strategic analysis of the indian pharmaceutical contract manufacturing marketfinal ppt
DESCRIPTION
The Indian Pharmaceutical CMO market has been analyzed and assessed with respect to APIs and finished dose formulations (solids, liquids and injectables). Strategic recommendations for the success of market participants have been provided.TRANSCRIPT
Strategic Analysis of the Indian Pharmaceutical Contract Manufacturing
Market
Presenting Opportunities for Market Share Gain
Aiswariya ChidambaramSenior Research Analyst - Healthcare
Areas of Contract Manufacturing
Indian Contract Manufacturing Market Value Chain
25%
15%20%
55%
15% 15%
0%
10%
20%
30%
40%
50%
60%
Discovery API development
Dodage development
API manufacturing Dosage manufacturing
Packaging
Extent of Outsourcing in Each Area of the Value Chain
Exte
nt
of
Outs
ourc
ing
Outsourced Core Functions
Outsourcing Trends
Increase in outsourcing of core functions
Late life-cycle outsourcing – API manufacturing represents the highest share
Drug discovery, development activities and dosage manufacturing – potential future areas
Increase in outsourcing of core functions
Late life-cycle outsourcing – API manufacturing represents the highest share
Drug discovery, development activities and dosage manufacturing – potential future areas
Traditional Formulation
Cluster
Traditional Formulation
Cluster
Emerging Bulk Drugs
Cluster
Emerging Bulk Drugs
Cluster
Emerging Formulation
Cluster
Emerging Formulation
Cluster
Traditional Bulk Drugs
Cluster
Traditional Bulk Drugs
Cluster
GOAMAHARASHTRA – Mumbai, PuneANDHRA PRADESH - Hyderabad
GOAMAHARASHTRA – Mumbai, PuneANDHRA PRADESH - Hyderabad
ANDHRA PRADESH - VisakhapatnamANDHRA PRADESH - Visakhapatnam
HIMACHAL PRADESH – BaddiUTTARAKHAND - Pantnagar, Haridwar
HIMACHAL PRADESH – BaddiUTTARAKHAND - Pantnagar, Haridwar
GUJARAT – Ahmedabad, Ankleshwar, Vapi, Vadodara
MAHARASHTRA – Mumbai, Tarapur, Aurangabad, Pune
ANDHRA PRADESH – Hyderabad, MedakTAMILNADU – Chennai PONDICHERRYKARNATAKA – Mysore and BangaloreGOA - Panaji
GUJARAT – Ahmedabad, Ankleshwar, Vapi, Vadodara
MAHARASHTRA – Mumbai, Tarapur, Aurangabad, Pune
ANDHRA PRADESH – Hyderabad, MedakTAMILNADU – Chennai PONDICHERRYKARNATAKA – Mysore and BangaloreGOA - Panaji
Contract Manufacturing Market—Key Indian Hubs
Contract Manufacturing Market—Benefit Analysis
50
25
25
3
10
5
15
7
United States
India
Raw Materials Manpower Depreciation Other Site Exp
Percentage points comparison with U.S.
Manufacturing Cost Arbitrage, India, 2010
The United States
The United States
ChinaChina
India – Non-
USFDA
India – Non-
USFDAIndia – USFDA
approved
India – USFDA
approved
EuropeEurope
Percentage points comparison with U.S.
Cost Comparison, India, 2010
100
95
70
66
22
7
4
United States
Germany
Italy
United Kingdom
Poland
India
China
Percentage points comparison with U.S.
Labor Cost Arbitrage, India, 2010
Low-cost manufacturing hubs
Cost of manufacturing 60 percent lesser than the
United States
Labor is the main source of cost arbitrage
Low-cost manufacturing hubs
Cost of manufacturing 60 percent lesser than the
United States
Labor is the main source of cost arbitrage
Contract Manufacturing Market—Cost Arbitrage
5
8
10
25
27
55
119
Hungary
Israel
Taiwan
Spain
China
Italy
India
Number of U.S. FDA-approved Facilities, Global, 2010
Contract Manufacturing Market—U.S. FDA-approved Facilities
India not only offers cost competitiveness, but
also ensures product quality
More than 119 U.S FDA approved facilities in
2010 – ranks second after the U.S
GMP compliant and cater to international
standards
India not only offers cost competitiveness, but
also ensures product quality
More than 119 U.S FDA approved facilities in
2010 – ranks second after the U.S
GMP compliant and cater to international
standards
DMF Filing Trend by DMF Type, Global, 2008-2010 DMF Filing with U.S. FDA, India, 2000 - 2010
0
100
200
300
400
500
600
700
800
2008 2009 2010(As on March10,2010)
786710
129
236
155
8578114
1116 20 4
No
. of D
MF
s fi
led
Type II Type III Type IV Type V
Year
271 294 321
455380 365
736 760799
1131
1021 1024
3739 40 40
37 36
10
15
20
25
30
35
40
45
0
200
400
600
800
1000
1200
2005 2006 2007 2008 2009 2010
% o
f DM
Fs
fro
m In
dia
No
. of D
MF
s fi
led
DMF Filed, India DMF Filed, Overall % of DMF from Ind ia
• India continues to lead in the number of DMF filings with the U.S. FDA.
• Way ahead of China as well as other Western countries
• Major companies include Dr. Reddy’s Laboratories, Aurobindo Pharma, Sun
Pharmaceuticals, Lupin, Matrix Pharmaceuticals and Orchid Pharmaceuticals.
Contract Manufacturing Market—DMF Filing
China India
EuropeThe United StatesBulk and Sourcing Hub
• Good cost of RM/ early stage intermediates
• Late lifecycle APIs
Scale Manufacturing Hub (API and formulations)
• More than 100 U.S. FDA-approved plants
• High-quality managerial
Quality assurance •
Strong API and
formulations capability
Early Stage and LaunchHub
• R&D expertise and
investments
• Technology capability• Facilities to support
launch• Relationships and track
record
Source: Frost & Sullivan analysis
Source: Frost & Sullivan analysis
Existing Business Model, Global, 2010
Contract Manufacturing Market—Existing Business Model
•
Pre-clinical API
Pre-clinical Formulation Phase-I API Phase-II a
APIPhase-II b
API Phase III API Registration Launch Commercial
Manufacturing
Clinical Trials Formulations
Formulations Development
PRE-CLINICAL DEVELOPMENT CLINICAL DEVELOPMENT COMMERCIALIZATION
FULL-SCALE SUPPLIESEARLY PHASE CUSTOM SYNTHESIS AND FORMULATIONS DEVELOPMENT
DEVELOPMENT PARTNERDEVELOPMENT PARTNER LAUNCH PARTNERLAUNCH PARTNERLIFECYCLE AND
TRANSITION MANAGEMENT
PARTNER
LIFECYCLE AND TRANSITION
MANAGEMENT PARTNER
Prior 20002000-20052005-20102010-20152015 OnwardsAPIs/ Bulk
Drugs
Prior 20052005-20102010-20152015-20202020 OnwardsFormulationsFormulations
Existing Business Model, Global, 2010
Contract Manufacturing Market—Emerging Business Model
Capacity
Reputation/Credibility
Technical expertise
QualityLow
Low High
Low High
2 105 6 8
2 104 6 8
2 104 6 8
Low High
2 104 6 8
High
Personal relationship
Communication
Timely delivery/ Speed
Approved facilities/Regulatory support
Low
Low High
Low High
2 104 6 8
2 104 6 8
2 104 6 8
Low High
2 104 6 8
High
Cost LocationLow High
2 104 6 8Low High
2 104 6 8
Note: Above are the key competitive factors in the selection of a CMO by Pharmaceutical/Biotech companies for contract manufacturing services. The factors are rated on a scale of 1 to 10 with 1 = Low importance and 10 = High importance based on the end-user’s input.Note: Above are the key competitive factors in the selection of a CMO by Pharmaceutical/Biotech companies for contract manufacturing services. The factors are rated on a scale of 1 to 10 with 1 = Low importance and 10 = High importance based on the end-user’s input.
Source: Frost & Sullivan analysis.
Key Competitive Factors in the selection of a CMO
Analytical: Sample Types
Divi’s Laboratory
Ltd.
Piramal Healthcare Ltd.
Jubiliant Organosys
Ltd.
Aurobindo Pharma
Ltd.
Dr. Reddy’s Laboratory
Ltd.
Raw Materials
API Testing
Dosage Form
Cleaning Validation
Intermediates
Company Service Information Comparison
API Types Divi’s Laboratory
Ltd.
Piramal Healthcare Ltd.
Jubiliant Organosys
Ltd.
Aurobindo Pharma
Ltd.
Dr. Reddy’s Laboratory
Ltd.
Small Molecules
Controlled Substances
Custom Organic Synthesis
API - Intermediates
Cytotoxics
Process Development
Company Service Information Comparison (continued)
Formulations List
Divi’s Laboratory
Ltd.
Piramal Healthcare Ltd.
Jubiliant Organosys
Ltd.
Aurobindo Pharma
Ltd.
Dr. Reddy’s Laboratory
Ltd.
Injectable
Oral
Topical
Buccal/ Sub-lingual
Ophthalmic
Antibodies Formulation
Company Service Information Comparison (continued)
Patent Expiry of Blockbuster Drugs WorldwidePatent Expiry of Blockbuster Drugs Worldwide
Interest of Big Pharma Leading to Increased Industry ConsolidationInterest of Big Pharma Leading to Increased Industry Consolidation
Expansion of Manufacturing CapacitiesExpansion of Manufacturing Capacities
New Product Launches/Novel Drug Delivery MechanismsNew Product Launches/Novel Drug Delivery Mechanisms
Increasing Adherence towards an Integrated Business ModelIncreasing Adherence towards an Integrated Business Model
Biologics ManufacturingBiologics Manufacturing
Contract Manufacturing Market – Emerging Trends
Enormous Cost-
saving Benefits
Manufacturing costs
reduced by 40 – 60 %
Patent Cliff
Drugs worth $150 billion
going off patent
globally
Increasing Regulatory
Support
Novel technology,
new pharmaceuti
cal hubs, SEZ policy
Industry Consolidation
Strategic alliances between
Big Pharma
and domestic participan
ts
Limited Technical Know-how
Lack of expertise in sterile products, technolog
y platforms
IPR Protection
Breach of proprietar
y informatio
n
Drivers Restraints
Contract Manufacturing Market—Pushing and Pulling Forces
United StatesSize: $55.78 BGrowth (2011 – 2016): 8.5%
EuropeSize:$36.44 BGrowth: 8.2%
JapanSize:$8.00 BGrowth: 9.2%
IndiaSize:$10.00 BGrowth: 18.5%
ChinaSize:$26.45 BGrowth: 19.4%
Global Generic Pharmaceuticals Market – Patent Cliff
• Currently Indian generics represent 15% of the generics in
the U.S.• With drugs worth $67.50 billion losing patent protection in the
United States, it is expected that Indian companies will capture at
least 30.0 per cent of the replacement generic equivalents
Indian Generics Market – A Snapshot
48%52%
Domestic Sales and Export of Generics, India, 2010
India – primarily a branded generics market with
more than 95% generic penetration
Constitutes 20 – 22% volume share globally
Leading exporter of generics to the tune of $11
billion
Highly fragmented market – more than 20,000
registered units
Big Pharma vying to gain market shares in
domestic market
Price driven; cost pressures fuelling
consolidation
IndiaIndia China
Source: Frost & Sullivan analysis
Focus on:
- Late stage intermediates
- Complex synthetic APIs (Custom Synthesis)
- Dosage
Greater number of U.S FDA plants and DMF filings Large English speaking population TRIPS compliant product patent regime
Focus on:
- Early stage intermediates- Large volume API manufacturing- Expertise in fermentation
Currently lagging behind, expected to rapidly catch up Language barriers Better logistics & infrastructure
China – A Potential Competitor
In the last two years, the drive among multinationals to outsource manufacturing to Indian companies has gained momentum. Although contract manufacturing companies should have been best positioned for these contracts, the multinationals are preferring the Indian generic companies as outsourcing partners.
The key reasons for this are:
•Generic facilities are capable of manufacturing products across various therapeutics segments, unlike the pure play contract manufacturers that develop cost efficiencies through one or two technologies at a time.
•Generic facilities are already running and manufacturing products for less regulated or emerging markets.
•Generic companies are already in compliance with regulations in regulated and semi regulated markets, something that is lacking in pure contract manufacturers.
•Frost & Sullivan, therefore, foresees that pure play contract manufacturers will continue to face hurdles related to scale up and will not be able to effectively compete against the generic companies for strategic tie-ups, as Big Pharma has being showing interest in strategic tie-ups with Indian generic companies (which have their own brands in emerging markets)
Strategic Tie-ups between MNCs and Indian Companies
Source: Assocham, Frost & Sullivan analysis
Contract Research and Manufacturing Services Deals
Source: Assocham, Frost & Sullivan analysis
Contract Research and Manufacturing Services Deals (continued)
Source: Assocham, Frost & Sullivan analysis
Contract Research and Manufacturing Services Deals (continued)
Strategic Deals between MNCs and Indian Companies
Strategic Deals between MNCs and Indian Companies (continued)
80%
20%
APIs and Intermediates Formulations
64%
36%
APIs and Intermediates Formulations
Percent Revenue Split, India, 2010Percent Volume Split, India, 2010
• Outsourcing of APIs for generic drugs is expected to remain high in the future.
• Contract Manufacturing of APIs and intermediates for NCE has started gaining momentum.
• Contract manufacturing of NCE formulations is expected to begin during the forecast
period.
Indian Contract Manufacturing Market Overview (continued)
Active pharmaceutical ingredients (APIs) or bulk drugs are defined as the active part of a drug, which is responsible for its medicinal property.
Asia Pacific, particularly India, is a favored market for API outsourcing, due to low cost benefits, complex synthetic abilities, and GMP compliance.
Every company currently involved in the contract manufacturing segment, also has some presence in the API segment due to the amount of manufacturing outsourced to this segment.
In terms of volume, 80-85 percent of the entire outsourcing in contract manufacturing takes place in the areas of APIs and intermediates.
Contract manufacturing for API, which is outsourced to India, is mainly for generic formulations.
However, as the Indian contract manufacturing segment market matures, contract manufacturing for New Chemical Entities (NCEs) will be outsourced to India.
Indian contract manufacturing organizations are already being used by many MNCs as suppliers of advanced intermediates.
China is a major competitor in the Asian market. However, is still a supplier of low-cost off-patent molecules and low-end intermediates.
However, the threat from the Chinese suppliers for these products and higher-end ones is only bound to increase as the Indian contract manufacturing segment market matures.
The trend is shifting toward outsourcing the manufacturing of advanced APIs, such as biotech-based APIs, biopharmaceuticals and advanced bulk drugs required for the production of dosage forms of new chemical entities in high-end therapy areas, such as oncology.
Source: Frost & Sullivan analysis
APIs and Intermediates—Overview
• Early market growth stage• Limited shelf-life and storage
issues• Require high investments and
specialised technical know-how
• Increasing focus on biologics• Expected to witness fastest
growth (29.5%, 2011 – 2017)
• More than 70% of Indian CMOs have expertise
• Patient compliance and prevalence of self-prescription.
• Low manufacturing costs and lower degree of technical change
• Expected to remain the key segment (25.4%, 2011 – 2017)
• Low-value business
• Majority pediatric and baby-boomer end-users
• High transportation and wastage costs
• Likely to present relatively lesser growth prospects (12.5%, 2011 – 2017)
Formulations —Overview
-range of services control the market
-Number of CMO’s - high-Suppliers can forward integrate-Volume benefits are available
- Moving up the value chain
Becoming more specialized and niche
Power of Suppliers
-End users have bargaining power-Buyer concentration vs. industry is high
- Buyers in need due to generic penetration and pressure on margins
Power of Buyers
- Low entry barriers in case of toll - Government policies are supportive - Economies of scale & scope exits
- IPR strengthening
- Technology and regulatory strength
Threat of New Entrants
-Easy access to cheap technology
- Virtual pharma model - Wider product range and
Threat of Substitutes
- Consolidation likely to increase
Low Impact
Medium Impact
Industry Rivalry
Traditional
Emerging
- Top participants, control the
- High toll manufacturing CMOs- Suppliers can forward integrate
- Volume benefits are available-
-
Power of Suppliers
- End users have bargaining power
- Buyer concentration versus industry is high
-
Power of Buyers
- Low entry barriers
Supportive Government policies -
Economies of scale and scope
-
Threat of New Entrants
- Easy access to low – cost
technology and skilled labor
-
-
Threat of Substitutes
-
Low Impact
Medium Impact
Industry Rivalry
Traditional
Emerging
-
market concentration
market
services
Contract Manufacturing Market: Porter’s Five Forces Model for Non-sterile Formulation, India, 2010
Non-sterile Formulation—Porter’s Five Forces Model
Contract Manufacturing Market: Porter’s Five Forces Model for Sterile Formulation, India, 2010
Power of Suppliers
- Number of suppliers is high
- Raw material cost is low
- Difficulty to forward integrate
- High competition exists
Threat of New Entrants
- High entry barriers
- Stringent and time-consuming
regulatory processes
- Rising attractiveness in terms of
market size and profitability
Threat of Substitutes
- Access to technology
- High capital investment
- Complex manufacturing process
- Availability of limited capacity
Power of Buyers
- Less bargaining power
- Average buyer concentration vs. industry
- Buyers in need due to new sterile product
approvals
- Expanding role of generic pharmaceuticals
Industry Rivalry
- Very few reliable companies
- Low competition
- Outsourcing trend is accelerating
- Competition is on the basis of
technology, quality and capacity
-
Low Impact
Medium Impact
Traditional
Emerging
Sterile Formulation—Porter’s Five Forces Model
Source: Frost & Sullivan analysis
Emerging Opportunity Areas
Innovation
Funding
Expertise
Regulatory compliance
“Any sufficiently advanced technology is indistinguishable from magic”
– Arthur C. Clarke
Technology – The Powerful Tool
Larger companies - complex technologies such as combination drugs and controlled releases.
Foray into therapeutic segments, which have difficult manufacturing processes and less competition.
Focus on cost, quality of manufacturing and complex chemistry skills.
Commoditized generic market - focus on complex technologies and can command premium pricing.
Indian Companies Focussed on Complex Technologies
TherapeuticsDevelopment of RNA-i based therapeutics
Development of anti-sense based therapeutics Recombinant protein therapeutics
Monoclonal antibodies
GovernmentRegulatory bodies like EMEA to drive new
product and technology introduction
Increase in approval rates of new biopharmaceuticals and biosimilars.
GlobalizationConsolidations, mergers, acquisitions
Opening and expansion of Asian marketsGlobal capital markets
CMOs moving up the value chain
– consolidating horizontal spread,
expanding vertical spread
“A-one-stop-shop” offered by
CMOs, promoting a complete
portfolio of products and
comprehensive range of services.
Shift from a purely transactional
relationship to a risk-sharing model
aligned with customer priorities
Large CMOs moving into niche
areas of manufacturing.
Development of virtual pharma
Transition from “small molecule
blockbuster” model to
biopharmaceutical model“ The best way to predict the future is to create it” – Peter Drucker
What Can be Expected in the Future?
Customer-centric range of services
Staying ahead of industry curve by building brand
preference
Strengthened relationship for longevity
Reacting to Change
Anticipating Change
Leading the
Change
• Develop drugs for key indications.
• Customize according to customer needs and preferences.
• Comply with new government policies.
• Analyze prospects for market globalization.
• Research customer needs, preferences and expectations.
• Monitor new technological developments to predict future.
• Foresee capacity requirements.
• Pioneer new and better technologies.
• Introduce innovative products, that open new market opportunities and spur creation of whole new industries.
• Seek to set industry standards.
• React and respond as needed.
• Defend and protect company’s position in the market.
• Plan ahead for future changes.
• Invest in R&D.
• Instill competitive capabilities.
• Improve product line.
• Strengthen distribution.
• Seize the offensive.
• Be the agent of industry change.
• Influence rules of the game.
• Force rivals to follow.
Strategic Posture Actions Strategy
“ Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy
Source: Frost and Sullivan
Facing the Change – Strategic Recommendations
• Outsourcing of non-core activities such as manufacturing of intermediates and APIs to low-cost
destinations such as India is gaining momentum for pharma MNCs as they focus on their core R&D and
brand building business.
• Indian companies have strengthened their presence in the market and developing technical expertise in
niche segment (sterile drugs, cytotoxics, lyophilization, etc.) that offer higher margins and higher entry
barriers. Acquisition of foreign facilities would accelerate growth and foster better relationships with
innovator companies, though generating adequate return from such investments can be difficult.
• In the long run, companies, which provide integrated drug development, research, clinical trial and
manufacturing outsourcing services, will prove to be one stop shops catering to all the needs of the
innovator companies resulting in long-term partnerships and better customer franchise.
• The domestic market offers significant opportunities for CRAMS providers, as increasingly larger
domestic companies are outsourcing manufacturing and packaging services to these participants in
order to focus on marketing and sales, and new drug development. Their ability to offer value-added
services such as drug delivery systems, combination drugs further leverages their value proposition.
• Overall, the outlook for Indian CRAMS appears to be healthy, supported by increasing outsourcing of
manufacturing and high-end research activities.
Conclusion
About Frost & Sullivan
Our Industry Coverage
Our Global Footprint 40+ Offices
Tel: 61606666 Fax: 24314264Email: [email protected]
Contact Information
State your need, we would be happy to serve you…
www.frost.com
Frost & Sullivan (I) Pvt. Ltd.7th Floor, Karumuttu Centre,498 Anna Salai, NandanamChennai - 600035
AISWARIYA CHIDAMBARAMSenior Research Analyst - Healthcare
Your Growth Partner