Over-the-counter route to accelerate sales growth for domestic pharma firms

Domestic pharmaceutical companies are now focusing on the over-the-counter (OTC) segment to accelerate sales growth.

They are relaunching older prescription brands in the space or taking an inorganic route to beat the slowdown in sales. The industry’s domestic pharmaceutical sales dipped to 5.5 per cent in 2017 — the lowest growth rate in eight years. 

On Monday, Lupin announced its foray in the segment and relaunched laxative Softovac in the OTC space.  Lupin is targeting Rs3 billion in sales from the segment over the next five years.

“The OTC business is a strategic move for Lupin, and the management recognises gestation period for establishing consumer health care business. We are looking at a business turnover of Rs 3 billion in a five-year horizon. The aim is to build a strong pipeline of brands worth over Rs 1 billion in large categories like vitamins and mineral supplements, gastrointestinal, lifestyle OTC,” said Anil Kaushal, Lupin’s head of consumer business.
 

Relaunching older prescription drugs in the OTC space allows companies to overcome sluggish prescription growth and also extend life of mature brands.
 

Pegged at over $2.7 billion (Rs 188.6 billion) as on 2016, as per Nicholas Hall 2017 report , the Indian OTC market is expected to grow at a CAGR of 9 per cent  to cross the $6.5 billion (Rs 441.1 billion) mark by 2026. 

While Lupin is a late entrant in the space, peers including Sun Pharmaceutical Industries, and Cipla, among others, have been making a significant investment in this category. “We are growing at a healthy rate,” said Anantha Nayak, CEO of Cipla’s consumer health division. Cipla’s OTC business is held in a separate company, which has private equity firm Fidelity Growth Partners as co-investor.

Domestic pharmaceutical companies are now focusing on the over-the-counter (OTC) segment to accelerate sales growth

Piramal Enterprises has been growing its business through acquisitions, while Sanofi has brought its American OTC topical analgesic brand Combiflam Icyhot to India. “Research shows that consumers in India are increasingly self selecting their preferred health care brands and products. Self-medication has grown from 23 per cent to 41 per cent in the past 10 years. With this increased self medication and potential for new OTC regulation, we aim to grow our consumer health care portfolio in mid- to high-double-digits over the next five years,” said Nikhilesh Kalra, general manager, consumer health care, Sanofi, India.
 

“Our vision is to grow sales to Rs 10 billion by FY20. For the past eight years, we have been growing at 24 per cent, and we hope to continue at the same pace,” said Kedar Rajadnye, the chief operating officer (consumer products division) of Piramal Enterprises.

Last month, the Piramal group acquired Digeplex and associated brands from Shreya Lifesciences, adding to its presence in the Rs130-billion gastrointestinal market.

“Often pharma firms shift products from prescription to OTC when faced with the question of growth. Firms need a wide distribution network, a war chest for advertising and a business mindset like a FMCG to be successful in OTC segment,” said a senior executive from a pharma firm.

Rajadnye said Piramal Enterprises has invested in building a sales force and has a team over of 2,200 personnel. “Our idea is to build strong portfolio of brands, and grow the business through brand refresh and consumer connect,” he added.