This slide-deck contains an analysis of the Pharmaceutical Industry. Copyright: Ashish Jagyasi.

1. Industry Analysis Primer
The Indian Pharmaceutical Industry
A Domestic Business Perspective
Ashish Jagyasi
President, Healthcare Club (PGP -2015)
Mail me at: ashish_jagyasi2015@isb.edu

2. Product Identification Product Development
Establish
Chemical Equivalence
Establish
Bioequivalence
The Industry Value Chain
R&D*
Regulatory
Approval
Manufacturing*
Marketing , Sales
and Distribution
Post Market
Surveillance and
Pharmacovigilance
Target Identification Drug Discovery
Pre-Clinical
Development
Clinical
Development
(Phases – I, II & III)
Product to Market
R&D – New Drugs
R&D – Generics
Business Verticals
API
•Active pharmaceutical ingredient
•The biologically active component of a finished drug product
Formulations
•APIs are combined with several inactive agents to make the product
available to the body in an optimal way
•e.g. of formulations – Tablets, Capsules, Injections, Depots, Implants
Biologics
•This area deals with product that are derived from biotechnology through
genetically engineered cells lines or live attenuated cells
•e.g Vaccines, Insulin, Monoclonal Antibodies
Clinical Research
•This areas deals with the clinical development of products through clinical
trials and pharmacokinetic studies
•Typically this is a vertical managed by specialized Contract Research
Organizations (CROs)
Preclinical
Research
•Involves assessment of biological safety and efficacy of drug entities in in-vitro
and animal models
•Typically this too is dominated by CROs and is a heavily outsourced process
The value chain can fundamentally be divided into two aspects with respect to the product development:
1) Branded Drugs – this involves a full scale product development involving the expensive and time consuming clinical trials ( overall product development takes ~10 years and upwards of
U$ 1 billion. Typically in markets like US innovative drugs are allowed a BRAND
2) Generic Drugs - Development of chemical and biologically equivalent copies of innovative products. Generally launched after the patent expires. In markets like US, these kind of product
are not allowed to brand and hence are called GENERICS. Emerging markets generally allow brands to copy-cat drugs too in which case such drugs take the definition ‘ BRANDED
GENERICS’

3. Domestic Business – Size and Therapeutic Segments
- Indian domestic pharmaceutical market is the third largest by volume and tenth by value, globally
- Valued at 72,069 crore INR in 2013 as against 65,654 crore INR in 2012 the industry has exhibited a strong CAGR of ~15% (2010 -12)
- Market classification based on Therapeutic Category:
India Formulations
Market
Chronic Therapies
e.g. Cardiovascular
Diabetes
Neurology
Gastrointestinal
2010 contribution – 27%
2013 Contribution – 30%
(CAGR – 14%)
Acute Therapies
e.g. Infectious Disorders
Respiratory
Pain
Gynaecology
2010 contribution – 73%
2013 contribution – 27%
(CAGR – 9.6%)
-The Indian population is experiencing a shift in disease profiles (see chart).
-Traditionally, the acute disease segment held a significant share of the Indian
pharmaceutical market. This segmentwill continue to grow at a steady rate,
due to issues relating to public hygiene and sanitation.
- Chronic will grow faster, however, due to the following factors such as rising
incomes, rise in life expectancy and the onset of lifestyle related conditions
- Amongst chronic diseases, India has the largest pool of diabetic patients in the
world,(> 41 million people suffering from the disease; ex. 73.5 million in 2025)
Shifting Disease Profiles Shifting Expenditure Patterns

4. Domestic Business – Distribution Model and Key Players
The Distribution Model
Key concern Areas:
- High logistics cost rangingfrom 4.72 to 6.22% of sales as against
0.5% in the US and 2% in Europe
- Ineffective control over channel inventory: 46 days for a
pharmaceutical company as against 26 days for an FMCG company
- Porous supply chain facilitating easy entry of counterfeits
- Sub-optimal penetration of the rural market
- Inadequate access to secondary and tertiary sales information
critical to planning processes
Key Players
(Ranked by India Business – IMS 2012)
RANK Company Origin Remarks
1 ABBOTT MNC Combined entity after acquisition of Piramal's India business
2 CIPLA Indian Strong presence in Acute, Respiratory
3 SUN Indian Leadership position in at least seven chronic segments
4 GLAXOSMITHKLINE MNC Strong in Anti-biotics, vaccines, Respiratory
5 RANBAXY Indian Strong in Anti-biotics, Cardiovascular, Vitamins
6 ZYDUS CADILA Indian Strong inCardiovascular, Gayanecology, Respiratory
7 MANKIND Indian
OTC, and Consumer Health, Acute segments are strength
areas
8 ALKEM Indian Strong in Cephalosporin Antibiotics
9 PFIZER MNC
Strong in Gastroenterology, Pain Management, Anti-biotics,
OTC
10 SANOFI MNC Strong presence in Cardiovascular, Diabetes
Top Brands
Rank Brand Company Market Share
1 Corex Pfizer 0.5
2 Phensedyl Piramal Healthcare 0.4
3 Voveran Novartis 0.4
4 Human Mixtard Abbott 0.4
5 Augmentin Glaxosmithkline 0.4
6 Revital Ranbaxy 0.4
7 ZIFI FDC 0.3
8 Monocef Aristo Pharma 0.3
9 Dexorange Franco Indian 0.3
10 Taxim Alkem 0.3

5. Domestic Business – SWOT ANALYSIS
STRENGTHS
• Higher GDP growth leading to increased disposable
income in the hands of general public and their
positive attitude towards spending on healthcare
• Cost Competitiveness
• Low-cost, highly skilled set of English speaking
labour force
• Growing treatment naive patient population
WEKANESSES
• Poor all-round infrastructure is a major challenge
• Stringent price controls
• Lack of data protection
• Poor health insurance coverage
OPPORTUNITIES
• Rapid OTC and generic market growth
• Increased penetration in the non - metro markets
• Large demand for quality diagnostic services
• Increase in healthcare insurance coverage
• Significant investment from MNCs
• Public-Private Partnerships for strengthening
infrastructure
THREATS
• Labour shortage
• Wage inflation
• Government expanding the umbrella of the Drugs
Price Control Order (DPCO)
• Considerable counterfeiting threat
• Competition from other emerging economies
Indian
Pharmaceutical
Market

6. Domestic Business – Alliances, M&A
Alliances are the order of the day for MNCs to reap value from the Indian Market allowing them limited investments with higher probability of success
Bayer - Zydus
Lilly- Lupin
Novartis -USV
Sanofi - Glenmark
Merck& Co. - Sun
Endo - Jubiliant
GSK - DRL
Pfizer - Aurobindo
Abbott - Priamal
Fresinius - Dabur
Reckitt Benckiser -Paras
Danone -Wockhardt
Sanofi - Shantha
Hospira – Orchid
Mylan – Matrix Labs
Domestic Market Global Market
Alliance &
Partnerships
Success Factors M&A

7. Sources
1) India in Business, Ministry of External Affairs, Govt. of India, ITP Division, Pharmaceuticals (as accessed on 23-Oct-14)
2) Pharmaceuticals Sector Analysis report, Equitymaster.com (as accessed on 23-Oct-14)
3) Indian Pharma Inc., Enhancing value through alliances and partnerships, CII, Pharma Summit 2011, Pricewaterhouse Coopers
4) Indian Pharma Inc., Changing landscape of Indian pharma industry, CII, Pharma Summit 2013, Pricewaterhouse Coopers
5) Indian Pharmaceutical Sector, Industry Update, ICRA, March 2012
6) Indian Pharma Inc., Capitalizing on Indian Pharma’s Growth Potential, CII, Pharma Summit 2010, Pricewaterhouse Coopers
7) Pharmaceutical Distribution Systems in India, Working Paper 1a, The Centre for International Health Public Policy, University
of Edinburgh, July 2007
8) IMS Health, India, 2012
9) An Overview of the Indian Pharmaceutical Sector, Ch.2, Performance of Pharmaceutical Companies in India, A Critical
Analysis of Industry Structure, Firm Specific Resources and Emerging Strategies, Mazumdar M., Springer 2013
10) Pfizer India, India Equity Series, Anand Rathi, September 2012