 "Indian pharma companies need to tap unexplored markets to boost revenues")
Indian pharmaceutical companies have capitalised on export opportunities in regulated and semi-regulated markets and pharma exports from India grew at a CAGR in excess of 20% from 2006 to 2012. Currently, India is the third-largest exporter of Active Pharmaceutical Ingredients (APIs). Indian pharma exports are expected to bring in an estimated $25 billion by the end of 2014.
Changes in the global landscape brought about by the increasing costs of healthcare and drying R&D pipelines have been able to create a number of opportunities for Indian players. The US and EU markets have been the largest importers of Indian products, but increasing scrutiny in these geographies is threatening export revenues and Indian companies would have to look at risk mitigation strategies. Further, the global environment, both from a regulations and a business perspective is changing rapidly and Indian pharmaceutical companies will be required to adapt their business models and operating strategies accordingly. It would be upon these companies to choose the most adequate lever to tap into newer markets as a part of their expansion strategy in the future. Understanding market dynamics will be imperative in determining the extent of growth and reach that Indian companies will be able to achieve.
With Indian products competing with their global counterparts in terms of quality, India has been able to establish a global footprint. Indian companies operating in the west have been able to do so successfully, but, markets such as Japan, parts of South America, Gulf Cooperation Council (GCC) and Commonwealth of Independent States (CIS) still remain untapped and can be explored.
Gulf Cooperation Council
The pharmaceutical market in the Middle East and North Africa (MENA) is currently estimated at $ 12 billion which accounts for a mere 2% of the global market. However, analysts expect the market to reach a value of $ 23.7 billion by 2014. This growth is most likely to be fueled by governments opting for increased generic substitution, a large demographic with high purchasing power, and an increase in the burden of lifestyle diseases. While the rest of the $ 825 billion global market for generic drugs is expected to witness annual growth in the range of 4% to 6% annual growth - the lowest growth levels in a decade - the MENA market foresees a likely growth in the range of 13% to 15%.
Biocon was one of the first companies to focus on the region in 2007 by setting up its first marketing joint venture in the United Arab Emirates, where it partnered with Abu Dhabi-based pharmaceutical manufacturer Neopharma. This was one isolated deal and for a while now, companies have not strategically opted to focus on the region. However, the situation is likely to change.
Gujarat-based Dishman Pharmaceuticals and Chemicals Ltd recently formed a joint venture company to manufacture APIs in Saudi Arabia with three partners (the Arab Company for Drug Industries and Medical Appliances, Spimaco, and the Capital Advisory Group). Intas Biopharma, too, which focuses on research & development and manufacturing of biopharma products, is looking to partner with MENA-based firms. It is likely that many more companies will follow suit.
South America
South America (Brazil and Argentina specifically) has been considered important markets from a pharma perspective for India in the future. Despite the significant presence of the multinational companies in these countries, India’s proposition in terms of cost effectiveness coupled with the right partnering or acquisition decision may help immensely in making a successful headway in the region.
India is most likely to score in this region via its proposition in biopharmaceuticals. These products are expensive treatment options for patients but are highly recommended and often prescribed because of their specificity in action, potency and lower risk of side effects. Like other emerging economies, Brazil, is looking to lower its cost of healthcare and make these treatments accessible to its larger demographic. Indian biosimilars which have been extensively tested clinically and have gone through due process of registration are likely to emerge as the choicest option in this regard.
The registration rules and requirements vary for different countries in South America and any player looking to enter these markets will have to manage these head on. It is fortunate that Indian companies have had exposure to Latin America and been able to establish a beach head with their products. This does make life easier for others to follow. The biopharma services potential in these markets is still untapped and can prove extremely profitable to Indian companies.
Commonwealth of Independent States
It is estimated that pharmaceutical sector in Russia and other CIS nations will report a double digit growth of 10-11 per cent during the years 2012-2016. There is no national drug provision insurance system in Russia and CIS countries, resulting in high out-of-pocket expenditures comprising over 60-70 per cent of all pharmaceutical sales. The landscape is dominated by large, locally-owned pharmacy chains but there are a substantial number of small, independent pharmacies in the Tier 2 & 3 cities. The hospital drug provision system, meanwhile, is more advanced and is likely to develop further.
An important imperative for pharmaceutical companies looking to succeed in the CIS region would be to customise and balance their portfolios of branded generics and over-the-counter (OTC) drugs that can be sold mainly at the retail level. A robust pipeline of innovative products that can leverage the developing reimbursement and insurance policies may be critical in this context.
The future growth within this market depends on innovation, and on an increasing focus on localisation.
Other potential markets
India’s exposure to Japan – the second-largest pharma market in the world and also one of the most difficult pharma markets to access – is a mere one per cent. However, Lupin’s success in establishing significant presence in Japan shows that building a footprint in this market is not impossible. Indian companies can also look at establishing foothold in other managed markets such as South East Asia and Africa. Liaisons in these developing markets can be facilitated more efficiently by collaborating with international agencies or via government intervention.
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Utkarsh Palnitkar is the Head of Lifesciences, Pharmaceuticals, KPMG in India
With inputs from Niloufer Memon, Pharma Analyst, KPMG in India
Changes in the global landscape brought about by the increasing costs of healthcare and drying R&D pipelines have been able to create a number of opportunities for Indian players. The US and EU markets have been the largest importers of Indian products, but increasing scrutiny in these geographies is threatening export revenues and Indian companies would have to look at risk mitigation strategies. Further, the global environment, both from a regulations and a business perspective is changing rapidly and Indian pharmaceutical companies will be required to adapt their business models and operating strategies accordingly. It would be upon these companies to choose the most adequate lever to tap into newer markets as a part of their expansion strategy in the future. Understanding market dynamics will be imperative in determining the extent of growth and reach that Indian companies will be able to achieve.
With Indian products competing with their global counterparts in terms of quality, India has been able to establish a global footprint. Indian companies operating in the west have been able to do so successfully, but, markets such as Japan, parts of South America, Gulf Cooperation Council (GCC) and Commonwealth of Independent States (CIS) still remain untapped and can be explored.
Gulf Cooperation Council
The pharmaceutical market in the Middle East and North Africa (MENA) is currently estimated at $ 12 billion which accounts for a mere 2% of the global market. However, analysts expect the market to reach a value of $ 23.7 billion by 2014. This growth is most likely to be fueled by governments opting for increased generic substitution, a large demographic with high purchasing power, and an increase in the burden of lifestyle diseases. While the rest of the $ 825 billion global market for generic drugs is expected to witness annual growth in the range of 4% to 6% annual growth - the lowest growth levels in a decade - the MENA market foresees a likely growth in the range of 13% to 15%.
Biocon was one of the first companies to focus on the region in 2007 by setting up its first marketing joint venture in the United Arab Emirates, where it partnered with Abu Dhabi-based pharmaceutical manufacturer Neopharma. This was one isolated deal and for a while now, companies have not strategically opted to focus on the region. However, the situation is likely to change.
Gujarat-based Dishman Pharmaceuticals and Chemicals Ltd recently formed a joint venture company to manufacture APIs in Saudi Arabia with three partners (the Arab Company for Drug Industries and Medical Appliances, Spimaco, and the Capital Advisory Group). Intas Biopharma, too, which focuses on research & development and manufacturing of biopharma products, is looking to partner with MENA-based firms. It is likely that many more companies will follow suit.
South America
South America (Brazil and Argentina specifically) has been considered important markets from a pharma perspective for India in the future. Despite the significant presence of the multinational companies in these countries, India’s proposition in terms of cost effectiveness coupled with the right partnering or acquisition decision may help immensely in making a successful headway in the region.
India is most likely to score in this region via its proposition in biopharmaceuticals. These products are expensive treatment options for patients but are highly recommended and often prescribed because of their specificity in action, potency and lower risk of side effects. Like other emerging economies, Brazil, is looking to lower its cost of healthcare and make these treatments accessible to its larger demographic. Indian biosimilars which have been extensively tested clinically and have gone through due process of registration are likely to emerge as the choicest option in this regard.
The registration rules and requirements vary for different countries in South America and any player looking to enter these markets will have to manage these head on. It is fortunate that Indian companies have had exposure to Latin America and been able to establish a beach head with their products. This does make life easier for others to follow. The biopharma services potential in these markets is still untapped and can prove extremely profitable to Indian companies.
Commonwealth of Independent States
KPMG India's Utkarsh Palnitkar
It is estimated that pharmaceutical sector in Russia and other CIS nations will report a double digit growth of 10-11 per cent during the years 2012-2016. There is no national drug provision insurance system in Russia and CIS countries, resulting in high out-of-pocket expenditures comprising over 60-70 per cent of all pharmaceutical sales. The landscape is dominated by large, locally-owned pharmacy chains but there are a substantial number of small, independent pharmacies in the Tier 2 & 3 cities. The hospital drug provision system, meanwhile, is more advanced and is likely to develop further.
An important imperative for pharmaceutical companies looking to succeed in the CIS region would be to customise and balance their portfolios of branded generics and over-the-counter (OTC) drugs that can be sold mainly at the retail level. A robust pipeline of innovative products that can leverage the developing reimbursement and insurance policies may be critical in this context.
The future growth within this market depends on innovation, and on an increasing focus on localisation.
Other potential markets
India’s exposure to Japan – the second-largest pharma market in the world and also one of the most difficult pharma markets to access – is a mere one per cent. However, Lupin’s success in establishing significant presence in Japan shows that building a footprint in this market is not impossible. Indian companies can also look at establishing foothold in other managed markets such as South East Asia and Africa. Liaisons in these developing markets can be facilitated more efficiently by collaborating with international agencies or via government intervention.
____________________________________________________________________________________________________
Utkarsh Palnitkar is the Head of Lifesciences, Pharmaceuticals, KPMG in India
With inputs from Niloufer Memon, Pharma Analyst, KPMG in India