INDIA’S PHARMA SECTOR – GROWING AT BREAKNECK SPEED
Indian pharma industry is on the threshold of becoming a major global player with rapid growth and expansion. It is expected to grow phenomenally over the next decade. But US restrictions could be a dampener and impact exports and the case in point is the US mandating manufacture of Active Pharmaceutical Ingredients (APIs) locally. However a PwC report suggests Indian pharma sector will overtake China by being the fastest-growing pharmaceutical nation in the globe over the next five years.
India’s pharma sector has been growing at almost 15 per cent annually over the past five years and if all goes well the pharmaceuticals industry could be one of the fastest-growing sectors in India for the next few years.
Most pharma multinationals with strong presence in India too want to strengthen their base further over the next few years even as Indian pharma majors have consistently expanded in recent years, both in India and abroad.
According to Sujay Shetty, leader, pharma life sciences, PwC India, pharmaceutical companies will continue to grow both organically and inorganically through alliances and partnerships in India.
“They will continue to focus on improving operational efficiency and productivity,” he says in a recent report. “Developments in health insurance, medical technology and mobile telephony can help in removing financial and physical barriers to better healthcare access in India.”
A recent survey by QuintilesIMS, a leading international firm which provides integrated information and technology solutions to the healthcare sector, India will be the sole ‘shining star’ as a major global player by recording a double-digit growth. And for the first time India will overtake China and maintain its momentum as fastest-growing pharmaceutical nation in the next five years, it says.
The PwC report notes that India will rank among the top-10 global markets by 2020. “The Indian pharmaceuticals market increased at a CAGR of 17.46 per cent during 2005-16 with the market increasing from US$ 6 billion in 2005 to US$ 36.7 billion in 2016 and is expected to expand at a CAGR of 15.92 per cent to US$ 55 billion by 2020.
“By 2020, India is likely to be among the top three pharmaceutical markets by incremental growth and sixth largest market globally in absolute size. India’s cost of production is significantly lower than that of the US and almost half of that of Europe. It gives a competitive edge to India over others.”
With 70 per cent of market share (in terms of revenues), generic drugs form the largest segment of the Indian pharmaceutical sector. India supplies 20 per cent of global generic medicines market exports in terms of volume, making the country the largest provider of generic medicines globally and expected to expand even further in coming years. Over the Counter (OTC) medicines and patented drugs constitute 21 per cent and 9 per cent, respectively, of total market revenues of US$ 20 billion.
The Department of Industrial Policy and Promotion and the Department of Pharmaceuticals, in a report in January noted that the country’s pharma sector grew by almost 30 per cent in 2015-16 to top the `2 trillion-mark. The industry also attracted FDI of $2.25 billion between April 2014 and March 2016.
According to the two government departments, India is one of the largest producers of pharmaceutical products and a leading player in the global generics market, exporting nearly 50 per cent of its production. Indian drugs are exported to more than 200 countries in the world, with the US as the key market. Generic drugs account for 20 per cent of global exports in terms of volume, making the country the largest provider of generic medicines globally and expected to expand even further in coming years, says the report.
Importantly, exports (not just drugs and pharmaceuticals, but also fine chemicals) added up to more than `1 trillion in 2015-16. India allows up to 74 per cent FDI through the automatic route for brownfield (urban projects which have had previous development on them) pharmaceutical projects; anything above that needs official approval.
Of course, the rapid growth of the past few years could face bottlenecks in coming months if the new US President, Donald Trump decides to go ahead with his much hyped border adjustment tax (BAT) which some Republicans are demanding.
American companies would not be taxed under the proposed new tax for profits from exports, but if they were to produce stuff abroad (including pharmaceuticals); their costs would not be eligible for tax deductions.
Though Trump has called BAT “too complicated” raising hopes for Indian players the fact remains that the US is seeking a level playing field with two pharma majors China and India. The new president would like to eliminate any tax incentives that would move American jobs or research or headquarters overseas as a means to protect local jobs.
About 30 per cent of the drugs consumed in the US are accounted for by supplies from Indian pharma majors. Top Indian generic drug makers such as Sun Pharma, Lupin and Glenmark export about 40 per cent of their total sales. India is the largest supplier of generic drugs globally.
In fact, India is the world’s largest exporter of generic drugs, accounting for a fifth of the global market. China, on the other hand, has a mere 1.5 per cent share in the generic drugs worldwide.
The Indian pharma sector is expanding rapidly not just because of exports, but also because of the growing demand for anti diabetic and cardiac care medicines. India also has the world’s largest number of diabetics. International drug makers including Pfizer, Merck, Eli Lilly, GlaxoSmithKline, Sanofi and AstraZeneca are targeting India to capture large chunk of the market.
India’s pharmaceutical sector will see dramatic changes over the coming years and both domestic and international companies are preparing to take on the new challenges. Market analysts expect several mergers and acquisitions (M&A) in the pharma sector over the next few years.
Words: Tillana Desai
Could you tell us about your company and its core areas of focus?
We started in early 2005 as a family concern with a small budget and before long we built a strong team. In 2007 our plant in Himachal Pradesh was built. Then my father, a family physician for the past 42 years, joined us in 2012 and today we are 2,150 strong with presence across the nation.
We worked on prescriptive medicines with a little bit of international reach. But mainly we are a key domestic player. In 2016 we had a pan-India presence and were ranked amongst top 50 pharma companies.
The four divisions include Pioneer, Xemx, Aarush and Wellness. Pioneer focuses on pain; Xemx on neuropathy; Aarush on women’s healthcare and Wellness on cardiology.
In cardio-diabetes we are working in two segments: essential and non-essential medicines. Essential medicines are for diabetes, hypertension, or lipid while the non-essentials are for obesity, lifestyle-oriented diseases. Obesity is not a disease per se but a lifestyle disease.
We have tied up with two to three European companies who have innovative molecules to treat obesity. They have patented the product which is marketed by us in India. Medicines for obesity, diabetic, neuropathy are innovative medicines.
Are you into the infertility segment?
Are you into the infertility segment?
Yes. For women’s healthcare we started Aarush division in 2008 with the presumption that infertility is a lifestyle disease due to late marriages, food habits and stress.
With Aarush, we are now among the top three companies in infertility. Infertility is an issue where the daughter won’t discuss with father, a subject discussed between couples or mother and daughter. It is a silent problem. We are very successful in this segment.
PCOS or Polycystic Ovary Syndrome is a common hormonal condition resulting in infertility. Cyst develops in fallopian tubes and to tackle this we have a wonderful product Trazer F Forte which rectifies vitamin D deficiency, poor absorption of food and folate deficiency.
Any expansion plans?
Segments such as dermatology and gynaecology need to be promoted as these are neglected areas in India. These two segments came to prominence because of Swachh Bharat campaign that increased overall awareness especially among the rural population.
Overseas we are looking at the US. Our hospitality sector there is quite strong and this could help us to make further forays. Agreed Donald Trump is espousing protectionism and the US market may look at imports differently. If that is so any acquisition may turn expensive. Only time will tell.
Could you tell us about your growth strategy?
We intend to grow both organically and inorganically in APIs as well as in formulations but it must be steady growth based on technology with distinctive approach and purpose.
Sunways about CSR too: Firaq Shroff
As manufacturer of sterile ophthalmic and ENT products what is your share of the market.
I am third generation Shroff and our prime focus was ophthalmology. Yes, we forayed into niche segment of ENT and introduced a few unique products which were not available in the domestic market. Being one of the top nautch players in eye segment we have our own fair share of the market.
Your father saw Ophthalmology as a niche market. How has the business developed under you ever since?
With 60 years’ experience in the field of ophthalmological products and having achieved many a milestone, SUNWAYS pursues a new vision in the globalised environment.
With newer developments and changes in the market scenario we tied up with Rohto Pharmaceuticals of Japan. Rohto is one of the biggest player in the international market for OTC eye drops. My ardent desire is taking Sunways to newer heights honouring grandfather and father’s wishes. Sunways continuously provides better products and services to all. It is part of our CSR.
Over the years, India has seen many players in Ophthalmology market. How competitive is your product from your nearest competitor? Protecting one’s eyes is one field where a poor man worries most. Is he able to access your products at affordable rate?
As I said vision of grandfather and father guides my company. Our quest in bringing new product range to our eye and ENT segments never ending. There is no laxity as far as pursuing our goals.
Are there diversification plans? Your share in the ENT market?
Our tie up with Rohto pharmaceuticals of Japan for our Dholka, Ahmedabad plant is part of the overall diversification strategy. Rohto is one of the biggest player in OTC eye drops and we have some more plans on anvil. We are strengthening our base in ENT market.
You acquired in quick succession three plants in Gujarat. One is the Sterile Manufacturing Plant at Ahmedabad, second Oral Liquid Manufacturing Plant in Sarigam and the third at Dholka which manufactures sterile preparations. How important were these companies? Did they change bottom-line?
These companies are important to our growth strategy. Sunways also introduced range of Vera Plugs in association with the US-based MNC Lacrivera, Yes, it did to large extent.
You father Kantilal Shroff was a visionary and a first-generation entrepreneur. As inheritor of his legacy what changes you foresee to enhance the growth factor?
I consider grandfather Kantilal Shroff’s attempt in setting up Sunways as a path-breaking effort. His commitment and vision to provide vital service to healthcare in India in post-Independence period is exemplary. His spirit still lives on guiding us in Sunways.