MANAGEMENT DISCUSSION AND ANALYSIS Indian Pharma Industry - an overview The Indian pharmaceuticals market is third largest in terms of volume and thirteen largest in terms of value, as per a pharmaceuticals sector analysis report by equity master. The market is dominated majorly by branded generics which constitute nearly 70 to 80 per cent of the market. Considered to be a highly fragmented industry, consolidation has increasingly become an important feature of the Indian pharmaceutical market. India has achieved an eminent global position in pharma sector. The country also has a huge pool of scientists and engineers who have the potential to take the industry to a very high level. Market Size The Indian pharmaceutical industry is estimated to grow at 20 per cent compound annual growth rate (CAGR) over the next five years, as per India Ratings, a Fitch Group company. Indian pharmaceutical manufacturing facilities registered with US Food and Drug Administration (FDA) as on March 2014 was the highest at 523 for any country outside the US. We expect the domestic pharma market to grow at 10-12 per cent in FY15 as compared to 9 per cent in FY14, as per a recent report from Centrum Broking. The domestic pharma growth rate was 11.9 per cent in October 2014, highlighted the report. Gujarat clocked the highest growth rate in pharmaceuticals market at 22.4 per cent during November 2014, surpassing the industry growth rate, which grew by 10.9 per cent, as per data from the market research firm AIOCD Pharma softtech AWACS. Also, growing at an average rate of about 20 per cent, India's biotechnology industry comprising bio-pharmaceuticals, bio-services, bio-agriculture, bio-industry and bio informatics may reach the US$ 7 billion mark by the end of FYI5, according to an industry body. Bio pharma is the largest sector contributing about 62 per cent of the total revenue, with revenue generation to the tune of over Rs. 12,600 crore (US$ 2.03 billion). The bio-pharma sector comprises vaccines, therapeutics and diagnostics. Investments The Union Cabinet has given its approval to amend the existing FDI policy in the pharmaceutical sector in order to cover medical devices. The Cabinet has allowed FDI up to 100 per cent under the automatic route for manufacturing of medical devices subject to specified conditions. The drugs and pharmaceuticals sector attracted cumulative foreign direct investment (FDI) inflows worth US$ 12,813.02 million between April 2000 and December 2014, according to data released by the Department of Industrial Policy and Promotion (DIPP). Government Initiatives The Addendum 2015 of the Indian Pharmacopoeia (IP) 2014 is published by the Indian Pharmacopoeia Commission (IPC) on behalf of the Ministry of Health & Family Welfare, Government of India. The addendum would play a significant role in improving the quality of medicines which in turn promote public health and accelerate the growth and development of pharma sector. The Government of India has unveiled 'Pharma Vision 2020' aimed at making India a global leader in end-to-end drug manufacture. It has reduced approval time for new facilities to boost investments. Further, the government has also put in place mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to address the issue of affordability and availability of medicines. Romania is keen to tie up with the Indian pharmaceutical companies for research and develop new drugs. "Romania will collaborate with India for license acquisition to sale India's drugs in Europe," said Mr Mario Crute, Counselor in Ministry of health in Romania at GCCI. The country will tie up with the Indian pharmaceutical companies for research and develop new drugs. Some of the major initiatives taken by the government to promote the pharmaceutical sector in India are as follows: • Indian and global companies have exbrssed 175 investment intentions worth X 1,000 crore (US$ 161.78 million) in the pharmaceutical sector of Gujarat. The memorandums of understanding (MoUs) would be signed during the Vibrant Gujarat Summit. • Telangana has proposed to set up India's largest integrated pharmaceutical city sbrad over II,000 acres near Hyderabad, complete with effluent treatment plants and a township for employees, in a bid to attract investment of Rs. 30,000 crore (US$ 4.85 billion) in phases. Hyderabad, which is known as the bulk drug capital of India, accounts for nearly a fifth of India's exports of drugs, which stood at Rs. 90,000 crore (US$ 14.56 billion) in 2013-14. Road Ahead The Indian pharma market size is expected to grow to US$ 85 billion by 2020. The growth in Indian domestic market will be on back of increasing consumer spending, rapid urbanisation, and raising healthcare insurance and so on. Going forward, better growth in domestic sales will depend on the ability of companies to align their product portfolio towards chronic therapies for diseases such as such as cardiovascular, anti-diabetes, anti-debrssants and anti-cancers are on the rise. Moreover, the government has been taking several cost effective measures in order to bring down healthcare expenses. Thus, governments are focusing on speedy introduction of generic drugs into the market. This too will benefit Indian pharma companies. In addition, the thrust on rural health programmes, lifesaving drugs and brventive vaccines also augurs well for the pharma companies. Pharmaceutical Exports India is one of the fastest-growing pharmaceutical markets in the world and has established itself as a global manufacturing and research hub. A large raw material base and the availability of a skilled workforce give the industry a definite competitive advantage. Highlights • The Indian pharmaceutical industry was estimated to be worth US$ I2 billion in 20I3 and is expected to touch US$ 100 billion by 2025. • Globally, India ranks third in terms of volume of production and fourteenth largest by value and is also expected to move up to eleventh place by 2017. • Indian pharma sales stood at US$ 22.6 billion in 2012 and is expected to register US$ 27 billion by 2016 growing at a rate of 14.4 percent. • The domestic pharma sector is witnessing strong growth due to higher penetration in tier-II and tier-III cities and greater focus on the largely-untapped rural market. Key Markets and Exports • India exports to more than 200 countries; its share of exports is expected to grow manifold. • Pharmaceutical exports from India grew at a rate of 1.2 per cent to reach US$ 14.84 billion in 2013-14. • The US is the prime importer of pharmaceuticals from India and accounts for nearly 25 per cent of Indian pharmaceutical exports, followed by the European Union and Africa at second and third positions respectively. • The export of bulk drugs continue to grow to regulated markets and is supported by India's existing foothold in semi-regulated market. References: Consolidated FDI Policy, Department of Industrial Policy & Promotion (DIPP), Press Information Bureau (PIB), Media Reports, Pharmaceuticals Export Promotion Council BUSINESS REVIEW Gufic is one of the most respected names in India's specialty pharmaceutical business marked by a history of industry out performance. • Total revenues of the Company increased by 22.98% • Sales of Formulation Division increased by 28.39% • Sales of Consumer Division increased by 37.07% |