report mor pharma industry final cadila

8/16/2019 Report MOR Pharma Industry Final CADILA

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IndianPharmaceutical Sector

A Study on

Cadila HealthCareLimited

By,

Abinash

Biswal

MBA (F&B ! I"th

Batch, #ct$%'%

Pae 1 o) 11


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CONTENTS

'*

Introduction+*****************************************************************************************************************************************

%* Mar-et.ynamics**********************************************************************************************************************************

* /o0ernment

Initiati0es*************************************************************************************************************************

1* Com2anies understudy+***********************************************************************************************************************

1*'* Cadila HealthCare Limited*************************************************************************************************1

3* Com2any Per)ormance At a /lance*****************************************************************************************************3

4* 5ey 2er)ormance 6atios

***********************************************************************************************************************3

7*

Methodoloy+ ***************************************************************************************************************************************3

8* 9uanti:cation o) Ma;or6is-s*************************************************************************************************************'


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Pae 2 o) 11


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1. Introduction:

Indian Pharmaceutical industry is worth INR 720 Billion and is growing at an impressive rate of

7 % C!R for the past five years" It is the world#s $th largest pharma player &y value and thirdlargest &y volume" 'he sector is highly (nowledge &ased and its steady growth is positively

affecting the Indian economy"

s per a ma)or study &y glo&al management and consulting firm* +c,insey - Company* India.s

pharmaceutical mar(et e/perienced a &oom* reaching 1 $3 &illion in 20$2 from 14 &illion

in 2005" 'he report further states that the Indian pharmaceutical mar(et will &e the si/th largest

in the world &y 2020" India is predominantly a generic mar(et and most of the Indian players

have their e/pertise in generic segment" +ore than half of the total revenue of Indian Pharma

players is through e/ports"'he report also suggests that India#s pharmaceutical sector will touch

1 5 &illion &y 2020" 'he rise of pharmaceutical outsourcing and investments &ymultinational companies 6+NCs* allied with the country.s growing economy* committed health

insurance segment and improved healthcare facilities* is e/pected to drive the mar(et#s growth"

2. Market Dynamics

India currently e/ports drug intermediates* ctive Pharmaceutical Ingredients 6PIs*

8inished 9osage 8ormulations 6898s* Bio:Pharmaceuticals* and Clinical 1ervices across the

glo&e"

'he e/ports of pharmaceuticals from India grew to 1 $"4 &illion in 20$2;$< from 1

4"2< &illion in 2004;07* C!R of around $5"2 per cent"

'he +inistry of Commerce has set a target for Indian pharma sector e/ports of 1 25 &illion

&y 20$ at an annual growth rate of 25 per cent"

3. Government Initiatives

'he !overnment of India has allowed $00 per cent 89I through automatic approval route in

the new pharma pro)ects &ut the foreign investment in the e/isting pharma companies needs

approval from 8oreign Investment Promotion Board 68IPB" 'he Ca&inet has approved

Pharmaceuticals Purchase Policy 6PPP for $0< medicines to ensure optimum utilisation of the

installed capacity of the pharma central pu&lic sector enterprises 6CP1=s and availa&ility of

>uality medicines at low prices to the masses* &esides ensuring drug security of the nation"

'he !overnment of India has made ta/ &rea(s availa&le to the pharma sector and a weighted ta/

deduction of $50 per cent for any R-9 e/penditure incurred" It has also introduced $? dedicated

special economic @ones 61=A to help stimulate pharma sector investment across the country"


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. Com!any under study:

Indian Pharma sector is highly fragmented with a&out 2000 companies in organi@ed as well as

unorgani@ed players put together" 'he top


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Ris( Profiling

International mar(ets account for more than half of the total revenues of Indian pharma

players* and revenues from these mar(ets are e/pected to grow faster than revenues from the

domestic mar(et"

owever* international mar(ets pose increasing challenges &ecause of evolving healthcare

regulations* intensifying competition* volatile e/change rates* and lengthening wor(ing capital

cycles"

Fhile players in regulated generics mar(ets are facing severe pricing pressures as a result of

government:led cost:containment measures* intensifying competition* and a more stringent

regulatory environment* players operating in semi:regulated mar(ets have &een e/posed to ris(s

related to sharp volatility in e/change rates and stretched wor(ing capital cycles

=conomy Fide 'esting

=rosion of margins in generics Internationally the acceptance of generics have increased due to

glo&al recessionary atmosphere as generics are much more economical that the original drugs"

'his increase in demands has attracted many large glo&al players to generic space" 9ue to

increased competition it is said that the margins in the generic space is set to come down" 1uch a

situation will affect Indian players adversely as India is one of the largest generic ma(ers in theworld"

Company 1pecific Ris(

Cadila ealthcare

NC= and N991 research re>uire significant investment and a longer gestation period* with low

chances of success* which is determined &y many factors" 'his e/poses the Company to the ris(

of its drug discovery efforts* turning unproductive at any phase"

,ey 8inancial 'rends

nalysisE

CadilaE 8or this the planned cape/ was around 500 cr and has &een funded &y long term loans

from various &an(s and due to which the 9G= ratio has increased"


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Industry Ris(

Increased Competition : 'he &usiness is negatively impacted if innovator pharmaceutical

companies are successful in limiting the use of generics through aggressive legal defense as

well as authori@ed generics deals" In view of the num&er of patent e/piries coming up in the

near future* sales of patent e/piry drugs in the 1 as well as in =urope represent significant

opportunity for all generics and PI manufacturers"

8oreign e/change fluctuations : Being a glo&al company* the income is e/posed to currency

rate fluctuations" In 20$0:$$* the Indian rupee appreciated &y appro/imately % vis:H:vis the 1

dollar* from 7" per 1 for the year ending


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-. uanti/cation o$ Ma0or )isks

'he num&er assigned to the impact on &usiness can &e &oth positive and negative" positive

num&er signifies that the ris( will affect the &usiness adversely and vice versa" By definition ris(

stands for &oth deviation of e/pected outcome that can &e &oth positive as well as negative" 'he

purpose of this study is to analy@e the negative impacts only"

. )isk Miti,atin, Measures National Pharmaceutical Pricing PolicyE Indian players will have to focus more on R-9

capa&ilities and development of new drugs" 'he revenue loss from e/iting products can &e made

up &y introduction of new more efficient drugs"

'ightening regulatory framewor( in western mar(etsE Indian Pharma companies have to

immediately invest in their manufacturing processes to ma(e it more stringent and ensure

complete adherence to international norms" 'he focus of >uality has to &e put in place and fresh

investment has to &e made in machinery enhancement and process control"

Ris( of ConcentrationE 'he Pharma companies should e/pand to developing mar(ets such as

atin merican* frican countries" 'hese mar(ets have evolved at a greater growth rate than the

developed mar(ets" 'his opportunity should &e tapped and the Indian players should e/pand their

presence in these mar(ets as well"

=rosion of margins in genericsE everaging e/tensive e/pertise in generic manufacturing to

control cost and investment in newer machinery to (eep prices under control" Ran&a/y has &een

up grading its machinery and replacing old machinery with &etter and efficient lines to remain

competitive in generic &usiness space" Dther players have to follow the suit to sustain in the

generic mar(et"

Counterfeiting E For(ing closely with the government to impose stricter laws to deter the

practice of counterfeiting" Constantly changing pac(aging of medicines and ma(ing it such that

imitation is not easy" =ducating end users a&out the a&out minute nuances of original drugs &y

use of print and electronic media"

8oreign currency fluctuation ris( E 'hese companies should avoid open position in fore/ and

should hedge their currency ris(s well" 'he e/change rate movements should &e very closely

monitored and a team of e/perts should &e set up to gauge the e/change rates and thus use the

fluctuations to one#s own &enefits" s the components of e/ports in total sales is very high thecost of setting up such a team of e/perts will &e negligi&le compared to the ris( potential"


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D&solesceE 8ocus on R-9E 'raditionally Indian players are not (nown for their R-9

prowess when compared to their glo&al counterparts" 'he glo&al ma)ors in Pharma sector spend

a&out 25 to

report mor pharma industry final cadila

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