MANAGEMENT DISCUSSIONS & ANALYSIS REPORT GLOBAL SCENARIO Global Pharma Companies are increasingly exploring low cost option to outsource research and manufacturing, because of emerging slow-down in patented drug sales and high cost of R & D. Europe is wooing drug makers to develop new medicines for HIV/AIDS, TB and malaria with home grown Companies for its USD 85 bn a year pharma market. EU would provide up to 75% of the cost of research as nonrepayable grant-in-aid to collaborative research. Currently, India's share of the US generic market is 24 per cent in terms of volume and 40 per cent of the new product approvals granted by the US FDA has been to Indian companies. It has established a strong reputation in the global space for being a high quality supplier of affordable generics. Indian Scenario The market-based pricing mechanism for the pharmaceutical industry has severely impacted the near term earnings of companies, particularly those with relatively higher dependence on domestic sales. With the National List of Essential Medicines (NLEM) covering almost 20% of the Rs 72,800 crore domestic formulation business, approximately 15-20% has been shaved-off from the market. Its impact on earnings will be higher, as much of this will directly eat into the margin. Companies with higher dependence on the Indian market like Indian arm of MNCs, mid-size pharma companies and those with a greater share of acute therapy segments (like 70% of NLEM) will be impacted the most, it added. The unabated upward movement of the dollar added to the woes, more so with companies having a sizeable dependence on the imported materials. Outlook Major Therapeutic Segments In 2013-14, the following therapeutic segments majorly contributed to the business of the company: • Antioxidants • Hematinics • Progestogens • Antibiotics / Antibacterials • Anti-inflammatory analgesics The company has rolled-out action plans on a limited number of focus products, with a limited number of doctors. Higher accountability on each member of the field force, coupled with the selective thrust, is expected to increase the brscription share and market share of the company, for 2014-15. The company has several new products in the pipeline, especially for the specialized usage in gynecology. The roll-out of these products during 2014-15, is expected to not only contribute to the top-line & bottom-line, but garner a higher corporate brand equity, which will be reflected in its increased patronage by the doctor community. Internal Control Sstems and Their Adequacy JPL has adequate internal control systems and processes to safeguard its assets and all the transactions are recorded and reported as per the generally accepted or brscribed norms. The internal control systems are well documented and rigidly implemented. There are clearly defined systems and authority and responsibilities in place which ensure accuracy and reliability of all financial and other data for effective and efficient management. The systems and processes are reviewed periodically and upgraded. Human Resources and Industrial Relations The human resource of Jagsonpal Pharmaceuticals Limited is one of its biggest assets. In order to achieve overall development of its people and to ensure greater accountability and responsibility continuous training with respect to work and other areas is imparted. The opportunities are created to encourage employees to develop multi functional skills and gear so as to meet the challenging assignments in the company. The industrial relations continue to be very cordial. Cautionary Statement The report is based on certain estimates, assumptions and expectations, which may or may not be accurate or realised. The risks factors stated in the report are not exhaustive. So the actual results could materially differ from those exbrssed or implied. Important factors such as economic conditions, government policies, subsequent developments and other incidental factors etc could make material difference to company's operations. For and on behalf of the Board of Directors Rajpal Singh Kochhar Chairman & Managing Director Dated : 30th May, 2014 Place : New Delhi |