Ipm

Indian pharmaceutical market

1. Indian Pharmaceuticals Market

2. Presentation Outline The Indian Domestic Pharma market Future Scope of IPM Indian Pharma Market Segments Rural Markets – The Next Frontier IPM – Challenges & Critical Success Factors

3. Indian domestic pharma market

4. Indian Domestic Market The Indian Pharmaceutical Industry (IPI) is globally the 3rd largest in terms of volume and 10 th in terms of value. More than 24,000 registered units (330 in organized sector) The top ten companies make up for more than a third of the market. The total market size of USD 12.3 billion includes domestic consumption market of 6.0 billion (contributing ~48.6%) and the exports market being 6.3 billion (contributing ~51.4%). India's drugs and pharmaceuticals industry is expected to grow at a (CAGR) of 14 per cent to reach a turnover of Rs 2.91 trillion (US$ 47.06 billion) by 2018. Capable of fulfilling 70% of country’s demands API / Intermediates / Formulation / Capsules / Tablets / Injections etc. Top Indian companies  significant footprint at Global level including markets like US, Europe & Japan .

5. Top 25 companies in IPM Source: AIOCD Oct 14

6. Therapy Areas in IPM Anti infectives is the biggest therapy area. Chronic therapy areas growing at much faster rate. GI, Nutrition, Respiratory, Diabetic, Derma, Ophthal segments are growing at double digits. Source: AIOCD OCT 14

7. Indian Pharma Industry-SWOT

8. Key Recent Trends and Implications Increase Investment & MNC activity Increasing reach in Non-Metro markets Growing Insurance Changing disease profile Healthcare Innovation Shift towards a Networked business model Increasing M&A and Alliances Consolidation in the market Seen as the next volume driver, though costs of operation is high due to poor health infrastructure More number of patients will be coming in for treatment Shift towards biotech & specialty therapies, increased investment inn R&D and acute disease segment will sustain strong growth Use of technology & It for innovation in healthcare delivery e.g. Mobile clinics

9. MNCs vs Indian companies - Business Models

10. Future Scope of IPM

11. Global Pharmaceuticals Market Scenario Dramatic shift in focus towards emerging markets EM growing faster than the leading economies 40% incremental growth from EM in this decade Emerging Markets 1 IMS Health Prognosis, Mar 2010 2.IMS Health Pharmemerging Shake up 2010

12. India – Country profile Republic of India 7 th largest country by area World’s 3 rd largest economy by PPP Currency – Indian Rupee Official languages – Hindi & English 28 states & 7 Union Territories Capital – Delhi Multilingual – Multi-ethnic society Population: 1.2 billion+ @ 1.3% Indexmundi.com, wikipedia.org

13. FUTURE IPM (2020) In pessimistic scenario characterised by regulatory controls & economic slowdown. Growth drivers are Epidemiological factors, Increasing PPP, increasing accessibility, rural penetration. Source: Mckinsey analysis 2020. 2013 Pessimistic case Base case Aggressive case 12.33 $ $ 35 $ 55 $ 70 17% CAGR 14.5% CAGR 10% CAGR

14. Propellant of Growth Population Expansion Growing Middle Class with higher purchasing power Changing Disease Profile Healthcare Infrastructure & Expenditure Healthcare Insurance

15. Population Expansion & Middle class HPP 2 nd most populous country in the world Rapidly Expanding Middle Class (USD 5K – USD 25K) 1/3 rd population expected to join middle class in near future. Population Growth Projections 1 Ascent of Middle Class as % of Population 2 1 ISI analytics 2010 2.Economic Times, PwC analysis

16. Expenditure Break - % of Disposable Income Consistent increasing spend on healthcare IDFC Institutional Securities, Indian Pharma (June 2010)

17. Government has increased health expenditure from 1.4 per cent to 2.5 per cent of GDP by the end of the twelfth Five-Year Plan (2012-2017) Eg . Central Government Health Scheme (CGHS), National Programme for Healthcare of the Elderly (NPHCE), Rashtriya Arogya Nidhi (RAN) and Janani Suraksha Yojana (JSY) Source: EIU Report, Datamonitor , primary interviews, Deloitte Consulting LLP analysis

18. Increase in public spending would lead to more penetration of healthcare opportunities for rural and remote areas Eg . RSBY (  Rashtriya Swasthya   Bima Yojana ) Source: High Level Expert Group on UHC, 2011 Source: Pharma 2020 Mckinsey & company

19. Increase in disposable income will help in larger per capita health care expenditure Rising rural market will increase the volume consumption Source: Pharma 2020 Mckinsey & company

20. Changing Disease Profile Chronic  Increase Ageing Population Lifestyle Diabetes capital Pollution Shift in Disease Profile towards Chronic Acute  Maintained Mass therapy Public hygiene Sanitation IDFC Institutional Securities, Indian Pharma (June 2010)

21. Increasing population as well as increase in geriatric population will thus increase the patient pool Declining Crude death rate will thus result in higher life expectancy Source: Office of the Registrar General and Census Commisioner of India, various years

22. Growing incomes and a faster pace of life, increased sedentary living, high work stress, rising pollution levels and consumption of unhealthy fast food are factors leading to a rise in lifestyle disorders Source: Patel et al., 2011 Source: EIU Report, Datamonitor , primary interviews, Deloitte Consulting LLP analysis

23. India has about 65 million diabetics, will see the number grow to 100 million by 2030 Chronic diseases like cardiovascular disease and diabetes are expected to drive demand for new drugs Apart from nearly 65 million diabetics, India has 77 million pre-diabetics

24. Demand for Oncological product will rise Increased awareness programs by companies and R&D expenditure will help in building the Chronic segment. Source: Takiar et al., 2010

25. Healthcare Infrastructure & Expenditure Healthcare infrastructure Healthcare expenditure 1.5 Mn 2.3 Mn 3.7 Mn ‘10 ‘15 ‘20 Fast expanding Pvt hospitals coupled with significant investment in medical infrastructure (estimated 200 Bn USD) expected to propel the growth of India HC. Telemedicine and usage of web based technology expected to improve health outcomes Np of hospital beds 6.7 Govt spend on HC in USD Bn 2006 2009 11.7 760 940 No of physicians (‘000s) ‘10 ‘20 Govt committed to establish rural hospitals with initiatives like National Rural Health Mission & sponsored programmes like RSBY Govt spend on HC as % of GDP expected to increase to 3% till 2020 7.7 9.2 2007 2008 +18% Share of GDP% 0.84% 0.88% 0.84% 0.93% Source: India Pharma 2020, Mc Kinsey; Overview of Indian Pharma Market, Accenture, Sept 11; Secondary published reports and websites

26. Health Insurance 80% India’s Healthcare expense = Out of Pocket This limits the propensity of Indians to spend on healthcare, particularly in lower & middle class ~ 95% population ISI analytics, Healthcare Industry (2010), General Insurance Council of India (2010)

27. Other Factors : Increasing demand for high-quality services Affordability Growing medical tourism industry Increasing Literacy rate will thus increase drug compliance M&A and JV will increase market penetration Patent cliff will increase the generic market Domestic R&D capability will govern growth and shape the market opportunity

28. Indian pharma market segments

29. Branded Generics Market Indian market largely dominated by branded generics – 90% Generics & innovator products constitute 10% with an approximate split 6% & 4% respectively Patented products to capture around 10% MS by 2020. Market for patented products to be concentrated in therapeutic areas – CNS, Oncology, diabetics, & CVS INN – International Nonproprietary Name Industry Interviews – PwC, McKinsey analysis

30. Medical Representative – The key link Avg. No. of medical reps meeting a doctor per day: 15 Average call time: 3 mins Average Number of Calls: 9-10 Approx Doctor list ~ 150 doctors Approx No. of Products ~ 5 – 7

31. Continued…. New models of sales force coverage and excellence are emerging Debate: Coverage vs Capabilities Content marketing by MR’s Emkay Research – August 2010, McKinsey Analysis

32. Rural Markets

33. Rural Markets – The Next Frontier Metro and Tier-I accounts for 30% of IPM Rural market accounts for 20% of IPM and is estimated to move up at 25% till 2020. The driver of growth for rural market is affordability which will be covered under RSBY. The other factors are better infrastructure (i.e. hospital), skilled manpower (i.e. doctor) and healthcare awareness among people.

34. Challenges & critical success factors

35. Key Challenges Price Controls Labour Intellectual Property Counterfeiting Infrastructure

36. Healthcare penetration in rural areas is significantly lower than in urban areas

37. Critical Success Factors Increasing public spend on Healthcare Innovation Use of Technology Infrastructure Development Health Insurance Enabling Policies & regulatory framework

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