A

Grand Project
On
A Study of Indian
Pharmaceutical Industry:
With Emphasis on the Generics
Market
SUBMITTED TO:
GUJARAT UNIVERSITY
SUBMITTED BY:
Project Guides:
1
Ch!ter "
The I#di# Phr$ceutic%s I#dustr&
"'" Curre#t Sce#rio
The Indian Pharmaceutical Industry today is in the front rank of Indias science-based
industries with wide ranging capabilities in the complex field of drug manufacture and
technology. From simple headache pills to sophisticated antibiotics and complex cardiac

compounds! almost e"ery type of medicine is now made indigenously.
The Indian Pharmaceutical sector is highly fragmented with more than #!### registered
units. It has expanded drastically in the last two decades. The leading $# pharmaceutical
companies control %#& of the market with market leader holding nearly '& of the market
share' (s per )*+-I,- data base! the estimated si.e of the domestic market for F/
##'-#% was *s. %!0# crores. It is an extremely fragmented market with se"ere price
competition and go"ernment price control.
"'( )e& Chrcteristics o* the I#dustr&
-elf-reliance displayed by the production of %#& of bulk drugs and almost the
entire re1uirement of formulations within the country.
2ow cost of production.
2ow *34 costs.
Inno"ati"e -cientific ,anpower.
5xcellent and world-class national laboratories speciali.ing in process
de"elopment and de"elopment of cost effecti"e technologies.
Increasing balance of trade in pharma sector.
(n efficient and cost effecti"e source for procuring generic drugs especially the
drugs going off patent in the next few years.
(n excellent centre for clinical trials in "iew of the di"ersity in population.
"'+ Gro,th Dri-ers o* the I#dustr&
The rise in disposable income has a positi"e impact on healthcare spend. In ##$!
'. percent of disposable income was spent on healthcare as compared to .6
7
percent in 100$. This augurs well for the pharma industry! as the strong economic
momentum is likely to continue with the Indian economy expected to grow by 60
percent in the next few years.
)n the international front! Indian generic drug makers are playing an important
role in the global consolidation process and are augmenting their market presence
across regulated as well as semi regulated markets through their organic as well as
inorganic initiati"es. In spite of increasing competiti"e intensity on account of
continued pricing pressure! se"eral significant opportunities are being le"eraged
by Indian generic players.
8ontract *esearch and ,anufacturing -er"ices 98*(,-:! is becoming one of the
most promising opportunities for the IPI. India! with its intrinsic competiti"e
ad"antages! remains as one of the most preferred outsourcing destinations and is
now playing a "ital role in manufacturing as well as drug de"elopment "alue
chain of "arious inno"ator pharma companies.
,;8 pharma companies are increasingly focusing on realigning their
manufacturing acti"ities in order to concentrate on core acti"ities such as *34
and brand building - thereby reinforcing the potential for cost sa"ings through
contract manufacturing. (t the same time! existing global 8*(,- players are
facing ad"erse business conditions! on account of increasing regulatory
compliances on en"ironmental issues and competition from low cost countries.
Pharma ,ultinationals are also increasingly using India as a base for exports not
only to the immediate neighboring markets! but also to other markets around the
world such as <apan! -outh (frica! 2atin (merica and 5urope. Pharma
multinationals are also exploiting Indias competencies in the field of Information
Technology and its strong and low cost IT skill sets= by setting up centers for their
global clinical data management functions in India.
>
The following are the growth dri"ers for 8*(,-?
8linical *esearch?
(t present! a ma@ority of clinical trials conducted in India are for Phase II and Phase III.
The go"ernment is in the process of considering the recommendation of the 4rug
Technical (d"isory Aoard 94T(A: to allow Phase I clinical trials for the drugs
disco"ered abroad. If this happens! then it will enable the Indian 8*(,- industry to
pro"ide a wide range of drug disco"ery ser"ices
+o"ernment -upport?
)n the regulatory front! the go"ernment is also trying to promote the growth of this
industry by pro"iding a tax exemption on all ser"ices carried out by the contract research
and clinical trials industry. This step is likely to further boost clinical trial outsourcing to
India.
Following the patent product regime! many Indian pharma companies ha"e embarked on
*esearch and 4e"elopment 9*34: to achie"e sustainable long term ad"antage. These
companies are now adopting inno"ati"e funding models to ad"ance their *34 acti"ities.
8urrently! as many as 1#-1 companies ha"e molecules under "arious stages of
de"elopment. *34 in"estments by Indian companies ha"e also increased significantly
and now account for as much as %-0 percent of sales for leading pharma companies.
;ew drug disco"ery is a costly and lengthy process. It takes anywhere between
9approximately: 1#-1 years! for a new drug to reach the market from the laboratory and
costs approximately B-4 6## million to 1. billion. The go"ernment and other regulatory
bodies can play a significant role in determining the success of drug disco"ery research in
India.
$
+rowth through collaborations?
Carious <Cs ha"e been formed between Indian and ,;8 pharma players for
strengthening their manufacturing capabilities! technology-sharing and le"eraging on the
partners experience in product filings! regulatory compliance! etc. *ecently! many Indian
pharma companies ha"e formed <Cs for expanding into semi-regulated markets.

+enerics?
)"er the last few years! Indian pharma companies ha"e been scaling up their presence in
the non-traditional business segments such as drug disco"ery and de"elopment! contract
research and manufacturing! etc.! and are focusing on building their competencies in
e"ery area of the pharma "alue chain. Dowe"er generics continue to remain the mainstay
of the industry. +lobally! the generics industry is expected to grow at a 8ompound
(nnual +rowth *ate 98(+*: of 11 percent between ##' and #1# and touch B-4 0>
billion by #1#. (t present! India has only 1# percent market share in this industry.
"'. Pte#ts
The signing of the Trade *elated Intellectual Property *ights 9T*IP-: agreement in
100$! which committed India to honour the ET) mandated product patent regime from
'
##$! marked the beginning of a fresh chapter in the industrys e"olution and India has
finally transited into product patent regime from process patent.
Process patent is the form of protection under which the process by which the drug is
manufactured is gi"en protection. (s there were many loopholes in this system!
companies "ery con"eniently made minor changes in the process and sold patented drugs
at lower prices. Aecause of this ,;8s like Pfi.er! 5li lily were reluctant to launch their
new molecules in Indian markets. Aut under product patent! the molecule gets the
protection and others can not de"elop the similar molecule till the patent is "alid.
"'/ Dru0 Price Co#tro%
4rug price control is a mechanism or a policy! which ensures that essential and life-
sa"ing medicines are a"ailable at reasonable prices. 8ontrol o"er the price of drugs to the
consumer exists in most countries. In India! the issuance of the 4rug Price 8ontrol )rder
94P8): in 10%# was the first structured price control mechanism. 2ater the go"ernment!
under -ection 7 of the 5ssential 8ommodities (ct! issued the 4P8) of 100$! which
pro"ides the list of price-controlled drugs! procedures for fixation of drug prices! method
of implementation of prices fixed by the go"ernment and penalties for contra"ention of
pro"isions.
%
8onditions under which 4rugs come under Price 8ontrol?
The basic parameters by which a drug is liable to in"ite price control are its mass
consumption nature and absence of sufficient competition.
Bnder 4P8) 100$! any bulk drug and its formulations would in"ite price control! if?
It has an annual turno"er of *s > crore or more
If there are less than fi"e bulk drug producers or less than 1# formulators!
If a single formulator has a market share of ># per cent or more.
(s per the Pharmaceutical Policy of ##! any bulk drug 9and its formulations: will be
under price control if the mo"ing annual total 9,(T: "alue of the bulk drug as on 71
st
,arch ##1! was more than *s $ crore and the market share of any single formulator
was $# per cent or more. ( bulk drug with an ,(T "alue *s 1#-$ crore will in"ite
control if a single formulator commands a market share of 0# per cent or more.
Thus! the IPI is characteri.ed by the issue of 4rug Price 8ontrol.
6
"'1 2edi#0 Co$!#ies
I#di3s To! Phr$ Co$!#ies 4J# 3567

T8%e "'"
India's Top 7 Pharma Companies
Rank Company
1 Cipla
2 Ranbaxy
3 GlaxoSmithKline
4 Zydus Cadila
5 Alkem Laboatoies
! Sun "hama
# $i%holas "iamal
-ource? www.financialexpress.com
8ipla 2aboratories continues to be the largest pharmaceutical company in the
domestic market. 8ipla has topped the )*+-I,- rankings for the month of
;o"ember ##% with a market share of $.> per cent and sales of *s 1>'.7 crore
9*s 1.>'7 million:! edging out *anbaxy which stood at second position with $.#0
per cent market share and *s 17%.>0 crore 9*s 1.7%> million: sales.
8ipla o"ertook *anbaxy and +laxo-mithFline India to become the largest
pharmaceutical company in the domestic market for the first time in ,ay ##%.
Ehile +-F has maintained its number three position in ;o"ember! Gydus 8adila
9fourth:! (lkem 2aboratories 9fifth: and -un Pharma 9sixth: ha"e mo"ed one rank
up from )ctober.
0
;icholas Piramal! which faced raw material shortages for its largest selling
codiene based formulations! like Phensydyl! in recent months! slipped three
positions to number se"en in ;o"ember.
)*+-I,-! the largest market intelligence company in India focusing on the healthcare
sector! tracks sales of Indian pharmas on a monthly basis! through o"er 7!### stockists
and '!### doctors.
*anbaxyHs growth has been largely dri"en by new introductions such as Colix! an anti-
diabetes drug launched in <anuary! )framax-Forte and anti-asthmatic drug -ynasma!
which it in-licensed from 5urodrug 2aboratories.
*anbaxyHs antibiotic ,ox 9amoxyllin:! which was not among the top ten brands a year
ago! has grown to become the fourth largest brand in the domestic market with monthly
sales at *s 0.6 crore 9*s 06 million: in ;o"ember! sources said.
8iplaHs growth was powered by positi"e growth in their existing portfolio! especially its
respiratory products.
Dowe"er! +-F has lost market share mainly in its main portfolios such as anti-
infecti"es! dermatologicals and pain management drugs which grew slower than the
market for these products! )*+-I,- said.
)*+-I,- named (lkem 2aboratories as the only company among the top ten for which
both older products 91# per cent: and new introductions 91 per cent: ha"e contributed
significantly to "alue growth.
1#
"'9 Go-er#$e#t !ro-isio#s
"'9'"
Bud0et (556:5; $esures
Increase in allocation to the health sector by 1$& o"er ##%-#6.
(llocation to the ;ational *ural Dealth ,ission 9;*D,: increased to *s 1!#$#
crore.
Pro"ision of *s 007 crore to the ;ational (ids 8ontrol Programme and allocation
of *s 1!#> crore for the eradication of polio with focus on high risk districts in
Bttar Pradesh and Aihar.
8ustoms duty to be reduced from 1#& to $& on certain specified life sa"ing
drugs and on bulk drugs used for their manufacture. These drugs are also
exempted from excise duty or counter"ailing duty.
5xcise duty on all goods produced in the pharmaceutical sector reduced from 1'&
to 6&.
(nti-(I4- drug! I(ta.ana"ir! as well as bulk drugs for its manufacture to be
exempted from excise duty.
In order to promote outsourcing of research! weighted deduction of 1$& on any
payment made to companies engaged in *34.
11
"'9'( Bud0et i$!ct
Increase in allocation to the healthcare sector is a positi"e gi"en the need to ramp
up the healthcare infrastructure in the country and impro"e the accessibility of
1uality healthcare to a larger section of the population&
*eduction of excise duty from 1'& to 6& is a positi"e for all pharma companies
enabling them to boost profitability going forward gi"en that the excise duty is
being paid on ,*P.
Increased allocation of funds for eradication of DICJ(I4- and polio and
reduction in customs duty on certain life sa"ing drugs from 1#& to $& is a
positi"e for companies ha"ing product pipeline catering to these segments.
Eeighted deduction of 1$& on payments made for outsourcing research ser"ices
is a positi"e for the sector as a whole gi"en that the emphasis on *34 has
increased.
"'9'+ Co$!#& I$!ct
*eduction of excise duty from 1'& to 6& is a positi"e for all pharma companies namely
domestic companies such as 8ipla! *anbaxy and the likes and ,;8 pharma companies
such as +-F Pharma! Pfi.er and ("entis.
5mphasis on allocating funds for the eradication of DICJ(I4- and polio is a positi"e for
8ipla 9which has a strong presence in the manufacture of anti-(I4- drugs: and Panacea
Aiotec 9which largely manufactures oral polio "accines:.
Eeighted deduction of 1$& on payments made for outsourcing research ser"ices is a
positi"e for *34 focused companies such as *anbaxy and ;icholas Piramal.
1
"'6 S<OT A#%&sis
The following factors are the -E)T factors for Indian Pharmaceuticals Industry.
Stre#0ths:
8ost 8ompetiti"eness
Eell 4e"eloped Industry with -trong ,anufacturing Aase
(ccess to pool of highly trained scientists! both in India and abroad
-trong marketing and distribution network
*ich Aiodi"ersity
8ompetencies in 8hemistry and process de"elopment
<e=#esses:
2ow in"estments in inno"ati"e *34 and lack of resources to compete with
,;8s for ;ew 4rug 4isco"ery *esearch and to commerciali.e molecules on a
worldwide basis
2ack of strong linkages between industry and academia
Production of spurious and low 1uality drugs tarnishes the image of industry at
home and abroad
17
O!!ortu#ities:
-ignificant export potential
2icensing deals with ,;8s for ;85s and ;44-
,arketing alliances to sell ,;8 products in domestic market
8ontract manufacturing arrangements with ,;8s
Potential for de"eloping India as a centre for international clinical trials
;iche player in global pharmaceutical *34
-upply of generic drugs to de"eloped markets
Threts:
Product patent regime poses serious challenge to domestic industry unless it
in"ests in research and de"elopment
4rug Price 8ontrol )rder puts unrealistic ceilings on product prices and
profitability and pre"ents pharmaceutical companies from generating in"estible
surplus
2owering of tariff protection
The new ,*P based excise duty regime threatens the existence of many small
1>
scale pharma units! especially in the states of (ndhra Pradesh and ,aharashtra!
that were in"ol"ed in contract manufacturing for the larger! established players
"'; E$er0i#0 Tre#ds
"';'" Co#trct M#u*cturi#0
The cost of setting up an F4( appro"ed plant in India is almost half of that in the B-(.
Eith the go"ernment now allowing 1##& F4I! many foreign companies are planning to
outsource the manufacture of their off patent drugs to Indian companies and concentrate
more in the de"elopment of new products. For Indian companies! this is an area of large
potential. Indian companies ha"e already started capitali.ing on this opportunity.
;icholas Piramal 2td. has recently entered into an agreement to manufacture "arious
(llergen Inc products.
,any global pharmaceutical ma@ors are looking to outsource manufacturing from Indian
companies! which en@oy much lower costs 9both capital and recurring: than their western
counterparts.
Indian companies are pro"ing to be better at de"eloping (PIs than their competitors from
target markets and that too with non-infringing processes. Indian drugs are either entering
in to strategic alliances with large generic companies in the world of off-patent molecules
or entering in to contract manufacturing agreements with inno"ator companies for
supplying complex under-patent molecules.
1$
I#di# Co$!#ies
-ome of the companies like 4ishman Pharma! 4i"is 2abs and ,atrix 2abs ha"e been
undertaking contract @obs for ,;8s in the B- and 5urope. 5"en -hasun 8hemicals!
-trides (rcolabs! <ubilant )rganosys! )rchid Pharmaceuticals and many other large
Indian companies started undertaking contract manufacturing of (PIs as part of their
additional re"enue stream. Top ,;8s like Pfi.er! ,erck! +-F! -anofi ("entis! ;o"artis!
Te"a etc. are largely depending on Indian companies for many of their (PIs and
intermediates.
The Aoston 8onsulting +roup estimated that the contract manufacturing market for
global companies in India would touch K0## million by #1#.
1'
I#di3s Co#trct M#u*cturi#0 Ser-ice Pro-iders
T8%e "'(
Contract Manufacturing Service Providers
Indian Service Provider Activity
'ishman "hama Conta%t (anu)a%tuin* )o+
'i,i-s Labs "atented 'u*s
Custom Synthesis and S%ale .ps

$i%holas "iamal Conta%t (anu)a%tuin* )o+
Shasun 'u*s / Chem
Ltd&
Spe%iali0ed Genei%s
(atix Laboatoies Ltd&

1"CA Labs
Shasun 'u*s / Chem
Ltd&
Conta%t (anu)a%tuin* )o+
2ubilant 3*anosys 3ld Genei%s43ld (ole%ules
5oent "hama
(oepen Labatoies
-ource? www.pharmaexpress.com
1%
Se%ect Co#trct M#u*cturi#0 De%s i# I#di
T8%e "'+
Se%ect M#u*cturi#0 De%s i# I#di
I#di# Co$!#& Mu%ti#tio#% Product
2upin 2aboratories
Fu@isawa 8efixime
(potex 2isinopril

;icholas Piramal (llergen Aulk 3 Formulations

(d"anced ,edical
)ptics
5ye Products

Eockhardt I"ax ;i.atidine

4ishman
Pharmaceuticals
-ol"ay Pharmaceuticals 5prosartan ,esylate

IP8( 2abs
,erck Aulk 4rugs
Tillomed (tenolol

)rchid
(potex 8ephalosporin and
other in@ectibles

-un Pharma
5li 2illy 8C- Products
Insulin

8adila Dealthcare
(ltana Pharma Intermediates for Pentopra.ole
Aoehringer Ingelheim
+astrointestinal and 8C-
Products

Aiocon Aristol ,yers -1uibb Aulk 4rugs

-ource? www.pharmaexpress.com
"';'( Co#trct Reserch
The market of 8ontract *esearch is growing at a rate of #& per annum. (ccording to
experts! it will be an industry worth anywhere between K$## million to K1.$ billion by
#1#. The global *34 spend is to the tune of K'# billion! of which the non-clinical
16
segment accounts for K1bn and the clinical segment accounts for K70bn. In terms of
Indian prices! this translates into K%bn 9at 1J7
rd
of B-J5B costs: and K%.6bn 9at 1J$th of
B-J5B costs: respecti"ely. This constitutes a total potential of K1>.6bn for the Indian
pharma companies.
"'"5 Success >ctors *or I#di
Co$!ete#t ,or=*orce:
India has a pool of personnel with high managerial and technical competence as also
skilled workforce. It has an educated work force and 5nglish is commonly used. Aesides!
the Professional ser"ices are easily a"ailable which gi"es an added ad"antage.
Cost:e**ecti-e che$ic% s&#thesis:
Its track record of de"elopment! particularly in the area of impro"ed cost-beneficial
chemical synthesis for "arious drug molecules is excellent. Indian pharmaceutical
industry pro"ides a wide "ariety of bulk drugs and exports sophisticated bulk drugs.
2e0% ? >i##ci% >r$e,or=:
India has a $% year old democracy and hence has a solid legal framework and strong
financial markets. There is already an established international industry and business
community.
I#*or$tio# ? Tech#o%o0&:
It has a good network of world-class educational institutions which pro"ide a huge pool
of talented workforce and has established strengths in Information Technology.
10
G%o8%i@tio#:
The country is committed to a free market economy and globali.ation. (bo"e all! it has a
%# million middle class market! which is continuously growing.
Co#so%idtio#:
The IPI is finding great opportunities in India. 8onsolidation! a generali.ed phenomenon
in the world pharmaceutical industry! has started taking place in India.
#
Ch!ter (
Ge#erics
1
('" Me#i#0 o* Ge#erics
( generic drug is a drug which is produced and distributed without patent protection 9The
generic drug may still ha"e a patent on the formulation but not on the acti"e ingredient:.
( generic must contain the same acti"e ingredients as the original formulation. In most
cases! it is considered bioe1ui"alent to the brand name counterpart with respect to
pharmacokinetic and pharmacodynamic properties.
Ay extension! therefore! generics are assumed to be identical in dose! strength! route of
administration! safety! efficacy! and intended use. +enerics also go through a rigorous
scientific re"iew to ensure both safety and effecti"eness In most cases! generic products
are not a"ailable until the patent protections afforded to the original de"eloper ha"e
expired. Ehen generic products become a"ailable! the market competition often leads to
substantially lower prices for both the original brand name product and the generic forms.
The time it takes a generic drug to appear on the market "aries. 4rug patents gi"e twenty
years of protection! but they are applied for before clinical trials begin! so the effecti"e
life of a drug patent tends to be between se"en and twel"e years.
4rug companies attempt to counter cheaper! bioe1ui"alent generic competition with
direct-to-physician ad"ertising that insinuates pharmacist substitution of a cheaper
product is usurping physicianHs authority. 4(E is an acronym for I4ispense as Eritten,
ensuring that pharmacists fill a Calium prescription for brand-name Calium instead of
e1ui"alent and cheaper generic dia.epam.
8ommodity generics ha"e low barriers of entry and low margins of profits due to
competiti"e pricing! while specialty and supergeneric drugs are reformulations of off-
patent drugs and ha"e higher margins.

('( Chrcteristics o* Ge#erics
('('" 2o, !rice
8ompetition?
The principal reason for the relati"ely low price of generic medicines is that competition
increases among producers when drugs no longer are protected by patents. 8ompanies
also incur fewer costs in creating the generic drug! and are therefore able to maintain
profitability while offering the drug at a lower cost to consumers. The costs of these
generic drugs are so low that many de"eloping countries can easily afford.
For example! Thailand is going to import millions of generic "ersion pills of Pla"ix! a
blood-thinning treatment to pre"ent heart attacks! costs @ust 7 B- cents per pill from
India! the leading manufacturer of generic drugs.
*e"erse-engineering?
+eneric manufacturers do not incur the cost of drug disco"ery! and instead are able to
re"erse-engineer known drug compounds to allow them to manufacture bioe1ui"alent
"ersions.
;o clinical trials?
+eneric manufacturers also do not bear the burden of pro"ing the safety and efficacy of
the drugs through clinical trials! since these trials ha"e already been conducted by the
brand name company. It has been estimated that the a"erage cost to brand-name drug
companies of disco"ering and testing a new inno"ati"e drug 9with a new chemical entity:
may be as much as K6## million.
7
5stablished (wareness?
+eneric drug companies may also recei"e the benefit of the pre"ious marketing efforts of
the brand-name drug company! including media ad"ertising! presentations by drug
representati"es! and distribution of free samples. ,any of the drugs introduced by generic
manufacturers ha"e already been on the market for a decade or more! and may already be
well-known to patients and pro"iders 9although often under their branded name:.
('('( No Mo#o!o%&
Prior to the expiration of a drug patent! a brand name company en@oys a period of
Lmarket exclusi"ityL or monopoly! in which the company is able to set the price of the
drug at the le"el which maximi.es profitability. This price often greatly exceeds the
production costs of the drug! which can enable the drug company to make a significant
profit on their in"estment in research and de"elopment. The ad"antage of generic drugs
to consumers comes in the introduction of competition! which pre"ents any single
company from dictating the o"erall market price of the drug. Eith multiple firms! the
profit-maximi.ing price generally reflects the ongoing cost of producing the drug! which
is usually much lower than the monopoly price.
>
>i0' ('" Pte#ted Dru0 #d Ge#eric Dru0 t G%#ce
('+ Pte#t issues
<he# c# 0e#eric dru0 8e !roducedA
Ehen a pharmaceutical company first markets a drug! it is usually under a patent
that allows only the pharmaceutical company that de"eloped the drug to sell it.
+eneric drugs can be legally produced for drugs where?
The patent has expired
The generic company certifies the brand companyHs patents are either in"alid!
unenforceable or will not be infringed
$
The expiration of a patent remo"es the monopoly of the patent holder on drug sales
licensing. Patent lifetime differs from country to country! and typically there is no way to
renew a patent after it expires. ( new "ersion of the drug with significant changes to the
compound could be patented! but this re1uires new clinical trials and does not pre"ent the
generic "ersions of the original drug.
This allows the company to recoup the cost of de"eloping that particular drug. (fter the
patent on a drug expires! any pharmaceutical company can manufacture and sell that
drug. -ince the drug has already been tested and appro"ed! the cost of simply
manufacturing the drug will be a fraction of the original cost of testing and de"eloping
that particular drug.
'
('. Ch%%e#0i#0 Pte#ts
Arand-name drug companies ha"e used a number of strategies to extend the period of
market exclusi"ity on their drugs! and pre"ent generic competition. This may in"ol"e
aggressi"e litigation to preser"e or extend patent protection on their medicines! a process
referred to by critics as Le"ergreening.L Patents are typically issued on no"el
pharmacological compounds 1uite early in the drug de"elopment process! at which time
the HclockH to patent expiration begins ticking.
2ater in the process! drug companies may seek new patents on the production of specific
forms of these compounds! such as single enantiomers of drugs which can exist in both
Lleft-handedL and Lright-handedL forms! different inacti"e components in a drug salt! or a
specific hydrate form of the drug salt. If granted! these patents Hreset the clockH on patent
expiration. These sorts of patents may later be targeted for in"alidation by generic drug
manufacturers.
('/ Ge#eric Dru0 EBc%usi-it&
The B.-. Food and 4rug (dministration offers a 16# day exclusi"ity period to generic
drug manufacturers in specific cases. 4uring this period only one 9or sometimes a few:
generic manufacturers can produce the generic "ersion of a drug. This exclusi"ity period
is only used when a generic manufacturer argues that a patent is in"alid or is not "iolated
in the generic production of a drug! and the period acts as a reward for the generic
manufacturer who is willing to risk liability in court and the cost of patent court litigation.
There is often contention around these 16# day exclusi"ity periods because a generic
producer does not ha"e to produce the drug during this period and can file an application
first to pre"ent other generic producers from selling the drug.
%
2arge pharmaceutical companies often spend thousands of dollars protecting their patents
from generic competition.

(part from litigation! companies use other methods such as
reformulation or licensing a subsidiary 9or another company: to sell generics under the
original patent. +enerics sold under license from the patent holder are known as
authori.ed generics. They are not affected by the 16# day exclusi"ity period as they fall
under the patent holderHs original drug application.
( prime example of how this works

is sim"astatin 9Gocor:! a popular drug created and
manufactured by B.-. based pharmaceutical ,erck 3 8o.! which lost its B- patent
protection on <une 7! ##'. India-based *anbaxy 2aboratories 9at the 6#-mg strength:
and Israel-based Te"a Pharmaceutical Industries 9at all other strengths: recei"ed 16# day
exclusi"ity periods for sim"astatin= due to GocorHs popularity! both companies began
marketing their products immediately after the patent expired.
2! E#suri#0 BioeCui-%e#ce
,ost nations re1uire generic drug manufacturers to pro"e that their formulation exhibits
bioe1ui"alence to the inno"ator product. +eneric drugs are always less expensi"e and can
sa"e patients and insurance companies thousands of dollars supposedly without
compromising the 1uality of care. Aioe1ui"alence! howe"er! does not mean that generic
drugs are exactly the same as their inno"ator product counterparts! as chemical
differences do exist.
(s an interesting case study in the use of generic e1ui"alents of name-brand agents!
warfarin has been only a"ailable under the trade name 8oumadin in ;orth (merica until
recently. Earfarin 9either under the trade name or the generic e1ui"alent: has a narrow
therapeutic window and re1uires fre1uent blood tests to make sure patients do not ha"e a
subtherapeutic or a toxic le"el. ( study performed in the 8anadian pro"ince of )ntario
showed that replacing 8oumadin with generic warfarin was considered safe. In spite of
6
the study! many physicians are not comfortable in allowing their patients to take the
branded generic e1ui"alent agents.
('9 A!!ro-% Process *or Ge#eric Dru0s
(;4(
(n (bbre"iated ;ew 4rug (pplication 9(;4(:! is an application for a B- generic drug
appro"al for an existing licensed medication or appro"ed drug. The (;4( contains data
which when submitted to F4(Hs 8enter for 4rug 5"aluation and *esearch! )ffice of
+eneric 4rugs! pro"ides for the re"iew and ultimate appro"al of a generic drug product.
)nce appro"ed! an applicant may manufacture and market the generic drug product to
pro"ide a safe! effecti"e! low cost alternati"e to the (merican public.
+eneric drug applications are termed Labbre"iatedL because they are generally not
re1uired to include preclinical 9animal: and clinical 9human: data to establish safety and
effecti"eness. Instead! generic applicants must scientifically demonstrate that their
product is bioe1ui"alent 9i.e.! performs in the same manner as the inno"ator drug:. The
generic "ersion must deli"er the same amount of acti"e ingredients into a patientHs
bloodstream in the same amount of time as the inno"ator drug.
0
Ch!ter +
The <or%d Ge#erics Mr=et
7#
+'" 2ti# A$eric# $r=et
In ##'! the generic sector in 2atin (merica was "alued at B-K.% billion! which
represented a $1& increase o"er the ##> figure of B-K1.7 billion. *egional generic
expenditure per capita stood at B-K7.6. Cene.uela had the highest expenditure per capita
at B-K6.#! followed by (rgentina at B-K$.6.
Throughout the region! pharmaceutical patenting remains a relati"ely new concept and an
on-going issue. ,any countries ha"e local industries geared to producing branded
"ersions of drugs still under patent in their country of origin. These copycats tend to be
priced cheaper than branded originals! and this diminishes HpureH generic penetration.
The traditional proliferation of non-bioe1ui"alent! branded generic or copycat products is
slowly being replaced by the steady introduction of bioe1ui"alent generics in 2atin
(merica. In an effort to increase local demand! raise awareness and increase export
opportunities! bioe1ui"alence standards are slowly being implemented.
+'"'" Br@i%
Ara.il! one of the ma@or emerging powers of the world! is marking its presence in almost
e"ery dimension of the world economy! including the generic drugs industry. Ara.il is
currently the largest market for generic drugs in 2atin (merica.
The generic drugs market in Ara.il witnessed an explosi"e growth of 76.6& and was
"alued in excess of B-K 1 Aillion in ##'. The market was dri"en by se"eral factors such
as a supporting political en"ironment! lower cost and patent expirations of se"eral
blockbuster drugs. The market is presently being dominated by domestic generic
manufacturers= howe"er! the presence of foreign firms in the market is increasing rapidly.
71
The growth of the market is expected to remain strong with generics expected to occupy
.6& of the total market by #11! enabling Ara.il to become one of the largest generic
markets in the world. Dowe"er! despite the strong growth! se"eral challenges still remain
to be tackled! including the pre"alence of cheaper non-bioe1ui"alent Msimilar drugsN! low
prescriptions from the pri"ate sector! and low penetration le"els in the pri"ate sector.
Facts about the Ara.ilian generics market?
+enerics in Ara.il occupy nearly 0.$& of the o"erall pharmaceutical market in
terms of sales "alue.
The domestic generic firms of Ara.il are o"er-dependent on the domestic market
and ha"e less participation in foreign markets.
The Ara.ilian go"ernment has made it a norm to prescribe generics in the public
sector.
-trengthening of the Ara.ilian *eal has increased the margins of domestic players
who import raw materials to manufacture generic drugs. 8urrently! the domestic
industry mainly focuses on finishing generic pharmaceuticals.
)ne of the biggest opportunities in the generic sector lies in the (ntiretro"iral
segment.
;on-bioe1ui"alent Msimilar drugsN! which are considerably cheaper than generics!
are pre"alent in the pharmaceutical market.
8ardio"ascular diseases are the biggest death cause in Ara.il.
,edley and 5,- -igma are the biggest generic manufacturers in Ara.il.
7
+'"'( Ar0e#ti#
The generic sector was "alued at B-K7$ million in ##'! compared to B-K#1 million
in ##$. (round %6.& of generic sales take place in the hospital sector. Pharmacy
penetration is "ery low= generic pharmacy sales stood at B-K'.> million in ##'! e1ual
to 1.>& of the total.
The international industry argues that most of the HgenericsH a"ailable in (rgentina are
copy products rather than true generics because they do not ha"e to demonstrate
bioe1ui"alence with the originator products.
+'"'+ Chi%e
4ue to low prices! generic penetration is "ery high in "olume terms. In ##'! there were
6'. million generics units sold! e1ual to 70.'& of the pharmacy sector. The a"erage
price of a generic medicine stood at B-K#.0 in ##'! compared to B-K>.> for a branded
generic and B-K%.' for an original drug.
T*IP--related patent enforcement and the new health reform will increase
pharmaceutical spending in the long term. 4omestic manufacturing is expected to shift
from copycats to originals and generics under license from multinationals! a trend that
could see many smaller manufacturers merge or be ac1uired by larger groups.
77
+'"'. MeBico
,exico has a small generic sector in comparison to its pharmaceutical market si.e. 2ocal
producers are -,5s but only a few are e1uipped to demonstrate bioe1ui"alence. Aut this
has to change! as new rules were enforced in ##$. Aioe1ui"alent generics are expected
to penetrate the market of similar drugs and explore new markets. There is a new wa"e of
generic producers looking for business opportunities in ,exico.
+'"'/ Peru
The Peru"ian generic sector is expected to increase by '& annually in the next fi"e years!
reaching B-K1%0 million by #1#. Pharmacy sales of generics represented 1& of the
total in ##$! e1ual to B-K6 million. They are expected to increase by %& annually in
the next fi"e years! reaching B-K70 million by #1#.
(ccording to 5spicom estimates! the generic sector represented 10.'& of the
pharmaceutical market as a whole in ##$. Pharmacy sales of generics represented >.1&
of the pharmaceutical market as a whole or %.& of the o"erall pharmacy sector in ##$!
which is a relati"ely high percentage.
+'"'1 Ve#e@ue%
+enerics 9branded 3 unbranded: are between #& and %#& cheaper than original drugs
in Cene.uela. Price continues to be their distincti"e ad"antage. Price competition between
generic producers! howe"er! has put the a"erage price of generics at B-K.7 in ##$!
compared to B-K7.7 in ##1. (s a result! growth in generic sales fell to 1#.%& in ##$!
reaching B-K1 million. There are 1!07> generic presentations in the Cene.uelan
pharmaceutical market! which represent #.%& of the total. The generic sector comprises
around 6% companies! but four leading producers concentrate around %$& of the sector
by "olume.
7>
+'( The US Mr=et
The B- represents the worlds largest market for generic drugs with unbranded generics
accounting for more than $#& prescriptions and 1#& sales out of the total
pharmaceutical market in ##'. The market is dri"en by se"eral factors! including lower
costs! a fa"orable political en"ironment! and rapidly increasing ageing population.
The top 1# players in the B- presently occupy more than %#& of the generic market! with
Te"a! -ando. 9;o"artis: and ,ylan leading the market. Dowe"er! the huge potential and
growth of this market also attracts se"eral (sian and 5astern 5uropean players. Thus!
competition in this market is expected to heat up in the future! making the market price
sensiti"e.
(lthough se"eral challenges! such as price erosion and litigations from branded
manufacturers! may hamper growth! the o"erall growth prospects of the market are good.
The market is expected to get a strong boost with the patent expiry of se"eral blockbuster
drugs in the next fi"e years and also with the launch of biogenerics which is expected in
around #1#:.
)"erall! the unbranded generic market is expected to continue its double-digit growth
rate between ##% and #11 and generate re"enues worth more than B-K '0 Aillion by
#11.
Facts about the B- +enerics ,arket?
Bnbranded generics grew faster than branded drugs! biotech drugs and branded
generics between ##> and ##'.
The sales "olume of drugs in the pharmaceutical market is being dri"en strongly
by the sale of generics.
7$
The Datchman-Eaxman (ct was a ma@or boost to the generic business in the B-.
The patent expiry of key biotech drugs is creating opportunities for biogenerics.
+eneric substitution of branded drugs resulted in estimated sa"ings of B-K 1#.
Aillion in the B- in ##'.
Bnbranded generics are expected to occupy more than 10& of the B-
pharmaceutical market by #11.
7'
+'+ Euro!e
5uropean generic pharmaceuticals markets ha"e experienced dramatic changes in recent
years. The business en"ironment has become significantly more complex! and generic
pharmaceutical companies are becoming increasingly international.
+i"en the importance of generic medicines in the 5uropean healthcare e1uation! it is e"er
more important to ha"e a firm understanding of the "arious 5uropean pricing and
reimbursement systems and the ways in which these systems can be impro"ed to de"elop
a "iable and competiti"e generic medicines industry in 5urope.
The French market has witnessed increasing generic penetration! as the French Dealth
(uthorities are more supporti"e to generic players compared to most of their 5uropean
counterparts for keeping rising public pharmaceutical expenditure under control.
8ountries are generally clustered in three groups according to their market shares?
1. 2ess than 1# per cent market share by "alue?
(ustria! Aelgium! Finland! France! Ireland! Italy! Portugal! -pain
. Aetween 1# and ># per cent market share by "alue?
4enmark! 5stonia! ;etherlands! -lo"ak *epublic! -lo"enia! -weden! Turkey! the Bnited
Fingdom
7. +reater than ># per cent market share by "alue?
8roatia! 8.ech *epublic! +ermany! 2at"ia! 2ithuania! Dungary! Poland
7%
( range of factors can affect generics markets within 5urope. For example! in an effort to
simplify the market! businesses are seeking to harmoni.e pharmaceutical registration
processes as well as product packaging! marketing strategies and branding.
Dence! these are the ma@or characteristics of the 5urope generics market.
+'. <or%d3s 2edi#0 Ge#erics Co$!#ies

T8%e +'"
"or#d's $eading %enerics Companies
Rank Company
1 5e,a "hama%euti%al 1ndusties
2 $o,atis Sando0
3 (e%k KGaA
4 S%h6a0 "hama
5 7atson "hama%euti%als
! "li,a
# (ylan
8 Alphama4A%ta,is
9 :a "hama%euti%als 1n%
1; 1,ax <$o6 "at o) 5e,a=
-ource? www.pharmabi..com
76
Ch!ter .
The I#di# Ge#erics Mr=et
70
.'" I#troductio#
)ne-time B- product upsides could propel sector earnings growth to 71& in fiscal ##0
and $& in fiscal #1#. 8ompared with this! the world generics market! according to
I,- Dealth report! is expected to grow at 0& 8(+* 98/#%-15: to K17 billion.
The Indian players will address at least K> billion or '#& of the B- generic product
opportunity for the next two years through first to file 9FTF: settlements and Para IC
launches alone! according to this report.
Further! while base business pricing remains stable! a congenial B- political and
regulatory climate for generics in ##6 adds the fi.. to patent expirations worth o"er K>#
billion in these two years.
The sectors current generic tally of 06 abbre"iated new drug appro"als 9(;4(s: could
increase $6& in fiscal ##0 to >%$ o"er the next 1 months while mainline companies
like *anbaxy! -un Pharma and 4r *eddys rank among the top fi"e international generic
players in Para IC and FTF pipeline.
)pportunities in the International ,arkets?
(part from B- market! the 5uropean and emerging markets! too! indicate good numbers
for the Indian industry. There is a strong growth potential for domestic players in
emerging markets like India! Ara.il! 8hina and some (frican countries! dri"en by
increasing per capita spend! impro"ement in primary care and due to the shift in focus
from infectious disease to chronic illnesses.
Predictions?
,errill 2ynch predicts a 1$& growth outlook for the A*I8- and other emerging markets!
which account for '1& of the re"enues! while mainline companies like *anbaxy! -un!
+lenmark and 4r *eddys will post a robust #& growth. +enerics re"enue growth in the
5B is predicted to grow at 1& 8(+* between ##6 and #1#.
>#
.'( Gro,th dri-ers
5xpiring patents?
-ome of the largest selling drugs in the B-! are going off patent this year. (bout 11
leading drugs! including four blockbuster drugs worth K# billion are going off-patent the
year ##6 in the B-.
Increasing Per 8apita Income?
The 0.> per cent +4P growth during ##'-#%! has translated into a per capita income of
*s 0!76 a year or *s !>>6.$ a month. Per capita income rose by 1>.7 per cent in ##'-
#% against *s $!%1' in the pre"ious fiscal year! according to figures released by 8entral
-tatistical )rganisation. This has a potential to lead to increase in healthcare products.
-hift from Infectious disease to 8hronic Illness?
The product inno"ations ha"e led to increasing efficacy of the drugs! thereby minimi.ing
the extent of infectious diseases. Dowe"er! the problem of 8hronic diseases such as
4iabetes! etc. remain unsol"ed. 4ue to this! a patient has to remain on a prescribed
medication almost for a lifetime. In such cases! one option for the patients is generic
drugs! which are bioe1ui"alent to the branded drugs but become economically "iable for
the patients.
>1
Indian Dealthcare -ector?
IndiaHs high population makes it as an important player in the Dealthcare Industry.
In India! 6#& of the healthcare expenditure is borne by the patients and that borne by the
state is 1&. The expenditure co"ered by insurance claims is 7&. (s a result! the price
sensiti"ity is 1uite high and the high-le"el healthcare facilities are not in the reach of
patients.
(mong the top fi"e therapeutic segments! gastro-intestinal and cardiac therapies are
experiencing both high "olume and "alue growth. )pthologicals! cardio"ascular! anti-
diabetic and neurological drugs continue to top the growth list.
The anti-infecti"e! neurology! cardio"ascular and anti-diabetic segments ha"e witnessed a
high number of new product launches in the recent years from the top pharma companies.
Eith increasing number of non-insured population in western countries and increasing
healthcare expenditure! resulting in people to opt for treatment options out side their
country. ,edical Tourism in India will be one of the ma@or sources for foreign exchange.
Dence! this has been a ma@or growth dri"er.
>
.'+ Mjor I#di# Co$!#ies i# the Ge#erics Mr=et
The Indian companies are growing steadily in the generics market. )rganic as well as
inorganic growth has helped the Indian companies to consolidate their position. ,ore and
more companies are now looking for inorganic growth through ac1uisitions and @oint
"entures with foreign companies in order to gain access to emerging international
markets.
The following table lists some of the leading Indian companies in the generics market.
9;ote that this list does not indicate the ranking of these pharma companies.:

T8%e .'"
Indian Companies
Sr&o Company
1 Ranbaxy
2 Cipla
3 '& Reddy
4 Zydus Cadila
5 5oent "hama
! Cadila "hama
# Auobindo "hama
8 7o%khadt

>7
Ch!ter /
Reserch #d A#%&sis
>>
/'" Reserch Methodo%o0&
/'"'" O8jecti-es o* the stud&
To study the Indian Pharmaceuticals industry! with emphasis on the generics
market.
To identify the -E)T factors for the companies under study.
To identify the opportunities for the Indian players in the generics business for
exploring the international market.
To identify the market expansion strategies that the Indian companies under
study! use to enter International generics markets.
To understand the effects of the generics market on branded products.
/'"'( Sco!e o* the Project
The basic purpose of the pro@ect is to study the +enerics market in the Indian
pharmaceuticals industry. The report co"ers ma@or pharma companies in (hmedabad and
*anbaxy 2td. only.
>$
/'"'+ Reserch Desi0#
(n exploratory research design has been used for the study.
-ampling Procedure?
The sampling procedure used for the sur"ey is con"enience sampling.
/'"'. Methods o* Dt Co%%ectio#
Primary 4ata?
The primary data was collected through a semi structured 1uestionnaire
administered on ,iddle 2e"el ,anagers of "arious pharmaceutical companies.
-econdary 4ata?
The sources of secondary data were books! @ournals! internet! articles! etc.
/'"'/ 2i$ittio#s o* the Stud&
+eographical co"erage of this study is limited to (hmedabad city.
2ack of response due to the confidentiality of data for the target samples was a
ma@or constraint! making the sample si.e small. Dence! the results cannot be
generali.ed.
>'
/'( Co$!#& Pro*i%es
/'('" Cdi% Phr$ceutic%s
/'('"'" I#troductio#
8adila Pharmaceuticals 98P2: (hmedabad! India! exemplifies a spirited Indian
5nterprise. Its phenomenal growth is a corporate epic! an epoch in time nurtured by fifty-
two years of rich! caring heritage. Eith a trail of creditable milestones! 8P2 today has
e"ol"ed to become the undisputed leader in the Indian Pharmaceutical sector! with the
largest therapeutic groups! itHs operations spanning >$ countries. 8P2 is multi-locational!
with its global offices and infrastructure.
It is considered to be one of Indias most reputed! *esearch based! Tech sa""y
pharmaceutical companies focusing on areas O Formulations 9Duman 3 Ceterinary:! ;ew
4rug 4isco"ery! ;o"el 4rug 4eli"ery! (cti"e Pharmaceutical Ingredients! (nalytical
*esearch! Phytochemistry! Aiotechnology! Plant Tissue 8ulture! Aiosynthesis! +enetic
5ngineering! Caccines! Immunoglobulins.
4i"ersified operations encompass Dospital 4isposables 3 Instrumentation! 4iagnostics!
-pecialty 8hemicals! -oftgel! Pharma ,achinery! Telecommunications! Tra"el 3
2eisure.
>%
/'('"'( The Ge#erics SBU:
Pursuing the philosophy of making a"ailable 1uality products at affordable prices for the
mass of people! is 8adila Pharmaceuticals! +eneric -AB. 2aunched with the slogan!
Lyour faith is our strengthL! the +eneric -AB today is the market leader in the country.
Ehat began as a small acti"ity a couple of years ago! is now a full-fledged di"ision worth
*s. 6## million! all set to reach the *s.6 billion mark by ##6! through no"el marketing
strategies.
Pursuing the trail of success in +eneric business! this di"ision has further
di"ersified its acti"ities into newer therapy areas by promoting another marketing arm O
+en"ista.
The product basket contains more than a hundred products
from 1$ therapeutic segments! including (nalgesics!
(ntipyretics! (nthelmintics! (nti-hypertensi"es! (nti-
inflammatory preparations! (nti-bacterials! 8ardio"ascular
drugs! Citamins! Iron and protein tonics! etc.
( slew of high-"alue! branded generic products are being
augmented to the product basket from time to time.
Eith more products in the pipeline! this di"ision is poised to
further consolidate its position as a leading player in
+enerics in India.
>6
/'('"'+ A#%&sis:
Core Strte0&:
The company follows strategy of cost leadership. Inno"ation in process impro"isation!
coupled with the impro"ing technology in production dri"es down the o"erall costs.
>oot!ri#ts:
8P2 is predominantly present in the domestic market of generics. It has got international
presence in certain (frican countries and supplies bulk-drugs to B-.
Busi#ess >ocus:
8P2 wants to focus on the generics segment more as compared to branded products. This
is due because already 8P2 is one of the bigger players in the domestic generics market.
Further concentrating on this business and tapping the international markets can gi"e
them a competiti"e ad"antage.
Co$!etitors i# the Do$estic Mr=et:
8ipla! *anbaxy! Gydus 8adila! Eockhardt! Intas Pharmaceuticals! 4r. *eddys! (lembic
Pharma are the ma@or competitors.
Co$!etitors i# the I#ter#tio#% Mr=et:
*anbaxy! +lenmark pharmaceuticals! 4r. *eddys are the ma@or competitors in the
international market.
>0
Mr=et EB!#sio# Strte0&:
8P2 takes the route of ,3( for market expansion. They are likely to follow other
Inorganic growth strategies to enter "arious international markets. This gi"es a
readymade market entrance and a"oids marketing costs.
Mjor Ther!& Se0$e#ts:
8ardio"ascular! 8;-! +astrointestinal and (nti-infecti"es are the ma@or therapy segments
of 8P2.
(part from these! (nalgesics! (ntipyretics! (nthelmintics! (nti-hypertensi"es! (nti-
inflammatory preparations! (nti-bacterials and Citamins are the "arious therapeutic
segments catered to by the +enerics di"ision of the company.
Core Ares o* Busi#ess:
8P2 is likely to focus on generics business which is its core competency.
$#
Thret o# Br#ded Products:
,arket shrinking is likely to take place due to increase in the generics market. Price
erosion is the other ob"ious factor that will result due to the generics competition.
8osts on marketing and other acti"ities may go up for sustaining the competition.
Pro88%e Cou#ter Strte0ies:
M*ate and *angeN has to be a strategy for companies producing branded products. This
means that in order to compete the generic drugs manufacturing companies! it will be
important that these companies opt for line extension. It is a substitution market in India
and so how many products you are able to produce will hold the key.
Eith huge market opportunity predictions! the outlook for the Indian +enerics players
looks "ery attracti"e. Dowe"er! the companies that will make the most of this predicted
opportunity will be those that inno"ate in technology and products said the 8adila
Pharmaceuticals official.
$1
S<OT A#%&sis
Stre#0ths:
2arge number of formulations in different therapeutic segments
2ow cost production capabilities
(ccess to latest technology
Puality products
<e=#esses:
-etting up *34 in the direction of other therapeutic segments which are not
produced by the company
O!!ortu#ities:
The entire international market of generics
Indias share in the global generics market is @ust & which suggests a huge
potential for the company.
Threts:
+o"ernment policies
2ow margin
$
8ompetition
/'('( R#8B&
/'('('" I#troductio#
*anbaxy 2aboratories 2imited! IndiaHs largest pharmaceutical company! head1uartered in
India! is an integrated! research based! international pharmaceutical company! producing
a wide range of 1uality! affordable generic medicines! trusted by healthcare professionals
and patients across geographies. It is one of the leading pharma 8ompanies in India
commanding a market share of $.#%&. 9-ource? )*+-I,-! ,arch! ##%:. The 8ompany
has clocked sales of B-4 6' ,n 9##': registering a growth of o"er 1%&. The
8ompany is dri"en by its ambition to achie"e B- K$ An -ales by #1 and be amongst
the top fi"e generic players worldwide.
*anbaxy "iews its *34 capabilities as a "ital component of its business strategy that will
pro"ide the company with a sustainable! long-term competiti"e ad"antage. The company
today has a pool of 1!## scientists who are engaged in path-breaking research.
The robust *34 en"ironment within the company for both drug disco"ery 3
de"elopment and for generics is designed to bring into sharper focus! the uni1ue needs of
both e1ually.
To translate these ob@ecti"es into reality and to optimi.e "alue creation! the 8ompany has
adopted a multi-pronged strategy. (c1uisition of generic brands o"erseas! strong
emphasis on brand marketing in the B- and 5urope! entering high potential new markets
with "alue added product offerings! are the ma@or thrust areas.
-uccessful business de"elopment transactions form a key component of its business
strategy. In each of their partnerships! they stri"e to build enduring! mutually beneficial
$7
relationships that can produce positi"e results for both parties. *anbaxy is interested in
sales and marketing partnerships and product ac1uisition opportunities in all the markets
where they operate. They are exploring opportunities through 2icensing and (lliances to
draw maximum "alue from such arrangements.
They continue to e"aluate opportunities to add to their product basket! enhance their
therapeutic presence and also expand their distribution network and the o"erall reach.
In addition! *anbaxy has acti"e *34 programs in oral controlled release drug deli"ery
systems. The company is also acti"ely e"aluating options for ac1uiring new technology
platforms to de"elop differentiated high margin products.
/'('('( )e& >cts 8out R#8B&
In the ;44- segment! *anbaxy is the market leader with %.0& market share and
its ;44- product portfolio contributes to about 0& of its total turno"er.
Its product portfolio spans across (cute 3 8hronic Ausiness co"ering (nti-
infecti"es! ;utritionals! +astro-intestinals! Pain ,anagement 9 (cute:
8ardio"asculars! 4ermatologicals! 8entral ;er"ous -ystems 98hronic:segments.
8ompanys India operations are a dominant force in a number of participating
therapeutic segments! for example (nti-infecti"es! -tatins! 4ermatology and Pain
,anagement )perations are structured into 0 -trategic Ausiness Bnits.
( publicly listed company! *anbaxy India is also a member of IP( 9Indian
Pharmaceutical (lliance: 3 )PPI 9)rgani.ation of Pharmaceutical Producers of
India:.
$>
(mongst the pharmaceutical companies in India! *anbaxy has the largest *34
budget with an *34 spend of o"er B- K 1##,n.
It is ranked amongst the top ten generic companies worldwide.
The 8ompany has manufacturing operations in 11 countries with a ground
presence in >0 countries and its products are a"ailable in o"er 1$ countries.
$$
/'('('+ A#%&sis
Core Strte0&:
The core strategy of the company is hybrid. The cost leadership strategy is a common
focus amongst the pharmaceutical companies! *anbaxy also has got the ad"antage of
being a leader in ;44- products which offers a "alue added differentiation.
,oreo"er! the company is also acti"ely e"aluating options for ac1uiring new technology
platforms to de"elop differentiated high margin products.
>oot!ri#ts:
It has presence in both! the domestic as well as the international markets for generic
drugs.
They ha"e presence in *egulated markets as well as -emi *egulated markets such as US,
5astern 5urope! *ussia! (frica and -outh 5ast (sia. )"erall! they ha"e presence in >0
countries across the globe.
Busi#ess >ocus:
Their key business focus is +enerics. They are the leaders in the domestic generics
market. (lso! they ga"e importance to de"elopment of new chemical entities.
Co$!etitors i# the Do$estic Mr=et:
4r. *eddy! 8ipla! Gydus 8adila! (urobindo Pharma
$'
$%
Co$!etitors i# the I#ter#tio#% Mr=et:
+laxosmithkline! Disun 98hina:! Pfi.er! Aristol-,yers -1uibb! 4r. *eddy! Imugene! etc.
Mr=et EB!#sio# Strte0&:
Their main market expansion strategy is through strategic ac1uisitions. In the financial
year ##$-#'! *anbaxy concluded nine ,3( deals! amounting to a "alue close to B-
K>$# ,n. This has enabled *anbaxy to significantly expand their presence in emerging
and profitable markets like *omania and -outh (frica.
Mjor Ther!& Ares:
8ardio"ascular 8entral ;er"ous -ystem! *espiratory! 4ermatology! )rthopedics!
;utritionals and Brology segments are the ma@or therapy areas for *anbaxy.
Core Ares o* Busi#ess:
+eneric drugs unit is their core area of focus. *anbaxyHs endea"our is to be a leader in the
generics space and also to build a strong proprietary prescriptions business based on the
8ompanyHs ;44- and ;85 9;ew 8hemical 5ntity: research outcomes.
$6
S<OT A#%&sis
Stre#0ths:
2eadership in ;o"el 4rug 4eli"ery -ystem 9;44-: products! which offer "alue-
added differentiation o"er con"entional products.
-trong brand building capabilities! reflected in the fact that # brands feature in
the MTop-7## brands of the IndustryN list. The leading $ brands are -poridex
98ephalexin:! 8ifran 98iprofloxacin:! ,ox 9(moxycillin:! Ganocin 9)floxacin: 3
Colini 94iclofenac:
( well-built customer interface! with one of the highest customer co"erage across
India! and an excellent franchise with both +eneralists 3 -pecialists.
*obust internal control systems in the company and subsidiaries.
5mphasis on Fnowledge ,anagement and ,edico-marketing initiati"es such as
(d"isory Aoard ,eetings! Post ,arketing -ur"eillance -tudies and 8ontinuous
,edical 5ducation programs. These ha"e resulted in an excellent customer
relationship with the medical fraternity.
Eith a futuristic approach! the India operations attempts to capitali.e on the fast-
emerging! high-growth segments with inno"ati"e products and ser"ices?
Aiological formulations such as Cerorab 9*abies Caccine: and Caxigrip
9Flu Caccine:! which re1uire competencies to propagate the newer
concepts in the market place.
$0
Digh end anti-infecti"es such as 8ilanem 3 Faronem ha"e been launched
for the first time in India'
4ry Power 3 ,etered 4ose Inhalers ha"e been launched in the
*espiratory segment. (ll ,etered 4ose Inhalers are DF( based
formulations! en"ironment friendly inhalers. It is for the first time in India!
that a company has launched its entire DF( propellant based ,4I range.
The worlds first no"el product! )so"air 9Formoterol Q 8iclesonide:
inhalation capsules has been introduced in the Indian market.
(nti-diabetic franchise has been further consolidated with launch
of Insucare Insulin: with an inno"ati"e deli"ery mechanism - M8ontrolled Insulin
2ogisticsN This ensures that the cold chain! "ital for product efficacy! is
maintained.
-trong *34 capabilities
-trong "ertical Integration
+lobal Presence! amongst the top 1# global generic companies
-trong ,arketing and 4istribution ;etwork
<e=#ess:
2ow attention gi"en to Aiogenerics
'#
O!!ortu#ities:
10% (;4(s filed with the B- F4(! of which 11 ha"e been appro"ed.
Bnder penetrated generics markets of -pain and Italy
5xpiry of patents on a large number of products in de"eloped countries.
+o"ernment support for generics opens up a large market opportunity suitable to
8ompanys current competency.
Threts:
5ntry of newer players from the emerging economies
Inherent risks of generic segment such as patent litigation! product liability!
increasing regulations and compliance related issues! particularly in the de"eloped
markets
'1
/'('+ Torre#t Phr$ceutic%s
/'('+'" I#troductio#
Torrent Pharmaceuticals 2td. is one of the leading companies in the Indian
Pharmaceutical market. The 8ompanys re"enues are mainly from manufacture and sale
of branded as well as unbranded generic pharmaceutical products. ( further break down
of pharmaceutical sales can be done as 4omestic formulations 9comprising branded
pharmaceutical formulations sold in the domestic market:! 8ontract manufacturing
9mainly comprising of sourcing! manufacturing and supplying insulin formulations nder
the third-party brand name: and International operations 9comprising sales outside India
of branded and unbranded-generic pharmaceutical formulations:.
T8%e /'"
Ther!eutic Are -ise s%es
Ther!eutic Are
>Y (551:59 >Y (55/:51
8ardio"ascular 77&
77&
8;- 22> 19>
+astro Intestinal 19> 21>
(nti Infecti"es 13> 1!>
Pain ,anagement 5> 4>
)ral (nti 4iabetics 4> 4>
)thers 5> 3>
Total 1;;> 1;;>
-ource? Torrent Pharma (nnual *eport ##'-#%
'
/'('+'( )e& >cts 8out Torre#t Phr$ceutic%s 2td
(pproximately 1#& 9pre"ious year 1$&: of the domestic formulations sales of the
8ompany were sub@ect to price control under the 4rug Price 8ontrol )rder! 100$. The
8ompany introduced >0 new products 9including line extensions: during F/ ##'-#% as
compared to >7 in F/ ##$-#'.
International sales 9sales outside India: comprised branded-generic and unbranded-
generic formulations. For the year international sales constituted >%& 9pre"ious year
>$&: of consolidated sales and grew by >7& 9pre"ious year &:. The growth was
dri"en by Ara.il! 5urope and *ussia.
The 8ompany is ranked 1$th by turno"er in the domestic market! has ' brands in top 7##
brands and has % brands in leadership positions in their respecti"e molecule segments.
*egion-wise international sales are gi"en below?
T8%e /'( 9*s. In 8rore:
Re0io#:-ise i#ter#tio#% s%es
Re0io#s >Y (551D59 >Y (55/:51 Gro,th
-ales & -ales & &
Ara.il 1''.6 6& 11$.'6 #.6 >>&
*ussiaJ8I- $%.7$ 1#& 7%.'' #.0 $&
5urope 76.6' '#& >%.$6 #.11 -16&
Deumann R '6.#% >$& 1'6.6> #.> $0&
*.).E. '%.'6 11& >0.10 #.1 76&
Tot% $06.%' 1##& >16.0$ 1 >7&

'7
-ource? Torrent Pharma (nnual *eport ##'-#%

R Deumann Pharma +mbD 3 8o +enerica F+ 9Deumann: a wholly owned subsidiary
operating in +ermany was ac1uired in <uly ##$. The sales for ##$-#' are for the post-
ac1uisition period.
The companys international sales comprise of branded generics as well as unbranded O
generic formulations.
The table below sets forth the growth rates in therapeutic segments in which the
8ompany has presence?
T8%e /'+
Ther!eutic Se0$e#t Gro,th Rtes
Ther!eutic Se0$e#t Co$!#&Es Gro,th O-er%% Se0$e#t Gro,th
8ardio"ascular 1#.7& 11.&
+astrointestinal $.7& 17.1&
8;- $.#& 1.6&
(nti-Infecti"es '.7& 1$.1&
Pain ,anagement $.7& .&
(nti-4iabetics >6.1& 1%.'&

-ource? )*+-I,- ,arch ##% ,(T
'>
/'('+'+ A#%&sis
Core Strte0&:
The core strategy of the company is hybrid. There main strategy is cost leadership. This is
more or less focused in the case of domestic market. The company follows differentiation
strategy for regulated markets like B-. The reason is that as such the market regulations
pre"alent in these markets mean that low cost is an inherent re1uirement for all the
companies. Dence! in order to gain a competiti"e ad"antage! Torrent Pharma focuses on
differentiation attributes such as 1uality! packaging! etc.
>oot!ri#ts:
The company has presence in domestic as well as international markets for generics
products.
I#ter#tio#% Mr=ets:
Presence in *egulated markets in B- and 5urope. (lso! presence in -emi regulated
markets such as Ara.il! ,exico etc.
Torrent is also present in <apan! (ustralia.
,oreo"er! its wholly-owned subsidiaries in *ussia and +ermany are the principal sources
of re"enue.
It further plans to enter the semi regulated markets which are emerging.
'$
Busi#ess >ocus:
Their business focus is in both- the generics segment as well as branded products. The
emphasis is laid on branded products because in the domestic market! the foreign brands
are still sold due to brand e1uity. Dence! they want to capitali.e on that opportunity as
well.
Co$!etitors i# the Do$estic Mr=et:
4r. *eddys! 8ipla! Gydus 8adila! *anbaxy! 8adila Pharma
Co$!etitors i# the I#ter#tio#% Mr=et:
*anbaxy! ;o"artis! 4r. *eddys! ;o"artis
Mr=et EB!#sio# Strte0&:
The company is focusing on organic as well as inorganic growth. ,3( and <Cs with
companies in semi regulated markets is their current focus right now as most of these
markets are branded generics markets! thus! resulting in better margins.
Mjor Ther!& Se0$e#ts:
8ardio"ascular! (nti-infecti"es! 8;- and gastrointestinal are the ma@or therapy areas for
Torrent Pharma.
Core Are o* Busi#ess:
''
In the short term future! when the generics market is likely to grab the headlines! Torrent
Pharma would like to simultaneously concentrate on ;44- and ;85 business areas.
Thret o# the Br#ded Products:
Torrent Pharma belie"es that as far as the domestic market is concerned! the doctors
prescribe branded products for their patients. This is a fact! specifically in the case of the
Isuper specialties therapeutic segments of Torrent Pharma such as 8;-! 8C- etc.
Pro88%e Cou#ter Strte0ies:
(ccording to Torrent Pharma! a probable counter strategy against the competition from
generic drugs can be strong brand building. ,arketing strategies will also come into
focus! with more focus laid on building brand e1uity with the doctors.
'%
S<OT A#%&sis
Stre#0ths:
-table system for internal control
-trong Information Technology infrastructure
-trong marketing and distribution network.
8ompetiti"e cost ad"antage
2atest technologies for the research process.
4uring the year! the 8ompany recei"ed the B-F4( appro"al for its (PI and
formulations manufacturing facilities located at 8hatral. This will start a
potentially important re"enue stream in the coming years.
<e=#esses:
(ttrition rates O MEe face high attrition le"els! particularly in sales force! *34
technical staff and production technical staff. This leads to disruption and delays
in pro@ects! problems like loss of customers and sales! and it also increases the
cost of recruitment and training. M
MTo counter this! we pro-acti"ely manages this manage this problem
through "arious measures including aggressi"e and timely recruitments!
'6
industry compatible remuneration J incenti"e system and strengthening of
the D* function.N
O!!ortu#ities:
4omestic?
+rowth from emerging market segments like organi.ed buyer groups! pharmacy
chains and corporate hospitals.
Product and assets ac1uisition opportunities.
Bse of information technology for efficient customer ser"icing and impro"ed
sales producti"ity.
)pportunity to increase growth through increasing doctor co"erage! product
exposure to new medical specialties! increased product focus! territorial
expansion! new therapeutic areas and building strong sales operations systems.
International?
5xpiry of patents on a large number of products in de"eloped countries coupled
with go"ernment support for generics opens up a large market opportunity
suitable to 8ompanys current competency.
Potential expansion in doctor and territorial co"erage
Digher healthcare funding promised by the +o"ernments to increase the current
per-capita spends on healthcare is expected to dri"e the growth in these markets.
'0
Bnexploited opportunities in the rest of the world markets by extending the
domestic market product portfolio in semi regulated markets and by extending the
5B and B- market product portfolio in regulated markets of (sia 3 (frica.
*esearch 3 4e"elopment?
8ollaborati"e research
4e"elopment of ;ew 4rug 4eli"ery -ystems 9;44-: to create differentiated
products and market exclusi"ity in commodity generics market
-electi"e ;ew 8hemical 5ntity 9;85: research! primarily with respect to
metabolic complications.
Threts:
4isco"ery *esearch
Price 8ontrol
Failure to tap the opportunities in the o"erseas markets in a timely manner
%#
/'('. F&dus Cdi%
/'('.'" I#troductio#
Gydus 8adila is a global healthcare pro"ider and one of the top fi"e pharma companies in
India. The company was founded by 2ate ,r. *amanbhai A. Patel in 10$ and went on to
become the second largest pharma company in the early 100#s.
In 100$! the group restructured its operations and now operates as 8adila Dealthcare 2td.!
under the aegis of the Gydus group. The company spearheaded by ,r. Panka@ *. Patel!
8hairman and ,anaging 4irector posted a turno"er of *s. 10## crores in ##'-#%.
)ne of the most reputed pharma companies globally! Gydus 8adila aims to be a leading
global healthcare pro"ider with a robust product pipeline and sales of o"er K1 billion by
#1#. It plans to achie"e sales of o"er K7 billion by #1$ and be a global research-dri"en
company by ##.
/'('.'( )e& >cts 8out F&dus Cdi%
Pro"en expertise in manufacturing and marketing different dosage forms such as
solid dosage forms! in@ectables! metered dose inhalers! dry powder inhalers!
transdermal patches! suppositories and oncology formulations.
Eide therapy co"erage through three multi-therapy di"isions and eight speciality
di"isions.
%1
( dedicated field force of 7### reaches out to super specialists! specialists!
surgeons! physicians and the rural markets.
The group is a leader in cardio"ascular! gastrointestinal and womens healthcare
segments.
-trong presence in the respiratory! pain management! 8;-! anti-infecti"es!
oncology! neurosciences! dermatology and nephrology segments.
The group was the first to launch ;ucoxia 95toricoxib:! ;upatch 94iclofenac
Patch:! Pantodac 9Pantopra.ole:! ,ifegest 9,ifepristone:! Penegra 9-ildenafil
8itrate:! Pro"idac Techsules! Aetaferon! Fludara! -limona 9*imonabant: and
;o"oli.er in India.
The group has se"eral brands that feature amongst the top 7## pharmaceutical
brands in India.
The group has a globally compliant manufacturing infrastructure comprising eight
state-of-the-art facilities which support product launches not @ust in India but also
in the regulated markets of B.-.! 5urope and 2atin (merica.
Three of the groups facilities including the formulation manufacturing plant at
,oraiya! and (PI plants at (nkleshwar and 4abhasa near Cadodara are appro"ed
by the B-F4(.
,ore than $## professionals spearhead the groups research programme.
)"er 7# scientists are working on new molecular entity research at the Gydus
*esearch 8entre.
%
Gydus 8adila is a partner of choice for se"eral global pharma ma@ors such as
Aoehringer Ingelheim! -chering (+! ,adaus (+! ;ycomed! Dospira! Gambon of
Italy! Aio -idus of (rgentina! ,allinckrodt of B-(! to name a few.
The product range in 8onsumer Products 4i"ision comprises of Sugar Free GoldO
Indias ;o.1 sweetener with a market share of o"er %#&! Sugar Free Natura O a
.ero calorie sucralose based sugar substitute! Sugar Free DliteO a low calorie
healthy drink and NutraliteO a premium cholesterol-free table spread.
The di"ision also caters to the skincare segment with its Everyuth and Dermacare
brands! which occupy a uni1ue distinction of being a Iskincare brand from a
healthcare company. EverYuth has a strong presence in ad"anced skincare
segments like soap-free! face washes! face masks! scrubs etc.
Gydus 8adila has strong global operations to market both formulations and (PIs.
Eith operations in B.-.(.! 5urope! 2atin (merica! <apan and o"er ># emerging
markets across the world! Gydus 8adila is a global healthcare pro"ider. The group
also manufactures and markets a wide range of intermediates and (PIs.
Dighlights of domestic formulations ##'-#%?
70 new products were launched in India during the year! of which 6 were 1st in
India
1% of our formulation brands now feature in the top 7## brands of India as per
)*+ I,- 9,(T 4ec-#%:
Eith ac1uisition of 2i"a Dealthcare! we entered *s. 1$## 8r dermatology market
,aintained leadership positions in the 8C-! +astro intestinal and ED8
segments.
%7
/'('.'+ A#%&sis
Core Strte0&:
The core strategy of Gydus is Dybrid. It not only pursues cost leadership similar to its
peers! but also differentiates itself by no"el product inno"ations. This is typical for their
consumer products di"ision which has gi"en block-buster products in the Indian domestic
market.
>oot!ri#ts:
Gydus 8adila has got domestic as well as international presence.
I#ter#tio#% Mr=ets:
Gydus is present in regulated markets such as B.-.! France and <apan. ,oreo"er! it has
already entered semi-regulated markets of Ara.il! -outh (frica and Taiwan. (part from
these markets! it has got presence in -rilanka! ,yanmar! Bganda! 8I-! Philippines!
Cietnam! -udan and Fenya.
Their presence in semi regulated markets can further enable them to ha"e easy access to
the upcoming opportunities in the growing generics market. This will enable Gydus as
these markets are "ery lucrati"e for branded generics. Dence! the margins that they get
will also be high.
Gydus further wants to penetrate the French market. The French market has witnessed
increasing generic penetration! as the French Dealth (uthorities are more supporti"e to
%>
generic players compared to most of their 5uropean counterparts for keeping rising
public pharmaceutical expenditure under control. (part from France! Gydus also plans to
enter Italy! Portugal and Aelgium markets.
Busi#ess >ocus:
Their business focus will be in branded as well as generic products. Gydus wants to focus
on their strong capabilities of formulating new chemical entities and patenting them! at
the same time! le"erage their competencies and tap the opportunity of the generics
market.
Gydus has been "ery dominant with its healthcare products and it would want to increase
their product portfolio in this -AB.
Co$!etitors i# the Do$estic Mr=et:
8ipla! *anbaxy! -un Pharma! ;icholas! 4r.*eddyHs! 2upin! Bnichem! Torrent! and Intas
are its domestic competitors.
Co$!etitors i# the I#ter#tio#% Mr=et:
*anbaxy! 4r.*eddyHs! -un Pharma! Eockhardt are its main competitors for the
international market.
Mr=et EB!#sio# Strte0&:
<oint "entures and ,ergers 3 (c1uisitions are there main modes of entering international
markets. The reasons 1uoted are?
- *educed lead time
- *eady market
%$
- *eady marketing infrastructure
- 2ocal knowledge base
- Aetter chances of success
Mjor Ther!& Se0$e#ts:
Gydus 8adila has many therapy segments such as 8ardio"ascular! )ncology!
+astrointestinal! Intestinal! 8;-! *enal.
(part from these! +ynecology! *espiratory! Pain management and steroids are some of
the other main therapy segments of Gydus.
Core Ares o* Busi#ess:
The core areas for business for Gydus 8adila during the booming generics market are in
the following order?
1. ;ew 8hemical 5ntities
. Aiotech 4rugs
7. ;ew 4rug 4e"elopment
>. +enerics
The rationale behind this choice can be attributed to the possibility that the company can
le"erage resources in ;85 as well as Aiotech drugs! whereas simultaneously the
emerging markets for generics can be tapped
%'
Thret o# Br#ded Products:
The threat on the branded drugs is that the re"enues of the company will be eroded due to
generic competition.
,oreo"er! to sustain in market! companies may ha"e to resort to price reductions. This
reduces the margins and hence decreases the o"erall profitability.
Pro88%e Cou#ter Strte0ies:
To a"oid or mitigate the risks posed by generics! companies producing branded 9patented:
drugs may choose the following courses of action?
- 2aunching authori.ed generics
- Impro"ement in product characteristics
- 2aunching combinations
- 2aunching stereo-isomers of existing molecules
- 5xtending legal battles with generic companies
- Faster turn-around of new and better products with the help of intensi"e
*34.
%%
S<OT A#%&sis
Stre#0ths:
2ow cost
Eorld 8lass ,anufacturing
Digh Puality Products
-trong Product 4e"elopment
-trong *34 capabilities
<e=#esses:
;ot "ery strong in in@ectibles! anti-retro"irals! li1uids and biogenerics
O!!ortu#ities:
Bnexplored territories
,a@or drugs going off-patent in the "ery near future
%6
Threts:
Forex risk- This is due to the current depreciating B- 4ollar. ( significant portion
of the companys re"enue comes from the international market. Eeak dollar
means that exports are affected and this has an ad"erse effect on the companys
profitability.
*isks associated with generics
The increasing ,anpower costs
Price erosion
%0
/'+ >i#di#0s
The core strategy that most of the pharmaceutical companies follow is that of cost
leadership. (chie"ing a low cost production is enabled by technology and
inno"ati"e manufacturing capabilities. Aut low cost production and o"erall cost
leadership has become necessity now for the pharma companies in order to
sustain competition.
Dence! most of the companies under study follow a Dybrid strategy. They not
only follow a low cost strategy! but also try to differentiate in product 1uality!
packaging! etc.
,ost of the companies ha"e already established a strong presence in the
international markets. B-! 5urope and Ara.il seem to be the common markets
where Indian companies ha"e got access and are ready to tap the opportunity of
the boom in the generics market. ,oreo"er! companies that ha"e not got a strong
presence in the regulated markets are likely to focus more on the emerging
markets. These are the markets of the branded "ersion of generic drugs and hence!
the margins they will get are higher.
These companies ha"e a common outlook for business priority. Their business
focus is in the generics segment as well as that of the branded drugs. The
emphasis is laid on branded products because in the domestic market! the foreign
brands are still sold due to brand e1uity. Dence! they want to capitali.e on that
opportunity as well.
(part from the option to take the organic growth! the pharma industry! being so
highly fragmented! is taking the route of inorganic growth as well. ,3( and
<oint Centures seem to be the unanimous choices of these companies.
The lack of 9*34: producti"ity! expiring patents! and stiff generic competition
are dri"ing the mergers and ac1uisition acti"ity in the sector.
Further! according to ,r. (lok +arg of Gydus 8adila! the primary reasons that the
companies opt for ac1uisiti"e growth are Mreduced lead time! a ready market!
6#
ready marketing infrastructure! local knowledge base! and hence better chances of
successfully tapping international markets.N
,ost of the companies studied ha"e presence in "arious therapeutic segments
such as 8ardio"ascular! )ncology! +astrointestinal! Intestinal! 8;-! *enal!
+ynecology! *espiratory! Pain management and steroids.
The business focus of most of these companies during the booming generics
market is ;ew 8hemical 5ntities! Aiotech 4rugs! ;ew 4rug 4e"elopment! and
+enerics. The rationale behind this choice is that the companies can le"erage
resources in ;ew 8hemical 5ntities as well as Aiotech drugs! whereas
simultaneously the emerging markets for generics can be tapped.
The common threat to the companies is +o"ernment policies! low margin of
generics! competition from companies in the emerging markets! etc.
The main threat to these companies is the fluctuations in the foreign exchange and
the recent depreciating B- dollar. Aecause of current phenomenon! the exports of
these companies ha"e suffered and this poses a considerable threat for the future
also.
(lso! the high le"el of attrition rates is a problem. This is particularly in the case
of sales force! *34 technical staff and production technical staff. This leads to
disruption and delays in pro@ects! substantiates problems like loss of customers
and sales! and it also increases the cost of recruitment and training.
The ob"ious threat on the companies producing branded drugs is that price
erosion will result due to the generics competition. 8osts on marketing acti"ities
may go up for sustaining the competition.
The possible counter strategies that can be used against the generics competition
are that the product portfolio be increased! emphasis on strong brand building
which builds a fa"orable brand e1uity etc.
(lso! strategies such as launching authori.ed generics! impro"ement in product
characteristics! extending legal battles with generic companies and faster turn-
around of new and better products with the help of intensi"e *34 can be
fruitfully used.
61
Ch!ter 1
Out%oo= *or the I#di# Ge#erics I#dustr&
6
1'" Mer0ers ? AcCuisitio#s
1'"'" The Rtio#%e
,ost of the pharma companies studied in this report! prefer to opt for ac1uisiti"e growth
to enter the international markets. (lthough "ery beneficial! this doesnt necessarily mean
that the companies should pursue it under any and all circumstances.
(c1uisiti"e growth makes sense only if these ac1uisitions create sustainable competiti"e
ad"antage.
(d"antages?
1. *educing 8ost *elati"e to 8ompetitors
(n ac1uisition-based growth strategy can be implemented in effecti"e especially in
fragmented industries such as pharmaceuticals! where companies can use ,3( to
consolidate the industry and achie"e scale and cost ad"antage.
. (c1uiring ;ecessary 8apabilities
-ome companies can use ac1uisitions to fill in gaps in their capabilities! rather than wait
to de"elop those capabilities internally. This can help them sa"e time and costs.
67
,3( )utlook?
(s pressures on the pharmaceutical industry increase! global consolidation will continue.
The consolidation is likely to lead to the creation of new Ibig biotech companies in the
(sia-Pacific region. The lack of research and de"elopment 9*34: producti"ity! expiring
patents! generic competition and high profile product recalls are dri"ing the mergers and
ac1uisition 9,3(: acti"ity in the sector.
In India! a number of companies ha"e made ,3(s in global markets. In India! it will be
dri"en in the medium term by implementation of the new patent regime and generic
companies looking to establish a low-cost base out of the country. ,oreo"er! it appears
Indian companies will continue to look at ac1uisition opportunities in the regulated
market! especially 5urope.
)pportunities?
Indias strong manufacturing base is likely to stand some global companies in good stead.
The domestic pharma companies ha"e forayed into mergers and ac1uisitions in order to
gain access to global markets.
The Indian pharma industry is known for generics! cost-effecti"eness and
competiti"eness that gi"e it an edge.
The Indian market is huge and the "aried nature of diseases in India interests international
companies.
The B- Food and 4rug (dministration 9B-F4(: has already appro"ed '# manufacturing
sites in India. (ll domestic producers were obliged to comply with +ood ,anufacturing
Practices by <anuary ##$! under -chedule , of the 4rugs and 8osmetics (ct! 10>#. The
costs are "ery competiti"e too.
6>
,3( trend likely to grow?
The key feature of ,3( acti"ity in (sia-Pacific has been consolidation of indigenous
drug manufacturers! particularly in 8hina and India. There were entry barriers for
companies from the de"eloping countries and ac1uisitions make it easy to find a foothold
in those markets. For instance! there was a cultural and language barrier in 5urope. The
B- is a huge market and will always interest the Indian pharma companies for its sheer
si.e.
The domestic industry is fragmented! and in such a scenario! consolidation seems to be
the only answer to sur"i"e in the post patent regime.
6$
1'"'( Rece#t AcCuisitio#s
The number of mergers and ac1uisitions in the past years shows that the Indian pharma
industry is all set to take on the global markets.
;icholas Piramal ac1uired 1% per cent in Aiosyntech! a 8anadian pharma packaging
company in <uly ##$.
4uring the same period! Torrent ac1uired Deumann Pharma! a generic drug company that
was earlier a part of Pfi.er.
,atrixs ac1uisition of the Aelgian firm 4ocpharma is one of the largest ac1uisition
deals.
*anbaxy has completed nine ,3( deals in the last two years! amounting to a "alue close
to B- K>$# ,n. These ac1uisitions ha"e significantly expanded its presence in emerging
and profitable markets! such as *omania and -outh (frica.
Gydus 8adila recently ac1uired ;ippon Bni"ersal Pharmaceuticals 2td.! which has got a
country wide reach to more than >### hospitals and clinics in <apan. This gi"es them a
critical access to a ready manufacturing and marketing base as well as a strongly
established distribution network in <apan.
6'
1'( Ste!s T=e# i# the Directio# o* Gro,th
I#di3s US DM> Su8$issio#s
>i0ure1'"
The S axis indicates the respecti"e year.
The "alues on / (xis indicate the number of 4,Fs submitted.
-ource? B-F4( J ;ewport -trategies Dori.on +lobal T
The abo"e graph represents the number of 4rug ,aster Files submitted by Indian pharma
companies in the B-.
There is consistent rise in the number of 4,Fs submitted.
R ( 4,F is a master file that pro"ides a full set of data of an (PI. It is a document
prepared by the manufacturer in the pharma industry and submitted at his own discretion
6%
to the Food 3 4rug (dministration. There is no re1uirement by law or F4( regulation to
present 4,F.
Dowe"er! filing 4,F supports other drug applications.
This can help drug application process simpler and faster.
4,Fs are used more in 8ontract ,anufacturing.
I#di# US DM>s: (551
66
>i0ure 1'(
-ource? B-F4( J ;ewport -trategies Dori.on +lobal T
The S axis indicates the number of Indian 4,Fs in ##'
The / axis indicates the four 1uarters of ##'
-ource? B-F4( J <P ,organ <an ##%
Inference?
This graph indicates Indias contribution to the total 4,Fs filed in the year ##'. The
four 1uarters of a financial year are taken into consideration and we can see that
Indias contribution is atleast 1J>
th
of the total 4,Fs filed. In P7 of ##'! Indis share
is close to 7#& whereas in P>! it goes as high as >#&.
60
1'+ O!!ortu#ities ? Ch%%e#0es
The generics industry is going through a period of unprecedented growth! with K6
billion worth of global blockbusters facing B- patent expiry by ##6. The changing
dynamics of the generics market are dri"ing strategic e"olution of leading players! with
portfolio management! geographic expansion and alliance networks determining success
and failure. Eith cost-containment a focus for all healthcare players! the growth of the
generics market is outpacing the branded sector by a considerable margin.
Dowe"er! the operating en"ironment for generics is becoming increasingly competiti"e
pushing existing players further up the pharmaceutical "alue chain. Arand and generics
companies alike must be prepared for this new competition. Eith %0.%& of ##7
blockbuster sales potentially exposed to generic competition by #1#! e1uating to K1#7.%
billion worth of products at ##7 sales "alue! the growth opportunities in the generics
sector are significant. Dowe"er! understanding how different country dynamics shape the
competiti"e landscape is critical to e"aluating risk and return.
I#ter#tio#% Mr=ets:
The B-! BF and +ermany are mature generics markets experiencing substantial price
competition. This is reflected by the fact that! while generics make up $$& of all global
prescriptions! generic market sales e1uate to only 1%& of total sales. Dowe"er! less
mature markets also exist! including France! -pain! Italy and Portugal. These markets
offer better growth opportunities as genericsH current market share is comparati"ely small.
8rucial to generics companiesH strategies in the B- is the use of Paragraph IC patent
challenges to gain lucrati"e market exclusi"ity periods. Aeing the first to market a new
generic drug makes for exceptionally attracti"e market share and profit margins.
Dowe"er! these profits are short-li"ed! due to ri"al launches coming at the end of the
exclusi"ity period. This means generic companies must continually launch new products
to maintain their margins.
0#
5ffecti"e portfolio management is critical to future success in the generics market.
,aintaining breadth of portfolio and low cost supply is critical for commodity generics
players! forcing many players to e"aluate higher "alue generic sectors! thus generating
new competitors to brand pharma. In the B-! the generic In@ectables sector retains high
barriers to entry! but in 5urope! competiti"e analysis suggests that the market place is
more crowded. (s such! in@ectable products may represent a less "aluable proposition to
5uropean generics players than B- analysis would suggest.
01
1'+'" Thret *ro$ Chi#
8hina is becoming a ma@or competitor to India! especially in exports of acti"e
pharmaceutical ingredients 9(PIs:. 8hinas pharmaceutical industry ranks no.% in the
world and is expected to become the worlds $th largest by #1#. 8hinas domestic drug
sales ha"e been estimated at about B-K6 billion in ##7 and the exports are growing at
the rate of about #& per annum.
The reasons for 8hinese competiti"e ad"antage are?
The electricity costs are lower in 8hina as compared to India. The power costs
range from *s.1.$# to .$# per FED as against Indian cost of *s.>.$ to '.# per
FED.
2abour charges are >#& lower in 8hina than India.
8hina is more cost competiti"e in manufacturing sector
8hina has already implemented clear intellectual property laws and data
exclusi"ity rules that take it one step ahead of India in attracting foreign players.
In 100! a pact was signed with B-! which heralded the Product patent regime
coming in force in 8hina.
8hina has established a large number of profit oriented research and de"elopment
institutions! which are today independent of go"ernment funding in contrast to
institutions in India! which are mostly dependent on go"ernment funding.
The 8hinese go"ernment pro"ides an income tax holiday of 1## per cent for the
first two winning years 9profit making years: and $# per cent for the next three
years
0
They ha"e better fermentation process systems in place
The companies are also allowed duty free import of capital e1uipment.
2ow turnaround time for ships at 8hinese ports make it conduci"e as a base for
exports.
07
I#di #d Chi# DM> Su8$issio# Co$!riso#
>i0ure 1'+
The S axis indicates the respecti"e year.
The "alues on / (xis indicate the number of 4,Fs submitted.
-ource? B-F4( J ;ewport -trategies Dori.on +lobal T
The abo"e graph compares India and 8hinas 4,Fs submission. India is
comprehensi"ely beating the other countries in terms of number of 4,Fs.
-ince last couple of years! all the 4,Fs submitted by India are dominated by (urobindo
Pharma! *anbaxy and 8ipla. The 4,Fs submitted ha"e been for acti"e compounds
lately.
8hina is far behind India in absolute terms. Aut the threat of 8hinese players such as
Ghe@iang Disun poses a tough challenge to the Indian companies.
It has got a strong (PI presence in statins and anti-cancers.
Co$!riso# o* To! 2e-e% Co$!#ies: I#diGChi#
0>
T8%e 1'"
Prticu%rs R#8B& Hisu#
B- 4ose ,arketing Presence /es
5B 4ose ,arketing Presence /es
B- (PI Presence /es /es
5B (PI Presence /es /es
2ocal 4ose ,arketing Presence /es /es
)ther 8ountry ,arketing /es /es
4rug 4isco"ery /es
4,Fs /es /es
(;4(sJPara IC /es
-ource? B-F4( J ;ewport -trategies Dori.on +lobal T
CONC2USION
0$
The Indian Pharmaceutical Industry today is in the front rank of Indias science-based
industries. This highly fragmented industry is "ery competiti"e. The companies are
compelled to focus on *34 and inno"ati"e methods to impro"e their manufacturing
capabilities.
The industry is characteri.ed by low cost of production. ,ore and more companies are
now stri"ing to achie"e competiti"e ad"antage by in"estments in excellent and world-
class national laboratories speciali.ing in process de"elopment and de"elopment of cost
effecti"e technologies. Eith top pharma companies "enturing into emerging trends such
as contract manufacturing and contract research! the business hori.on of pharmaceutical
industry is expanding rapidly.
IPI is well positioned for sustainable growth and expansion. The industry has grown at a
8(+* of 17 percent from ##-##% and is expected to grow at a 8(+* of 1' percent
o"er ##%-#11.
8urrently! the generics market is the centre of attraction for the pharmaceutical industry.
,any patented blockbuster drugs are nearing their patent expiry! which is set to open up a
huge market. The current world market which is "alued at B- K$$ An is expected to
touch the B- K0# An mark by #1#.
(part from the regulated markets of B-( and 5urope! the 2atin (merican markets are
also playing a ma@or role in this de"elopment. Particularly! markets of Ara.il and
(rgentina are growing at a "ery rapid rate. The B- and 5urope markets are also booming
and opportunities galore for the pharma companies to tap these markets.
Dowe"er! due to the regulatory control issues which characteri.e these regulated markets!
the pricing pressure increases. 4ue to this! many pharma companies are targeting to tap
the semi-regulated markets which offer branded generics. 4ue to this! these companies
can reap higher margins as compared to the other generics.
0'

The generics market in India is also on the upswing. (part from the B- market! the
5uropean and the emerging markets also indicate a fa"orable opportunity for the Indian
companies. Eith price-competition getting stiffer and wholesalers and distributors
becoming increasingly demanding in the traditional generics markets of B- and Eestern
5urope! most global generics players ha"e been forced to expand geographically and
focus on backward integration! which has resulted into a large mergers in global generics
industry. There is a strong growth potential for domestic players in emerging markets like
India! Ara.il! 8hina and some (frican countries. These markets are dri"en by increasing
per capita spend! impro"ement in primary care and shift in focus from infectious disease
to chronic illnesses.
In the Indian pharma sector! leading companies like *anbaxy! 8ipla! etc. are tapping into
the international markets to grab the opportunities in the generics business.
,ost of the pharma companies! as determined by the industry characteristics! are
focusing on cost leadership as their main strategy. Aut at the same time! they are also
focusing on creating "alue through differentiation in their offerings. This is more
applicable in the specialty therapeutic areas such as 8C- and 8;-.
,ergers and (c1uisitions is a unanimous choice for the pharma companies to gain access
in the domestic as well as in the international markets around the world. The rationale of
ac1uisitions is to ha"e an easy access to international markets with already established
marketing and distribution networks.
Aut! the booming generics sector also poses a few challenges and issues. The branded
drugs in the market are likely to face sufficient price erosion! which will reduce the
margin! and hence the profitability of the companies.
,oreo"er! though there are a number of drugs going off-patent in ##6 including a few
blockbusters! it would be interesting to obser"e how Indian companies consolidate this
0%
generic opportunity! particularly when dollar depreciation is likely to hit their profit
margins! which may further erode by intense generic competition in the B-.
Further! 8hina might pose a threat to the Indian companies in terms of stiff competition.
Eith skilled manpower! access to re1uired capital and a dominant manufacturing sector!
the competiti"e ad"antage of 8hina cannot be underestimated.
Aut! with the tide relati"ely firmly in fa"or of generics! the Indian pharmaceutical
companies with their robust product pipeline and ability to pro"ide products at cost-
competiti"e prices will definitely hold an edge. The company which has got a strong
*34 support and access to contemporary technologies will make the most of the
opportunities that lie ahead.
06