. Ltd., for a total
consideration of Rs.180 crores.
298,87,500 bonus shares issued to the existing shareholders in ratio of 1:1.
CETZINE, second generation anti-histamine and a research product of UCB Belgium, was
launched during the year under a co-marketing arrangement.
The Company launched two anti-TB products, ZUCOX & RIZAP, with the novel concept of a
patient-friendly compliance kit.
BECORIDE and BRCORIDE JUNIOR which are used in the management of Asthma were also
introduced.
1995
Glaxo India has entered into a marketing tie-up with Grampian Pharmaceuticals, a UK-based
veterinary products maker.
The company has struck a major deal with the UK-based 160 million pound company, Grampian
Pharmaceuticals, which will boost Glaxo's presence in the veterinary market. The deal is part of
tripartite agreement between Glaxo, Grampian and Global Parenterals, a
Bangalore based Pharma Company.
Global Parentals has put up a modern manufacturing facility for producing Grampian's products.
The Grampian range of veterinary products is likely to contribute around 6 to 7 per cent to the
total AFC business of Glaxo which has a large product range for cattle and poultry segments.
Glaxo entered fisheries market a few years ago through a collaboration with a Canadian
company to market Ovaprim, a fish spawning agent. Grampian products will complement
Glaxo's range in these three segments of the market.
During the year, oral liquids dpt. was substantially upgraded and the newly designed and re-
constructed tablet facilities at Worli started production during the end of the year.
The Company issued Bonus Shares in the ratio of 1:1 which were allotted on 21st February.
The Company has launched special Respiratory, Dermatology and Hospital Sales teams to
Bionova’s focus area is Dermatology. It has already made its mark by leading in the oral anti-
acne segment with brands like Azifast
(Azithromycin) and Acutret (Isotretinoin). Also offered are fast growing brands like Leset
(Levocetirizine) and Nipcan (Fluconazole
INNOVA Division
Innova marks Ipca’s entry into the Indian Neuropsychiatry segment. Already to its credit are
segment leaders such as Pari (Paroxetine), Sove(Zolpidem), and Ozapin MD (Olanzapine Mouth
Dissolving). Recently, Innova launched Pari CR – India ’s first Paroxetine with Controlled
ReleaseTechnology, an international patent for which have been filed.
ACTIVA Division
A super-speciality division, Activa was the countries first Rheumatology and Orthopaedic –
focused division. It markets a growing portfolio ofdynamic brands, including: HCQS
(Hydroxychloroquine Sulfate), Folitrax (Methotrexate), Saaz (Sulfasalazine), and Movon
(Aceclofenac), thefirst Aceclofenac in India . Today, Activa is a leader in its segment with a 39%
market share, and is also Ipca’s fastest growing division.
HYCARE Division
The marketing focus of this division is on the growing need for Cardiac and Antidiabetic
products. HyCare markets all major molecules for themanagement of cardiovascular disease,
Type II diabetes and its related complications. Glyree (Glimepiride), Glyree-M (Glimepiride +
Metformin)and Zilast (Cilostazole) are some of the leading brands of HyCare.
ALTUS Division
Ipca's youngest division, Altus caters to the need of intensivists, both surgical and non-surgical,
with a basket of oral and injectableAntibiotics like Keftragard, Keftragard V, Lactagard,
Lactagard 2:1, Tazofast, Primegard, Keftra, Foloup, Supraheal and Sultax(Sulbactum +
Cefotaxime), a world first.
The 7-S-Model---------------------IPCA LABOTARIES LIMITED:
The 7-S-Model is better known as McKinsey 7-S. This is because the two persons who
developed this model, Tom Peters and Robert Waterman, have been consultants at McKinsey &
Co at that time. They published their 7-S-Model in their article “Structure Is Not Organization”
(1980) and in their books “The Art of Japanese Management” (1981) and “In Search of
Excellence” (1982).The model starts on the premise that an organization is not just Structure, but
consists of seven elements: Those seven elements are distinguished in so called hard S’s and soft
S’s. The hard elements (green circles) are feasible and easy to identify. They can be found in
strategy statements, corporate plans, organizational charts and other documentations.The four
soft S’s however, are hardly feasible. They are difficult to describe since capabilities, values and
elements of corporate culture are continuously developing and changing. They are highly
determined by the people at work in the organization. Therefore it is much more difficult to plan
or to influence the characteristics of the soft elements. Although the soft factors are below the
surface, they can have a great impact of the hard Structures, Strategies and Systems of the
organization.
Division
Innova marks Ipca’s entry into the Indian Neuropsychiatry segment. Already to its credit are
segment leaders such as Pari (Paroxetine), Sove(Zolpidem), and Ozapin MD (Olanzapine Mouth
Dissolving). Recently, Innova launched Pari CR – India ’s first Paroxetine with Controlled
ReleaseTechnology, an international patent for which have been filed.
Division
A super-speciality division, Activa was the countries first Rheumatology and Orthopaedic –
focused division. It markets a growing portfolio ofdynamic brands, including: HCQS
(Hydroxychloroquine Sulfate), Folitrax (Methotrexate), Saaz (Sulfasalazine), and Movon
(Aceclofenac), thefirst Aceclofenac in India . Today, Activa is a leader in its segment with a 39%
market share, and is also Ipca’s fastest growing division.
Division
The marketing focus of this division is on the growing need for Cardiac and Antidiabetic
products. HyCare markets all major molecules for themanagement of cardiovascular disease,
Type II diabetes and its related complications. Glyree (Glimepiride), Glyree-M (Glimepiride +
Metformin)and Zilast (Cilostazole) are some of the leading brands of HyCare.
Division
Ipca's youngest division, Altus caters to the need of intensivists, both surgical and non-surgical,
with a basket of oral and injectableAntibiotics like Keftragard, Keftragard V, Lactagard,
Lactagard 2:1, Tazofast, Primegard, Keftra, Foloup, Supraheal and Sultax(Sulbactum +
Cefotaxime), a world first.
The 7-S-Model---------------------IPCA LABOTARIES LIMITED:
The 7-S-Model is better known as McKinsey 7-S. This is because the two persons who
developed this model, Tom Peters and Robert Waterman, have been consultants at McKinsey &
Co at that time. They published their 7-S-Model in their article “Structure Is Not Organization”
(1980) and in their books “The Art of Japanese Management” (1981) and “In Search of
Excellence” (1982).The model starts on the premise that an organization is not just Structure, but
consists of seven elements: Those seven elements are distinguished in so called hard S’s and soft
S’s. The hard elements (green circles) are feasible and easy to identify. They can be found in
strategy statements, corporate plans, organizational charts and other documentations.The four
soft S’s however, are hardly feasible. They are difficult to describe since capabilities, values and
elements of corporate culture are continuously developing and changing. They are highly
determined by the people at work in the organization. Therefore it is much more difficult to plan
or to influence the characteristics of the soft elements. Although the soft factors are below the
surface, they can have a great impact of the hard Structures, Strategies and Systems of the
organization.
Description:
The Hard S’s
Strategy
Actions a company plans in response to or anticipation of changes in its external environment.
Structure Basis for specialization and co-ordination influenced primarily by strategy and by
organization size and diversity.
Systems
Formal and informal procedures that support the strategyand structure. (Systems are more
powerful than they aregiven credit)
THE SOFT S’s
Style / Culture
The culture of the organization, consisting of two components:
• Organizational Culture: the dominant values and beliefs, and norms, which develop over time
and become relatively enduring features of organizational life.
• Management Style: more a matter of what managers do than what they say; How do a
company’s managers spend their time? What are they focusing attention on? Symbolism – the
creation and maintenance (or sometimes deconstruction) of meaning is a fundamental
responsibility of managers.
Staff
The people/human resource management – processes used to develop managers, socialization
processes, ways of shaping basic values of management cadre, ways of introducing young
recruits to the company, ways of helping to manage the careers of employees
Skills
The distinctive competences – what the company does best, ways of expanding or shifting
competences
Shared Values / Superordinate Goals
Guiding concepts, fundamental ideas around which a business is built – must be simple, usually
stated at abstract level, have great meaning inside the organization even though outsiders may
not see or understand them.
Effective organizations achieve a fit between these seven elements. This criterion is the origin of
the other name of the model: Diagnostic Model for Organizational Effectiveness.
If one element changes then this will affect all the others. For example, a change in HR-systems
like internal career plans and management training will have an impact on organizational culture
(management style) and thus will affect structures, processes, and finally characteristic
competences of the organization.
In change processes, many organizations focus their efforts on the hard S’s, Strategy, Structure
and Systems. They care less for the soft S’s, Skills, Staff, Style and Shared Values. Peters and
Waterman in “In Search of Excellence” commented however, that most successful companies
work hard at these soft S’s.
The soft factors can make or break a successful change process, since new structures and
strategies are difficult to build upon inappropriate cultures and values. These problems often
come up in the dissatisfying results of spectacular mega-mergers. The lack of success and
synergies in such merger is establish effective common systems and structures.
The 7-S Model is a valuable tool to initiate change processes and to give them direction. A
helpful application is todetermine the current state of each element and to compare this with the
ideal state. Based in this it is possible todevelop action plans to achieve the intended state.
Growth strategy:
Ipca is a market leader in the anti-malarial therapeutic category in India, enjoying 45% market
share. Antimalarial drugs accounted for 40% of its revenues around a decade ago, but now they
contribute only 17%. This is due to a diversified product mix that includes therapeutic areas like
cardio-vascular, diabetes, non-steroidal anti-inflammatory drugs and anti-bacterials . Till a few
years ago, over half its portfolio comprised drugs which were under price control, but that
proportion has now fallen to 13-14%. The company also plans to foray into oncology -
another attractive therapeutic area.
In ‘05, Ipca entered into an agreement withR anb axy Labs for manufacturing drugs to be sold by
the latter in the US.It has signed two more such agreements with companies in the US and
Canada. The branded formulations business(spread across India, CIS, Asia, Africa and Latin
America) is set to be its biggest growth driver. Ipca expects itsdomestic formulations business to
grow by 20% and the international segment to grow 40% this year.
System
The IPCA project aims to develop a new intelligent interaction mechanism that will enable
people with severe motor and speech disabilities to control standard, and especially web-based,
applications. The system will be based on a flexible combination of existing non-invasive
sensors and encoders able to control different physiological parameters, and a set of software
tools that will allow the user to interact with existing computer applications. IPCA will facilitate
user interaction with different Internet applications and services.
IPCA has two components:
•
Multi-channel Monitoring System (MMS), based on non-invasive sensors able to control several
physiological
parameters from the user such as: EMG, EDR, accelerometers, RR/RA, etc.
•
Ambient Navigation Toolkit (ANT) that will interface between the MMS and some standard
software applications, by providing keyboard and/or mouse emulation functions. Its components
are:
o
Smart Web Browser that will facilitate user interaction with Internet services
o
Training system
o
Personal profile manager
o
On-screen keyboard with scanning and word prediction capabilities
o
Emotional Response Monitoring System
Structure
Ipca is always willing to try new structures in new situations. The dynamic change in the
business requirements is effectively handled by maintaining a flexible organization structure and
openness. Delegation of authority and responsibility and freedom to work has enhanced
decentralization resulting in quick and effective decision making.
The senior management including Executive Directors and Managing Directors interact with
employees at different levels at different forums. Employee level or category does not restrict the
access to top management. The non- hierarchical reporting and feedback are being used
effectively and have improved communication amongst all levels.
Nippon Tokusei i-spear (eye spear)
Nippon Tokusei u-drape (microscope drape)
Nippon Tokusei i-custom pack, (phaco pack)
Nippon Tokusei i-dispoable gown
Nippon Tokusei i-solation gown
Disposable cutter, Medicel Switzerland
XXK100 Fluidic System, Medicel Switzerland
Growth strategy:
Ipca is a market leader in the anti-malarial therapeutic category in India, enjoying 45% market
share. Antimalarial drugs accounted for 40% of its revenues around a decade ago, but now they
contribute only 17%. This is due to a diversified product mix that includes therapeutic areas like cardio-
vascular, diabetes, non-steroidal anti- inflammatory drugs and anti-bacterials . Till a few years ago,
ago, over half its portfolio comprised drugs which were under price control, but that proportion
has now fallen to 13-14%. The company also plans to foray into oncology -another attractive
therapeutic area.
In ‘05, Ipca entered into an agreement withR anb axy Labs for manufacturing drugs to be
sold by the latter in the US.It has signed two more such agreements with companies in the US and
Canada. The branded formulations business(spread across India, CIS, Asia, Africa and Latin
America) is set to be its biggest growth driver. Ipca expects itsdomestic formulations business to grow by
20% and the international segment to grow 40% this year.
System
The IPCA project aims to develop a new intelligent interaction mechanism that will enable and
disabilities to control standard, and especially web-based, applications. The system will be
based on a flexible combination of existing non-invasive sensors and encoders able to control
different physiological parameters, and a set of software tools that will allow the user to interact
with existing computer applications. IPCA will facilitate user interaction with different Internet
applications and services also makes the Indian pharmaceutical companies minnows in the
field.Besides price, there are many other hurdles that the Indian pharmaceutical companies face
in their path to discovery. For instance, DRR had to abandon development of drugs to treat
diabetes and obesity after disappointing result in the early phase of clinical trials. Such
inevitable bottlenecks often have a discouraging effect on market capitalization for the
company. Nevertheless, Indian giants have come up with another and rather simple solution to
this problem, by creating separate spin-off companies, solely dedicated to R&D which are
divorced from their presently remunerative outsourced work. This was started by DRR and soon
followed by Ranbaxy, Sun Pharma, Nicholas Piramal and Glenmark. The patents so far
executed by Indian pharma/biotech companies are mostly derivative compounds where they
seek to “ever green,” a molecule. Real discovery will take time and it is estimated that even the
success met by companies like DRR will take another 6-7 years before they yield results. With
one in every scientist abroad being Indian, there is no doubt that India has plenty of talent. For
now harnessing this potential remains a distant reality for the companies trying to make a real
mark on the pharmaceutical world.
Outsourcing and other services
It has been well recognized that the global pharmaceutical industry is facing a number of
challenges at present. The difficulties the industry is experiencing have forced all drug
companies to change their current operation models. They are now forced to pursue more
efficient, cost-effective and productive ways to conduct their operations, whether in R&D or
manufacturing. The keys for them to make a quick turnaround are to get drug discovered
quicker, developed faster, manufactured cheaper and marketed wider.
Outsourcing has been proven to be one of the effective solutions for drug companies to quickly
turn the situation around as it provides them with the desired efficiency, flexibility and agility.
Among all emerging countries for outsourcing, India have risen rapidly and become stars in the
global pharmaceutical outsourcing arena as both countries possess the unique combination of
low cost and quality service. The current global financial crisis has also greatly enhanced the
importance of these two countries to many drug companies around the world who are
vigorously seeking cost reduction.
However, India also possess its own, unique features and characteristics, not only in the
pharmaceutical-related industries but also in almost every aspect of social structure. To many
companies who are interested in conducting outsourcing or investment in either country, it is
always a challenge to decide which country best fits their investment goals.
The report, “Comparison of Pharma Outsourcing between China and India”, has conducted so
far the most complete and comprehensive comparisons between China and India. It first time
revealed the similarities and differences between these two countries in a broad rang of areas. It
also revealed the advantages and disadvantages of each country in pharmaceutical outsourcing
and the strengths and shortcomings of their service capabilities. Besides, the report also made
in-depth comparisons of pharmaceutical and biotechnology industries between China and India
including their R&D capabilities of innovative medicines.
The report provides a clear insight into the current development states of pharmaceutical
outsourcing industries in each country including their market sizes and service capabilities in
each technical area. In addition, it provides valuable advices to pharmaceutical and biotech
companies who are interested in outsourcing to either country of how to appropriately evaluate
each country and decide which one best fits their development goals and outsourcing strategies.
The report is a must-read book to all professionals in the industries of pharmaceutical,
biotechnology, financial investment and outsourcing service that are interested in either one of
these two countries. It is also a valuable reference book to drug regulatory agencies and other
government agencies that are involved in strategic planning for development of pharmaceutical
industry in their own countries. Key Findings of the Report:
In many aspects China and India are very similar. Both are located in Asia and the most
populated countries in the world. Both are still developing countries with low wages for most
workers in most industries. However, there are also significant differences between these two
countries in the areas related to pharmaceutical industry. Each country possesses its own
features and characteristics.
In general, China is better equipped in industry infrastructure than India. Chinese
pharmaceutical market is also much bigger than India’s. However, the business operation style
and philosophy in Indian companies are closer to the Westerner than in Chinese companies.
Indian companies are also more familiar with the Western regulations than Chinese companies.
They also have broader global presences than Chinese companies.
China is better in education of biology than India. The biotechnology industry in China is also
more advanced than in India. However, Indian pharmaceutical companies have invested more in
R&D and have a much broader product scope than Chinese companies.
In traditional pharmaceutical sector, Chinese companies are still limited to manufacturing of
traditional products which are marketed in the limited number of countries. But, in the biotech
sector, Chinese companies possess much stronger capabilities in R&D and manufacturing of
macro compounds than Indian companies.
In professional outsourcing service, the two countries provide close service scopes and possess
close service capabilities. However, there are still differences in each service sector between
these two countries. In discovery service, Chinese companies and Indian companies possess
close skills and offer similar services and qualities. However, in target identification and
validation as well as those related areas such as research in genomics and proteomics, Chinese
companies possess stronger service capabilities than Indian companies; whereas in small
molecule drug R&D, Indian companies are more capable than Chinese companies.
In preclinical research service, Chinese CROs possess better service capabilities than Indian
CROs; whereas in clinical research service, it is just opposite. In process R&D and scale-up
synthesis, both countries possess similar capabilities. However, Indian companies possess better
skills and capabilities than Chinese companies in formulation, manufacturing and marketing of
generic drugs.
Major pharma and biotech companies play different strategies in these two countries. In India,
they more tend to form close collaborations such as risk-sharing outsourcing with an Indian
company to co-develop drug candidates, but very few of them are willing to permanently set up
a decent size of R&D center or manufacturing facility in the country. In stark contrast, almost
all major pharma and biotech companies have invested hundreds of millions of dollars in China
to establish their wholly-owned R&D centers and large scale manufacturing and marketing
facilities. Many of their China R&D centers have already reached decent sizes and gained strong
capabilities. They are ready to conduct full-scale research independently.
The outsourcing models between the Western companies and the Asian companies are also not
limited to just straight outsourcing. Rather, it has extended to including all types of activities
such as product marketing and drug candidate licensing. Also, the interesting outsourcing
service providers are not just limited to those professional ones. Any pharma or biotech
companies in any of these two countries could become outsourcing partners as long as they
possess the desired capabilities.
The pharma outsourcing industries in both countries have grown rapidly in the recent few years.
They are currently valued at about $1.42 B in China and $1.77 B in India, respectively; each
occupying only about 2% share in the global pharma outsourcing market. On the other hand,
both markets are posed to still grow rapidly in the future as they are driven by a number of
positive factors. However, China appears to have higher future growth potential than India as it
has fewer growth resistors. It will very likely catch and even surpass India after 2010. At
present, India is better than China in small molecule drug R&D and manufacturing. But China is
superior over India in biotechnologies including the R&D and manufacturing of macro
compounds. India offers better product quality but China has more cost reduction advantage. In
terms of investment opportunities, China seems to present more attractions than India as its
industry infrastructure and biotechnologies are more advanced.
The report is written based on the in-depth investigations and studies of pharmaceutical
outsourcing industries in both China and India. It first carefully selected, among a large pool of
companies, top 50 best outsourcing service providers in each country. It then conducted detailed
comparisons among these selected companies in more than twenty different areas.
The comparison is performed in four different ways:
Head-to-head comparison of two countries including advantages and disadvantages of each
country in pharmaceutical outsourcing;
Head-to-head comparison of pharmaceutical outsourcing industries between the two countries
including their development history and pattern, current market sizes and service capabilities,
strengths and shortcomings, and future growth potentials including the growth drivers and
resistors;
Head-to-head comparison of top outsourcing service providers of each country;
Head-to-head comparison of popular outsourcing models in each country.
The objective of the comparison is to provide readers an unbiased depiction of the
pharmaceutical outsourcing industry in each country with the emphases on revealing each
country’s strengths, weakness, advantages and disadvantages in outsourcing.
CHAPTER-14
SCOPE OF PHARMACEUTICAL INDUSTRY
Over the years pharmacy has grown in the form of pharmaceuticals sciences through research aand development processes. It is related to product as well as to services. The various drugs dis covered and developed are its products and the healthcare it provides comes under the category of services.Pharmacy involves all the stages that are associated with the drugs i.e. discovery, development, action, safety, formulation, use, quality control, packaging, storage, marketing, etc. This profession has a large socio-economic relevance to the Indian economy. In India this sector is among the future economy drivers. It is committed to deliver high quality drugs and formulations at an affordable price, so that majority of people can afford them.
This profession has a large socio-economic relevance to the Indian economy. In India this sector is among the future economy drivers. It is committed to deliver high quality drugs and formulations at an affordable price, so that majority of people can afford them. The transformation of the sector from conventional pharmacy to drug experts, which is both desired and necessary to reach the global standards, has already made commendable progress.
Liberalization, privatization and globalization (LPG) have helped the Indian pharmaceutical companies to achieve international recognition. It's remarkable to note that today several Indian pharma companies are approved by US FDA and are listed at NASDAQ.
The multibillion-dollar pharma industry grows mainly through knowledge wealth creation. This sector has transformed a lot over the years. The big pharma companies that were there about 15-20 years back are not in picture these days.
The analysis of Indian pharmaceutical sector shows that the innovative products, product life cycle management and marketing management steps taken by the pharma companies have led them to flourish. And the companies that refused to change their strategy lost the race. Cipla and Sun Pharma are two companies that are focused on new product development and have grown tremendously.
Accounting for two percent of the world's pharmaceutical market, the Indian pharmaceutical
sector has an estimated market value of about US $8 billion. It's at 4th rank in terms of total pharmaceutical production and 13th in terms of value. It is growing at an average rate of 7.2 % and is expected to grow to US $ 12 billion by 2010.
Over the last two years the pharmaceutical market value has increased to about US $ 355 million because of the launch of new products. According to an estimate, 3900 new generic products have been launched in the past two years. These have been by and large launched by big brands in the pharma sector. And in the year 2005 Indian pharmaceutical companies captured around 70% of the domestic market.
As in the present scenario, only a few people can afford costly drugs, which have increased price sensitivity in the pharmaceutical market. Now the companies are trying to capture the market by introducing high quality and low price medicines and drugs.
With the Product Patent Act, which came into action in January 2005, this industry is able to attract big MNCs to India. Earlier these big firms had apprehensions in launching new drugs in the Indian market.
At present, a large number of Indian pharmaceuticals companies are looking for tie-ups with foreign firms for in-license drugs. GlaxoSmithKline is among the top choices for the firms that wish to launch their product in India, but do not have any branch over here.
Contract research and pharmaceutical outsourcing are the new avenues in the pharmaceutical market. Contract manufacturing is growing at a very fast pace and is estimated to grow to US $30billion, whereas contract research is estimated to reach US$6-10 billion.
Indian multinational companies like Dr.Reddy's Lab, Cipla, Ranbaxy, etc have created awareness about the Indian market prospects in the international pharmaceutical market. Approvals given by Foods and Drugs Administration (FDA) and ANDA (Abbreviated New Drug Application)/DMF (Drug Master File) have played an important role in making India a cost-effective and high quality product manufacturer. Furthermore, the changes that took place in the patent law, change of process patent to product patent, have helped in reducing the risk of loss for intellectual property.
Industry Strengths:
Capital Investment in Technology: Owing to the availability of advanced technology at low
costs, the companies can produce drugs at lower costs.
Cost Effective: The filing cost of ANDAS and DMFs is comparatively low for the Indian
companies.
Manpower: There is a large pool of technical experts available at modest salaries.
Contract Research & Contract Manufacturing: There is a good scope for contract research and
contract manufacturing.
Infrastructure: There is a well-developed infrastructure for the pharmaceutical industry.
Generic Drugs: In the last few years, the generic drug-manufacturing segment has received huge investments, in the process making it more competitive and efficient.
Contract research and manufacturing
The amendment of the Indian Patent Act in 2005 has proved to be a decisive moment for the Indian pharmaceutical industry. This is especially so for Contract Research and Manufacturing Services (CRAMS) in India. The amendment has assisted the global pharmaceutical companies to look at the Indian pharma supply chain and as a consequence, led to the growth of the CRAMS market. Today, be it drug discovery, development or manufacturing, India is by far the most preferred outsourcing destination. With low manufacturing cost, high-quality research and skilled labor, the Indian CRAMS market present both a competitive threat and a partner opportunity for foreign pharmaceutical companies.
Today, the global pharmaceutical industry is at a defining moment. The ever-increasing cost of R&D tied with low level of new drug development has made it tough for the companies to introduce quality drugs at a competitive price. Global pharma companies are concerned at the large number of drugs which are at the threshold of losing their patent rights. These companies have found an option to save on costs by outsourcing some of their research and manufacturing activities. It is in this scenario that CRAMS has begun to play a major role and has brought new opportunities to many Indian pharma companies.
• Contract Research (including clinical trials and CDM) during2006 is estimated to be USD 366 million, a growth of 45 % overprevious year and is expected to scale up to USD 2.5billion by 2011. Contract manufacturing in 2006 was USD 659 million andgrowing at 48% over pervious year and expected to be worth USD 2.5 billion in India by 2011.
CRAMS - Major Players
• Contract manufacturing: Large Pharma companies - Ranbaxy, DRL, Wockhardt, Cipla, Nicholas Piramal and Lupin covering formulations, APIs, generics, NDDS, NCEs and biopharma Medium sized companies - Focused contract mfg companies- Matrix Labs,Shashun , Strides Arocolabs, Cadila, Jupiter biosciences, Jubilant Organosys,Orchid Pharmaceuticals, Dishman, IPCA, and Divis Labs – contract manufacturing of APIs for global MNCs.
• Contract Research: Large Companies – dedicated units/companies Medium sized CROs - Chembiotek (TCG Group), Reliance Research and Development Services
• Integrated contract Research and contract mfg – synergy
• Strategies followed International certifications of plants – FDA/MHRA Acquisition of mfg plants abroad – for customer acquisition (Dr Reddys,Nicholas)
Research and development
India acknowledged Intellectual property rights by embracing the patent regimen and then enforced it from January 1st, 2005. Since then, a new wave of progress has swept the country. Post 2005, pharmaceutical and medical biotechnology companies experienced some very critical changes, and since then, the only real differentiator has been innovation.
With the acknowledgement of the intellectual property rights there was an uprising in the almost 20,000 strong fragmented industry of the ‘90s change as it would mean the reinvention of the entire sector, where replication would have to give way to innovation. Earlier they had thrived with little or no need to have a robust new product pipe lines, as only process patents were recognized in India. Lack of product patents motivated Indian companies to be become masters of re-engineering. It was this fact that made India a preferred destination for outsourced manufacture. India dominates the Active Pharmaceutical Ingredient (API) market and it is said that one in two APIs is procured from India. The business model of API manufacturers is largely price driven and their competitiveness questionable due to a 30% annual increase in operational costs, increased wages, appreciating rupee and spiraling logistic cost. Outsourced research is also on the rise and here again the industry has to grapple with lack of trained labour, attrition and increasing operational expenditure. Although Indian companies will and should cash in on the outsource bonanza, innovation is clearly the only long-term solution.
At the moment, Indian companies neither have manpower capability to go from molecule to market nor do they have deep pockets that would keep them afloat over at least 12 year period (the average time needed for commercializing a patented molecule). The mid-cap companies find unique ways and means to enter the US market without R&D or infringement. Introducing high-value patented products is out of the question.
Despite these obstacles, a few large companies have made efforts to build intellectual property. In the 2007-08, Ranbaxy filed 208 patents while CIPLA filed 53. It is beneficial for Indian companies to enter the new drug discovery zone as the cost of developing a new molecule in India is 1/5 of the American cost.
It is to capitalize on this price advantage, pharmaceutical companies in India have significantly increased their R&D spend. This used to typically be 7% of sales but has now significant rise to 10-15%. However, this is still only a fraction of what their American and European counterparts spend. This also makes the Indian pharmaceutical companies minnows in the field.
Besides price, there are many other hurdles that the Indian pharmaceutical companies face in
their path to discovery. For instance, DRR had to abandon development of drugs to treat diabetes and obesity after disappointing result in the early phase of clinical trials. Such inevitable bottlenecks often have a discouraging effect on market capitalization for the company.
Nevertheless, Indian giants have come up with another and rather simple solution to this problem, by creating separate spin-off companies, solely dedicated to R&D which are divorced from their presently remunerative outsourced work. This was started by DRR and soon followed by Ranbaxy, Sun Pharma, Nicholas Piramal and Glenmark. The patents so far executed by Indian pharma/biotech companies are mostly derivative compounds where they seek to “ever green,” a molecule. Real discovery will take time and it is estimated that even the success met by companies like DRR will take another 6-7 years before they yield results. With one in every scientist abroad being Indian, there is no doubt that India has plenty of talent. For now harnessing this potential remains a distant reality for the companies trying to make a real mark on the pharmaceutical world.
Outsourcing and other services
It has been well recognized that the global pharmaceutical industry is facing a number of challenges at present. The difficulties the industry is experiencing have forced all drug companies to change their current operation models. They are now forced to pursue more efficient, cost-effective and productive ways to conduct their operations, whether in R&D or manufacturing. The keys for them to make a quick turnaround are to get drug discovered quicker, developed faster, manufactured cheaper and marketed wider.
Outsourcing has been proven to be one of the effective solutions for drug companies to quickly turn the situation around as it provides them with the desired efficiency, flexibility and agility. Among all emerging countries for outsourcing, India have risen rapidly and become stars in the global pharmaceutical outsourcing arena as both countries possess the unique combination of low cost and quality service. The current global financial crisis has also greatly enhanced the importance of these two countries to many drug companies around the world who are vigorously seeking cost reduction.
However, India also possess its own, unique features and characteristics, not only in the pharmaceutical-related industries but also in almost every aspect of social structure. To many companies who are interested in conducting outsourcing or investment in either country, it is always a challenge to decide which country best fits their investment goals.
The report, “Comparison of Pharma Outsourcing between China and India”, has conducted so far the most complete and comprehensive comparisons between China and India. It first time revealed the similarities and differences between these two countries in a broad rang of areas. It also revealed the advantages and disadvantages of each country in pharmaceutical outsourcing and the strengths and shortcomings of their service capabilities. Besides, the report also made in-depth comparisons of pharmaceutical and biotechnology industries between China and India including their R&D capabilities of innovative medicines.
The report provides a clear insight into the current development states of pharmaceutical outsourcing industries in each country including their market sizes and service capabilities in each technical area. In addition, it provides valuable advices to pharmaceutical and biotech companies who are interested in outsourcing to either country of how to appropriately evaluate each country and decide which one best fits their development goals and outsourcing strategies.
The report is a must-read book to all professionals in the industries of pharmaceutical, biotechnology, financial investment and outsourcing service that are interested in either one of these two countries. It is also a valuable reference book to drug regulatory agencies and other government agencies that are involved in strategic planning for development of pharmaceutical industry in their own countries. Key Findings of the Report:
In many aspects China and India are very similar. Both are located in Asia and the most populated countries in the world. Both are still developing countries with low wages for most workers in most industries. However, there are also significant differences between these two countries in the areas related to pharmaceutical industry. Each country possesses its own features and characteristics.
In general, China is better equipped in industry infrastructure than India. Chinese pharmaceutical market is also much bigger than India’s. However, the business operation style and philosophy in Indian companies are closer to the Westerner than in Chinese companies. Indian companies are also more familiar with the Western regulations than Chinese companies. They also have broader global presences than Chinese companies.
China is better in education of biology than India. The biotechnology industry in China is also more advanced than in India. However, Indian pharmaceutical companies have invested more in R&D and have a much broader product scope than Chinese companies.
In traditional pharmaceutical sector, Chinese companies are still limited to manufacturing of traditional products which are marketed in the limited number of countries. But, in the biotech sector, Chinese companies possess much stronger capabilities in R&D and manufacturing of macro compounds than Indian companies.
In professional outsourcing service, the two countries provide close service scopes and possess close service capabilities. However, there are still differences in each service sector between these two countries. In discovery service, Chinese companies and Indian companies possess close skills and offer similar services and qualities. However, in target identification and validation as well as those related areas such as research in genomics and proteomics, Chinese companies possess stronger service capabilities than Indian companies; whereas in small molecule drug R&D, Indian companies are more capable than Chinese companies.
In preclinical research service, Chinese CROs possess better service capabilities than Indian CROs; whereas in clinical research service, it is just opposite. In process R&D and scale-up synthesis, both countries possess similar capabilities. However, Indian companies possess better skills and capabilities than Chinese companies in formulation, manufacturing and marketing of
generic drugs.
Major pharma and biotech companies play different strategies in these two countries. In India, they more tend to form close collaborations such as risk-sharing outsourcing with an Indian company to co-develop drug candidates, but very few of them are willing to permanently set up a decent size of R&D center or manufacturing facility in the country. In stark contrast, almost all major pharma and biotech companies have invested hundreds of millions of dollars in China to establish their wholly-owned R&D centers and large scale manufacturing and marketing facilities. Many of their China R&D centers have already reached decent sizes and gained strong capabilities. They are ready to conduct full-scale research independently.
The outsourcing models between the Western companies and the Asian companies are also not limited to just straight outsourcing. Rather, it has extended to including all types of activities such as product marketing and drug candidate licensing. Also, the interesting outsourcing service providers are not just limited to those professional ones. Any pharma or biotech companies in any of these two countries could become outsourcing partners as long as they possess the desired capabilities.
The pharma outsourcing industries in both countries have grown rapidly in the recent few years. They are currently valued at about $1.42 B in China and $1.77 B in India, respectively; each occupying only about 2% share in the global pharma outsourcing market. On the other hand, both markets are posed to still grow rapidly in the future as they are driven by a number of positive factors. However, China appears to have higher future growth potential than India as it has fewer growth resistors. It will very likely catch and even surpass India after 2010. At present, India is better than China in small molecule drug R&D and manufacturing. But China is superior over India in biotechnologies including the R&D and manufacturing of macro compounds. India offers better product quality but China has more cost reduction advantage. In terms of investment opportunities, China seems to present more attractions than India as its industry infrastructure and biotechnologies are more advanced.
The report is written based on the in-depth investigations and studies of pharmaceutical outsourcing industries in both China and India. It first carefully selected, among a large pool of companies, top 50 best outsourcing service providers in each country. It then conducted detailed comparisons among these selected companies in more than twenty different areas.
The comparison is performed in four different ways:
Head-to-head comparison of two countries including advantages and disadvantages of each country in pharmaceutical outsourcing;
Head-to-head comparison of pharmaceutical outsourcing industries between the two countries including their development history and pattern, current market sizes and service capabilities, strengths and shortcomings, and future growth potentials including the growth drivers and
resistors;
Head-to-head comparison of top outsourcing service providers of each country;
Head-to-head comparison of popular outsourcing models in each country.
The objective of the comparison is to provide readers an unbiased depiction of the pharmaceutical outsourcing industry in each country with the emphases on revealing each country’s strengths, weakness, advantages and disadvantages in outsourcing.
Nippon
CHAPTER-15
SWOT ANALYSIS OF INDIAN PHARMACEUTICAL INDUSTRY
Strengths:
Cost effective technology
Strong and well-developed manufacturing base
Clinical research and trials
Knowledge based, low- cost manpower in science & technology
Proficiency in path-breaking research
High-quality formulations and drugs
High standards of purity
Non-infringing processes of Active Pharmaceutical Ingredients (APIs)
Future growth driver
World-class process development labs
Excellent clinical trial centers
Chemical and process development competencies
Weaknesses:
Low Indian share in world pharmaceutical market (about 2%)
Lack of strategic planning
Fragmented capacities
Low R&D investments
Absence of association between institutes and industry
Low healthcare expenditure
Production of duplicate drugs
Opportunities:
Incredible export potential
Increasing health consciousness
New innovative therapeutic products
Globalization
Drug delivery system management
Increased incomes
Production of generic drugs
Contract manufacturing
Clinical trials & research
Drug molecules
Threats:
Small number of discoveries
Competition from MNCs
Transformation of process patent to product patent (TRIPS)
Outdated Sales and marketing methods
Non-tariff barriers imposed by developed countries
CHAPTER-16
FUTURE PROSPECT
The dream of Indian pharmaceutical companies for marking their presence globally and
competing with the pharmaceutical companies from the developed countries like Europe, Japan,
and United States is now coming true. The new patent regime has led many multinational
pharmaceutical companies to look at India as an attractive destination not only for R&D but also
for contract manufacturing, conduct of clinical trials and generic drug research. With market
value of about US$ 45billion in 2005, the generic sector is expected to grow to US$ 100billion
in the next few years.
The Indian companies are using the revenue generated from generic drug sales to promote drug
discovery projects and new delivery technologies. Contract research in India is also growing at
the rate of 20-25% per year and was valued at US$ 10-120million in 2005. India is holding a
major share in world's contract research business activity and it continues to expand its
presence.
Clinical Research Outsourcing (CRO), a budding industry valued over US$ 118 million per year
in India, is estimated to grow to US$ 380 million by 2010, as MNCs are entering the market
with ambitious plans.
By revising its R&D policies the government is trying to boost R&D in domestic pharma
industry. It is giving tax exemption for a period of ten years and relieving customs and excise
duties of all the drugs and material imported or exported for clinical trials to promote innovative
R&D.
The future of Indian pharmaceutical sector is very bright because of the following factors:
Clinical trials in India cost US$ 25 million each, whereas in US they cost between US$
300-350 million each.
Indian pharmaceutical companies are spending 30-50% less on custom synthesis
services as compared to its global costs.
In India investigational new drug stage costs around US$ 10-15 million, which is almost 1/10th of its cost in US (US$ 100-150million). India’s largest pharmaceutical company by revenue, Ranbaxy Laboratories Ltd, has launched an initiative to reach out to smaller towns and villages and invest more in research with an eye on becoming the leader in the generic drugs market in the next two years. Ranbaxy chief executive and managing director Atul Sobti says that with the new initiative, the firm expects to reach a minimum 3,50,000 doctors by 2012, up from the current 200,000.
The company has already hired nearly 1,500 marketing personnel since the strategy, named Viraat, was kicked off in January—taking its workforce to 4,300. Ranbaxy is aiming to overtake Cipla Ltd as the market leader. Two-thirds of the new hires are field personnel, who will spread out into towns and rural areas to push the company’s over-the-counter and prescription drugs. The rest have been hired at managerial levels
Where is the pharmaceutical industry today?
Medical progress: Undeniably, research-based pharmaceutical companies have made enormous progress in the treatment of many illnesses, including infectious diseases, childhood diseases, some types of cancer, cardiovascular disease, diabetes and hepatitis. Looking back over the past century, it is clear that medical science has made breathtaking advances. This is shown, for instance, by the fact that life expectancy has risen enormously to Presentation by F.B. Humer around 80 years, compared with 55 in the late nineteenth/early twentieth century when Roche was established. Even so, it is still not possible to treat the causes of most diseases.
• Cost of research and development:
However, remaining at the cutting edge of technology in the face of such rapid advancement is becoming increasingly expensive. Despite the enormous progress that has been made, developing a new drug is still a bit like looking for a needle in a haystack: only one in 10,000 substances screened eventually becomes a fully fledged product that can be used to treat patients. And as I have said, it takes 10 to 15 years to achieve that. That costs an average of
about CHF 1 billion for each drug brought onto the market (including opportunity costs and the cost of failures). Over the past 20 years the cost of developing new drugs has increased by a factor of eight. Last year Roche invested more than CHF 5 billion in research and development and spending will be a good deal higher this year.
Despite the high sums involved, there is still no guarantee of success, let alone a guarantee thatprices or volume sales will be acceptable. The cost and complexity of research have increasedsubstantially. At the same time, political pressure on prices has risen and that has evidentlyincreased the attendant business risks. Those are the main reasons for the progressive consolidation of our industry. Fifteen years ago, the ten largest companies commanded 25% ofthe global market; today their market share is over 50%.
• Geographical shift: Another fact is that in recent years the pharmaceutical industry’s “centre of gravity” has shifted from its traditional home market of Europe to America. While European companies used to dominate the “champion’s league” — comprising the top ten pharmaceutical companies — the top players today are US companies. Even so, Switzerland can boast two players in this league. Twenty years ago, the European and American pharmaceutical markets were roughly equal in size. Today the US market is twice the size of the European market and far more profitable (if price levels in the United States were the same as in Europe, it would be impossible to maintain funding of industrial research and development at the present level). This ongoing trend has serious implications for research and innovation. For some time now, European companies have been channelling more than half of their research spending to North America, whereas twenty years ago Europe accounted for two thirds of global pharmaceutical research.
The United States has a clear edge both in terms of “output”, in other words, the number of new active ingredients for pharmaceuticals, and in terms of “input”, that is, R&D spending (USD 20 billion are spent on drug development in the United States every year). The shift away from Europe is one outcome of years of misguided and short-sighted policies in Europe. For pharmaceutical companies, globalisation not only means an increasingly tough race toinnovate; the United States, Europe and Switzerland are also competing fiercely for jobs andinvestment. And it will not be long before Asian countries like China, India and Singapore narrow the gap to the global elite in the field of research. New knowledge is sourced where it is available and cost-effective, and where the general framework is right. As a consequence, at the end of last year Roche became the first pharmaceutical company to open a research centre in Shanghai.
This is a challenge to Roche’s established research facilities, including those in Switzerland, tomaintain the dynamism of their research work and ensure they remain internationally competitive Presentation by F.B. Humer. Over the past 15 years, the EU has lost ground (to the US) as a centre for the pharmaceutical industry. Fortunately, this “European” trend seems to have by-passed Switzerland — indeed the importance of pharmaceuticals for the Swiss economy has grown disproportionately.
What will the future bring? Major trends point to a new era in medicine
Let us look ahead to the future. Not that I have any prophetic ability …. However, there are a number of fairly clear trends that are likely to have a significant impact on the pharmaceutical industry.Trend 1: Demographic change
The industrialised countries — in other words, Japan, Europe and the United States — will increasingly be confronted with the phenomenon of an ageing population and its consequences for all areas of life.Today, there are about 450 million people worldwide over the age of 65 (that is 7% of the globalpopulation). This figure will• virtually double by 2020• more than triple by 2050 (to 17% of the global population). In the USA alone, there will be morethan 80 million people over 65. Globally, about 400 million people will be over 80.The ageing population represents a growing burden on healthcare systems (in fact, on all socialsecurity systems). Per capita healthcare spending is highest among the over-65s because the death rate is highest in this age group. Chronic illnesses have already replaced infectious diseases as the main cause of death (in absolute terms). The older people are, the higher the (statistical) risk that they will suffer from a chronic illness.
Cancer is a case in point: according to US studies, people over 65 are 17 times more likely to getcancer of the colon than younger people. Given the demographic trend, progress in medicine anddisease prevention will take on a more significant role in a bid to alleviate the problems caused by rising demand for care for the elderly. The aim of medical research is to ensure that people do not simply live longer, but that they remain healthy and independent for as long as possible so they are not dependent on care. That is also the goal for the development of innovative drugs.One example is Alzheimer’s disease, which is a focus of Roche’s research in Switzerland. Alzheimer’s disease is one of the main reasons why many old people need care:• Potentially, it could affect any of us. Statistically, 10 percent of the people in this room will dieof Alzheimer’s. It is estimated that about 8% of over-65s in Switzerland and nearly 30% ofover-85s suffer from Alzheimer’s disease. Ageing is still the only known risk factor for thisdisease.Alzheimer’s is still incurable. However, innovative drugs slow the pace of development. A novel drug from Roche (a monoclonal antibody) which will shortly be entering clinical trials, could represent a major step forward in the treatment of this disease.
Prevention is an important factor, too: the most recent diagnostic studies indicate possible ways of identifying the disease before it breaks out, so preventive measures and possible methods oftreatment can be considered. Such tests will have their price, but the alternative is permanent andPresentation by F.B. Humer. Intensive nursing care accompanied by a reduction in the quality of life. Early diagnosis could thus prolong and improve life and also help save costs. Healthcare economics studies show that improving the general condition of people suffering from dementia — as a result of progress in psychopharmacology, for example — can reduce the cost of
care by up to EUR 10,000 per patient and year.Emerging countries like China and India face a completely different situation. Rapid economic and population growth will drive up demand for health care. The enormous potential of the Chinese market has become something of a cliché. One fact that is perhaps less well known is that if the recent growth rates continue, India is likely to have a larger population than China within the next 40 years. The Indian middle class is already larger than the entire population of the United States. Thanks to rising disposable incomes, 50-60 million Indians can now afford private health insurance. The industry therefore needs a presence in these growing markets.
One major reason why healthcare spending is increasing worldwide is that GDP is rising: as webecome more affluent we are prepared to spend more on healthcare, and this will not change in the future. A second major factor is the trend towards “personalised medicine”.
Trend 2: More individual medical treatment
One major problem is that drugs often do not have the expected effect. We all know that and most of us have probably experienced it either ourselves or in our families. The Pharmaceutical Research and Manufacturers Association of America estimates that about USD 100 million are wasted every year in the United States alone because patients take drugs that are ineffective or have serious side effects. There are many reasons for this. The most common is that the drugs are not taken, either because people forget, or because they are afraid of side effects. Alternatively, the medication may react with other drugs being taken at the same time.
However, there is also another possible reason. The biological make-up of everyone here in this room is different. Today, we know that that is due to genetic differences. Although 99.9 percent of genes are the same in all people, the remaining 0.1 percent can contain differences in the DNA sequences that store genetic information. It is therefore perfectly plausible that doctors could treat you and I more effectively if the difference between us could first be determined with the aid of a lab test, enabling them to prescribe the most effective — personalised — medicine for each of us.Is this merely a science fiction scenario? Well, yes and no.Firstly: clear advances have already been made towards personalised medicine. Roche is a leader in this sector.A good example here is breast cancer. Breast cancer remains the most common type of cancer inwomen: one in ten will contract this disease sometime in her life. Presentation by F.B. Humer.We are now also aware that there are different types of breast cancer and we understand the reasons for this: for example, in one aggressive form of the disease, extremely high concentrations of an abnormal form of the growth factor Her2 are found in the malignant cells.Together with its subsidiary Genentech, Roche has produced a genetically engineered drug(monoclonal antibody) to block the action of this growth factor. This means if this abnormality isidentified before treatment, the patient can be given more specific, personalised treatment.The Roche Centre for Medical Genomics in Basel is currently conducting in-depth research into the personalised treatment of rheumatoid arthritis. This is one of the most serious forms of arthritis, affecting one percent of the population. No really satisfactory treatment is available at present
. We at Roche see a chance of helping these patients with our product MabThera/Rituxan, which has been used to treat leukemia for some time now. It has been discovered that for a percentage of rheumatoid arthritis sufferers, MabThera/Rituxan is something akin to a “wonder drug”. However, this does not apply to all patients. Optimum treatment could be achieved if it were possible to test patients first to establish whether they will respond to the drug. That is the challenge facing us at present.
Roche Diagnostics recently passed a milestone on the road to personalised medicine. Last year the introduction of our first DNA chip (AmpliChip CYP450) caused a stir in Europe and the United States. As the first DNA chip test in the world to receive regulatory approval, it represents a pioneering new discovery. This test can be used to show whether people metabolise a drug faster or more slowly as a result of their genetic make-up. The chip provides information that can aid the selection and dosage of a range of medications (for example, anti-depressants, psychopharmaceuticals, painkillers and drugs to treat cardiovascular disease).Estimates indicate that systematic use of the AmpliChip test before treatment could improve overall efficacy by 10-20% and avoid 10-15% of all serious side effects. These molecular genetic findings open up scope for new approaches to medical research in the medium to long term.Personalised genetic analysis enabling doctors to investigate the complete genetic make-up of their patients and then prescribe drugs and treatments specifically intended to minimise side effects is still a very distant prospect.
However, even complete genetic mapping will never enable us to answer all medical questions. Our lives are not simply dependent on genetics — environmental factors, lifestyle and our economic situation are also major causal factors of disease.However, one thing is already clear: we are on the brink of a revolution in the diagnosis andtreatment of many diseases. A revolution that will accompany us over the next 50 years. This is what makes our business so fascinating.
Trend 3: The rising importance of diagnostics — plus pharmaceuticals
A third trend is the huge progress made by modern diagnostics, especially in combination withpharmaceuticals. Diagnostic procedures will continue to gain importance, allowing the earliestpossible identification of predispositions for certain diseases and, as we have just seen, moreeffective treatment. Increasingly, this will include disease prevention. At present, laboratory services account for an average of just 1% of overall healthcare costs. However, these services and the information they provide have enormous potential to raise the efficiency of healthcare as a whole, allowing optimization of the remaining 99% of spending.This potential needs to be tapped. The prospects for patients suffering from cancer would improve considerably if diagnostics were used more widely than in the past.More than 90 percent of cancer patients could live five, ten or more years with current methods of treatment if the disease were identified earlier. Further advances in molecular diagnostics aretherefore the best way of improving the prognosis for cancer patients in the short term. For example, in the first half of this year Roche will be launching a diagnostic chip (AmpliChip p53) to determine how aggressive a tumour is. At the end of the year we will be launching a
chip to diagnose leukemia (every year 80,000 people worldwide contract leukemia). So far, eight to ten different technologies have had to be used. Diagnosis takes days and the error rate is high. The new chip will allow diagnosis in a few hours and with an accuracy of over 98 percent. This new technology will have economic as well as medical benefits: it will cost around EUR 1,500, making it far less expensive than current diagnostic costs of around EUR 2,500, even though it has significant advantages.Diagnostic information can improve the efficiency of all aspects of medical care. Roche is the only leading healthcare company dedicated to innovation in both pharmaceuticals and diagnostics. This twin-track approach means that we can develop solutions for the entire spectrum of healthcare needs.
Trend 4: Biotechnology
There is no doubt that modern biotechnology is a key technology of the 21st century. Together with automation and information technology, it is starting to open up new perspectives for all areas of the life sciences, and especially for medicine. Highly potent, selective biopharmaceuticals have already proven very successful, especially in the treatment of cancer. In future, the treatment selected will depend on the genetic pattern of the tumour.A knowledge of the genetic differences between patients can also aid the development of new drugs. If we know which patients will not tolerate a potential new medication, or will not respond to treatment, these patients can be excluded from clinical trials at the development stage. That would enable us to pursue a number of projects that have previously had to be halted due to side effects or low average efficacy even though excellent results were obtained in specific patient groups (Herceptin; Tarceva).These social and scientific trends indicate that research-based pharmaceutical or, to be more precise, healthcare companies like Roche should not be regarded as “part of the problem” in the healthcare sector as the Swiss media commonly do at present. Instead, they should be seen as part of the solution, helping to make healthcare more efficient. And now I would like to say a few words about “costs versus benefits”, a central aspect of the current healthcare debate.
Costs versus benefits• The (internationally) high quality of our healthcare system
• The cost savings that can be achieved — as we have seen — through innovative drugs(scientifically proven)
• Moreover, healthcare economists agree that medicines are the healthcare cost component whose cost-efficiency has been examined most rigorously. In Switzerland, they only account for only about 11% of our healthcare costs. That is precisely why I refuse to look at medical progress and the benefits provided by our healthcare system simply from a one-sided cost viewpoint. The central issue is not whether healthcare costs are steadily rising, but what society obtains in return. Scientific progress and economic and demographic trends have a major impact on the future of healthcare and the healthcare sector. In the end, the infrastructure and resources provided for healthcare depend to a large extent on political decisions.
Political and regulatory framework
As I pointed out at the beginning, politics has a major impact on the future of our industry.Regulations on clinical trials, patent protection, parallel imports, marketing approval requirements and reimbursement prices do not only determine the pace of innovation; they also play an important role in determining the relative attractiveness of different locations. The devastating effects of misguided industrial policy can be seen clearly in Germany. For years theleading German pharmaceutical companies were nicknamed “the pharmacy of the world”. Now they have all but disappeared. The global success of the Swiss pharmaceutical industry is attributable to its high level of investment in research and development and the fact that so far the regulatory framework has basically been favourable.Other European countries increasingly see the successful Swiss model, which balances the interests of industrial and healthcare policy, as exemplary. In the international competition to attract business to a country, innovative capability is rapidly becoming more important. However, innovation is not a state, it is a highly dynamic process. Alongside the necessary material resources, research and innovation are dependent on a framework that fosters innovation: through public attitudes: acceptance of new technologies and a general willingness to accept economic risk determine the extent to which a country can pursue innovative research and development through political/legislative developments: in other words, providing incentives and rewards for innovation through pricing and patents to protect the fruits of innovation through taxation; for example incentives to create venture capital and encourage private investment in research.This innovation-friendly framework requires constant adaptation to new requirements the prospects for pharmaceutical research have never been more fascinating or more promising.Never have there been better conditions for achieving medical breakthroughs and thus commercial success. It is up to us to determine our future.