PROJECT REPORT ON
Indian Pharmaceutical Industry Overview: The Indian Pharmaceutical Industry today is in the front rank of India’s science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology. A highly organized sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 perc percen entt annu annual ally ly.. It rank ranks s very very high high in the the thir third d worl world, d, in term terms s of techno technolog logy, y, quality quality and range range of medic medicine ines s manufa manufactu ctured red.. From From simple simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously. Playing a key role in promoting and sustaining development in the vital field of medicine medicines, s, Indian boasts of qualit quality y produc producers ers and Indian Pharma Pharma Industry Industry boasts many units approved by regulatory authorities in USA and UK. International comp compani anies es assoc associa iate ted d with with this this sect sector or have have stim stimul ulat ated ed,, assi assist sted ed and and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world. The The Indi Indian an Ph Pharm armac aceu euti tica call sect sector or is high highly ly fragm fragmen ente ted d with with more more than than 20,000 registered units. It has expanded drastically in the last two decades. The leading 250 pharmaceutical companies control 70% of the market with market leader holding nearly 7% of the market share. It is an extremely fragme fragmente nted d market market with with severe severe price price compet competiti ition on and govern governmen mentt price price control. The pharmaceutical industry in India meets around 70% of the country's demand demand for bulk drugs, drug intermedi intermediates, ates, pharmaceuti pharmaceutical cal formulatio formulations, ns, chemicals, tablets, capsules, orals and injectibles. There are about 250 large 1 |Page
unit units s and and abou aboutt 80 8000 00 Smal Smalll Scal Scale e Unit Units, s, whic which h form form the the core core of the the pharmaceuti pharmaceutical cal industry in India (including (including 5 Central Central Public Public Sector Sector Units). Units). These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals als havin ving therap rapeutic value and used sed for production of pharmaceutical formulations. Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Cont Contro roll Au Auth thor orit ity. y. Tech Techno nolo logi gica call lly y stro strong ng and and tota totall lly y self self-r -rel elia iant nt,, the the pharmaceutical industry in India has low costs of production, low R&D costs, innovat innovative ive scient scientifi ific c manpow manpower, er, streng strength th of nation national al labora laborator tories ies and an incr increa easi sing ng bala balanc nce e of trade trade.. The The Ph Pharm armac aceu euti tical cal Indu Indust stry ry,, with with its its rich rich scientific talents and research capabilities, supported by Intellectual Property Protection regime is well set to take on the international market.
Environmental Analysis (PEST) Technological advancements, tighter regulatory-compliance overheads, rafts of patent expiries and volatile investor confidence have made the modern pharmaceutical industry an increasingly tough and competitive environment. Below is an analysis of the structure of the pharmaceutical industry using the PEST (political, economic, social and technological) model. Increasing Political Attention: Over the years, the industry industry has witnessed witnessed increased increased political political attention attention due to the increased recognition of the economic importance of healthcare as a compon component ent of social social welfare welfare.. Politi Political cal intere interest st has also also been been genera generated ted beca becaus use e of the the incr increa easi sing ng soci social al and and fina financ ncia iall burd burden en of heal health thca care re.. Examples are the UK’s National Health Service debate and Medicare in the US.. Economic Value Added: In the decade to 2003 the pharmaceutical industry witnessed high value merger mergers s and acquisi acquisitio tions7 ns7.. With With a projec projected ted stock stock value value growth growth rate of 10.5% (2003-2010) and Health Care growth rate of 12.5% (2003-2010), the audited value of the global pharmaceutical market is estimated to reach a 2 |Page
huge 500 billion dollars by 2004. Only information technology has a higher expected growth rate of 12.6%. Majority of pharmaceutical sales originate in the US, EU and Japanese markets. Nine geographic markets account for over 80% of global pharmaceutical sales these are, US, Japan, France, Germany, UK, Italy, Canada, Brazil and Spain. Of these markets, the US is the fastest growing market and since 1995 it has accounted for close to 60% of global sales. In 2000 alone the US market grew by 16% to $133 billion dollars making it a key strategic market for pharmaceuticals. pha rmaceuticals. The Social Dimension: Good health is an important personal and social requirement and the unique role role pharm pharmac aceu euti tica call firm firms s play play in meet meetin ing g soci societ ety’ y’s s need need for for popu popula larr wellbeing cannot be underestimated. In recent times, the impact of various global epidemics e.g. SARS, AIDS etc has also attracted popular and media atte attent ntio ion n to the the indu indust stry ry.. The The effe effect ct of the the inte intens nse e medi media a and poli politi tica call attention has resulted in increasing industry efforts to create and maintain good government-industry-society communications. Technological Advances: Modern scientific and technological advances in science is forcing industry players to adapt ever faster to the evolving environments in which they part partic icip ipate ate.. Scie Scient ntif ific ic advan advance ceme ment nts s have have also also incr increa ease sed d the the need need for for increa increased sed spendi spending ng on resear research ch and develo developme pment nt in order order to encour encourage age innovation. Legal Environment: The pharmaceutical industry is a highly regulated and compliance enforcing industry. As a result there are immense legal, regulatory and compliance over overhe heads ads whic which h the the indu indust stry ry has has to abso absorb rb.. This This tend tends s to rest restri rict ct it’s it’s dynamism but in recent years, government have begun to request industry proposals on regulatory overheads to so as not to discourage innovation in the face of mounting global challenges from external markets.
Company Profile We are an international specialty pharma company, with a presence in 30 mark market ets. s. We also also make make acti active ve phar pharma mace ceut utic ical al ingr ingred edie ient nts. s. In brand branded ed mark market ets, s, our our prod produc ucts ts are are pres prescr crib ibed ed in chro chroni nic c ther therap apy y area areas s like like card cardio iolo logy, gy, ps psyc ychi hiatr atry, y, neur neurol olog ogy, y, gast gastro roen ente tero rolo logy, gy, diabe diabeto tolo logy gy and respiratory. 3 |Page
We have the same drive for growth that marked our early days. Sun Pharma came into existence as a startup with just 5 products in 1983. In the time sinc since, e, we have have cros crosse sed d seve several ral mile milest ston ones es to emer emerge ge as an impo import rtant ant specia specialty lty pharma pharma company company with with techni technical cally ly comple complex x produc products ts in global global markets, and a leading pharma company in India. In India, We have reached leadership in each of the therapy areas that we operate in, and are rated among the leading companies by key customers. Strengthening market share and keeping this customer focus remains a high priority area for the company. In the post-1996 years, we have used a combination of internal growth and acquisitions to drive growth; important mergers were those of the US, Detroit base based d Carac Caraco o Ph Phar arm m Labs, Labs, ICN ICN Hung Hungar ary y (now (now call called ed Alka Alkalo loid ida a Chem Chemic ical al Company Exclusive Group), and that of the internationally approved plants at Halol, India as well as Bryan, Ohio, US and Cranbury, NJ, US. We have shifted work related to new molecules and drug delivery systems to a company, SPARC, which is listed on the Indian stock exchange.
BACKGROUND Sun Pharma began in 1983 with just 5 products to treat psychiatry ailments. Sales were initially limited to 2 states - West Bengal and Bihar. Sales were rolled rolled out nation nationall ally y in 19 1985 85.. Produc Products ts that that are used used in cardio cardiolog logy y were were introduced in 1987, and Monotrate, one of the first products launched at that time time has has sinc since e beco become me one one of our our larg larges estt sell sellin ing g prod produc ucts ts.. Impo Import rtant ant products in Cardiology were then added; several of these were introduced for the first time in India. Realizing the fact that research is a critical growth driver, they established thei theirr rese researc arch h cent center er SP SPAR ARC C in 19 1993 93 and this this crea create ted d a base base of stro strong ng product and process development skills. Sun Pharma was listed on the main stock exchanges in India in 1994; and the Rs. 55 crore issue of a Rs. 10 face value equity share at a premium of Rs. 140/- was oversubscribed 55 times. The minimum 25% that was required under the regulations then for listing was offered to the public, the owner family continues to hold a majority stake in Sun Pharma. We used this money to build a greenfield site for API manufacture, as well as for acquisitions. For the acquisitions, typically companies or assets that could be turned around and brought on track were identified. 4 |Page
Our first API manufacturing plant was built in Panoli in 1995, for access to high quality actives ahead of competition, and to tap the vast international opportunity for speciality APIs. Anoth nothe er AP APII plan plant, t, our our Ahmed hmedna nag gar plan plantt, was acqu acquiired red from from the the multin multinati ationa onall Knoll Knoll Pharma Pharmaceu ceuti tical cals s in 19 1996 96,, and upgrade upgraded d for approva approvals ls from regulated markets, with substantial capacity addition over the years. This was the first of several sensibly priced acquisitions, each of which would bring important parts to the long-term strategy. By 1997, our headquarters were shifted to Mumbai, the commercial capital of the country. We began on the first of our international acquisitions with an initial $7.5 million investment in Caraco Pharm Labs, Detroit. By 2000, we had completed 8 acquisitions, each such move adding new therapy areas or offering offering an entry to important important international international markets. markets. A new research center was set up in Mumbai for generic product development for the US market. In India, as new therapy areas were entered into post acquisition; customer attention, product selection and focused marketing helped us gain a foothold in areas like orthopedics, gynecology, oncology, etc. From a ranking at 38th in 1994, by 2000 we were ranked 5th with a leadership in 8 of the 11 therapy areas that we are present in. The year 2000 was the year of turnaround at the US subsidiary, Caraco, as it began to receive approvals after successful inspection by the USFDA. In December 2004, a research center spread over 16 acres was inaugurated by the President of India, with special lab space for drug drug disc discov over ery y and and inno innova vati tion on.. The The post post 20 2005 05 year years s have have witn witnes esse sed d impo import rtan antt acqu acquis isit itio ions ns to stre streng ngth then en our our US busi busine nessss- the the purc purcha hase se of manufacturing assets for controlled substances in Cranbury,NJ; that of a site to make creams and lotions in Bryan, that of Alkaloida, a Hungary based API and dosage form manufacturer , and recently, Chattem Ltd., a Tennesseebased controlled substance API manufacturer. The tally at the end of 2008: 17 manufacturing plants in 3 continents 8000 employees 2 World class research centers Brand selling in markets worldwide A growing presence in the US generic market
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Increasing research investments 60% of sales from international markets
COMPANY PHYLOSOPHY Sun Sun Ph Phar arma ma's 's phil philos osop ophy hy envi envisa sage ges s work workin ing g towa toward rds s high high leve levells of transparency, accountability, consistent value systems, delegation across all facets of its operations leading to sharply focused and operationally efficient growth. The company tries to work by these principles in all its interactions with stakeholders, including shareholders, employees, customers, suppliers and statutory statutory authorities. authorities. Sun Pharma is committ committed ed to learn and adopt the best practices of corporate governance.
VISION The Sun Pharma of tomorrow will have brands registered in major markets of the world, and in most markets, promoted by a high quality field force. With a strong network and established company equity, we would be an excellent partner for a company seeking to license out products across markets.
MISSION We are an international specialty pharma company, with a presence in 30 mark market ets. s. We also also make make acti active ve phar pharma mace ceut utic ical al ingr ingred edie ient nts. s. In brand branded ed mark market ets, s, our our prod produc ucts ts are are pres prescr crib ibed ed in chro chroni nic c ther therap apy y area areas s like like card cardio iolo logy, gy, ps psyc ychi hiatr atry, y, neur neurol olog ogy, y, gast gastro roen ente tero rolo logy, gy, diabe diabeto tolo logy gy and respiratory. In the time since, we have crossed several milestones to emerge as an impo import rtant ant sp spec ecia ialt lty y phar pharma ma comp compan any y with with tech techni nica call lly y comp comple lex x products in global markets, and a leading pharma company in India. We are leader in each of the therapy areas that we operate in, and are rated among among the leadi leading ng compan companies ies by key custom customers ers.. Streng Strengthe thenin ning g market market share and keeping this customer focus remains a high priority area for the company.
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Control and evaluation Audit Committee The The Board Board of the the Comp Company any has has cons consti titu tute ted d an Au Audi ditt comm commit itte tee, e, whic which h comprises of three independent non-executive Directors viz. Keki M. Mistry, S. Mohanchand Dadha and Hasmukh S. Shah. Keki M. Mistry is the Chairman of the committee. The constitution of Audit Committee also meets with the requirements under Section 292 A of the Companies Act, 1956. Kamlesh H. Shah, the Company Secretary of the Company is the Secretary of the Audit Committee. The terms of reference stipulated by the Board to the Audit Committee cover the matters specified under Clause 49 of the Listing Agreement as well as Section 292 A Companies Act 1956.
Remuneration Committee Committee The company has not formed any Remuneration Committee of Directors. The Wholet Wholetim ime e Direct Directors' ors' remune remunerat ration ion is approv approved ed by the Board Board withi within n the overall limit fixed by the shareholders at their meetings. The payment of remune remunerati ration on by way of commi commissio ssion n to the Partici Participat pating ing Non-Exe Non-Execut cutive ive Directors (NEDs) of the company is within the total overall maximum limit of half percent of net profits as worked under the provisions of Sections 349 & 350 of the Companies Act, 1956. This will be in addition to the sitting fees of Rs. 5,000/- per meeting payable to the Non-Executive Directors. The actual comm commis issi sion on paya payabl ble e to the the NonNon-Ex Exec ecut utiv ive e Dire Direct ctor ors s of our our comp compan any y seve severa rall lly y and and coll collec ecti tive vely ly is deci decide ded d by the the Boar Board d of Dire Direct ctor ors s of the the Comp Compan any y with within in the the over overal alll limi limitt fixe fixed d as abov above e by Memb Member ers s of the the Company.
Shareholders / Investors Grievance Committee The The Board Board of the Compan Company y had consti constitut tuted ed a Shareho Shareholde lders' rs' / Invest Investors ors'' Grie Grieva vanc nce e Comm Commit itte tee e comp compri risi sing ng of S. Moha Mohanc ncha hand nd Dadh Dadha, a, Dili Dilip p S. Shan Shangh ghvi vi,, Sudh Sudhir ir V. Vali Valia a with with Hasm Hasmuk ukh h S. Shah Shah as the the Chai Chairm rman an.. The The Committee inter alia, approves issue of duplicate certificates and oversees and and revi review ews s all all matt matter ers s conn connec ecte ted d with with the the tran transfe sferr of secu securi riti ties es.. The The committee looks into shareholders complaints like transfer of shares, non rece receip iptt of bala balanc nce e sh shee eet, t, non non rece receip iptt of decl declare ared d divi divide dend nds, s, etc. etc. The The Committee oversees the performance of the Registrar and Transfer Agents and and reco recomm mmen ends ds meas measur ures es for for over overal alll impr improv ovem emen entt in the the qual qualit ity y of inve invest stor or serv servic ices es.. The The Board Board of Dire Direct ctor ors s has has dele delega gate ted d the the powe powerr of approving transfer of securities to M/s. Intime Spectrum Registry Ltd, and /or the Company Secretary of the company.
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The Board has designated severally, Kamlesh H. Shah Company Secretary and Ashok I. Bhuta, D.G.M. (Legal & Secretarial) as Compliance Officers
BUSINESS DEVELOPMENT DEVELOPMENT Sun Sun Ph Phar arma ma is an inte intern rnat atio ional nal sp spec ecia iali lity ty pharm pharma a comp compan any. y. We have have a significant presence in the US through our subsidiary Caraco. In the rest of world markets, we have a strong ground network of 400 committed field force in 30 countries, with over 1000 products registered and marketed. We have 25 250000-per person son strong strong sales sales team team in India India dis distri tribut buting ing throug through h 20 2000 00 stoc stocki kist sts, s, We are are now now at a stag stage e of rapi rapid d grow growth th acro across ss geog geogra raph phie ies s spanning Russia and CIS countries, China and South east Asia, Africa and Lati Latin n Amer Americ ica, a, wher where e we are are rapi rapidl dly y emer emergi ging ng as a bran brande ded d gene generi ric c company of choice. In India , we are a re among the largest pharmaceutical companies and command a 3.5% market share (ORG IMS Stockist Audit, Mar 09). In India , we market over 500 products through 18 speciality marketing divisions that are built around chronic therapy areas. Typically, every year we introduce 25 -30 new products. All of these are developed in- house supported by strong bulk synthesis, formulation development, bioequivalence and regulatory teams. CMARC (A prescription audit agency) has ranked us as no 1 in key chronic therapy areas of Neuropsychiatry, Cardiology, Diabetology, Gastroenterology and and Ophth phthal almo molo log gy. We also also ran rank amon among g the the top top 5 compa ompani nies es for for Respiratory, Pain, Cancer and Gynecology.
In-Licensing We look at partnering and collaborating as an important strategic approach that that will will comple complemen mentt our growth growth in India India and intern internati ationa onall market markets. s. Our constant need is to add to our speciality product portfolio for prescription lead leader ersh ship ip in Indi India a . We also also seek seek to stre streng ngth then en our our pres presen ence ce,, with with a complete basket of speciality products, in Russia and CIS countries, China and South East Asia , Africa , Brazil and Mexico. We are curr curren entl tly y inte intere rest sted ed in in-l in-lic icen ensi sing ng prod produc ucts ts that that are alre alread ady y marketed or are in late stage clinical development in our key therapy areas. 8 |Page
We seek products that leverage our core strengths and complement our existing product portfolio in the following therapy areas: o
CNS disorders
o
Cardiology
o
Diabetes and Metabolic disorders
o
Gastroenterology
o
Ophthalmology
o
Oncology
o
Pain
o
Allergy, Asthma and Inflammation
o
Gynecologicals
We also also have have strate strategic gic intere interest st in licen licensin sing g biosim biosimila ilarr produc products ts and new products based on recombinant/humanized monoclonal antibody technology that find use in these therapy areas. We seek to establish a long term, mutually rewarding relationship based on exclusive marketing rights business model for the above listed geographies, as well as co-marketing or strategic alliances for co-development including clinical trials of products for necessary regulatory approvals.
Out-licensing Our formul formulati ation on develo developme pment nt expert expertise ise enable enables s us to develo develop p comple complex x generi generic c produc products ts which which are bioequ bioequiva ivalen lent, t, sus sustai tained ned release release oral dosage dosage forms and long acting injectable depot formulations. We offer a range of dosage forms for oral, injectable, topical and transdermal routes developed through non-infringing routes and/or patented routes. o
CVS
o
CNS
o
Pain
o
Cancer
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o
Gynecologicals
o
Allergy, Asthma other respiratory diseases
Our Our Orga Organi nic c sy synt nthe hesi sis s team team deve develo lops ps high highly ly comp comple lex x bulk bulk acti active ves s like like Peptides, Hormones, Steroids, Anticancer drugs and Cephalosporins through non-infringing routes and/or patented routes. We offer over 150 bulk actives manufactured at USFDA/UK MHRA approved sites. We seek seek out-l out-lic icen ensi sing ng oppo opport rtun unit itie ies s for for our our sp spec ecia iali lity ty gene generi rics cs,, su supe perr generics, and bulk drugs for global markets.
MANUFACTURING With worldclass technology and a team of strong professionals, we have built sites and systems that meet the most stringent international manufacturing standards. Expert quality teams ensure that systems and processes remain in comp compli lianc ance e with with the the late latest st stand standard ards. s. A numb number er of our our plant plants s hold hold approvals from the USFDA and the UK MHRA. APIs and Dosage forms are made in 19 sites across India, US, Hungary and Bangladesh.
Formulation We make make sp spec ecia iali lity ty form formul ulat atio ions ns acro across ss a rang range e of dosag dosage e form formss- oral oral,, injectable and delivery system based.
API We make make spec specia iali lity ty AP APIs Is incl includ udin ing g pept peptid ides es,, ster steroi oids ds,, horm hormon ones es and and anticancers at internationally approved worldclass sites.
Quality Policy Regu Regula larl rly y upda update ted d sy syst stem ems, s, proc proced edur ures es and an expe expert rt team team su supp ppor ortt a stringent quality policy.
Environmental Policy At Sun Pharma, a concern for safety and the environment is part of our plans. 10 | P a g e
GROUP COMPANIES Caraco Pharmaceutical Laboratories Laboratories Based Based in Detroi Detroit, t, Michig Michigan, an, Caraco Caraco develo develops, ps, manufac manufactur tures, es, market market and distribute distributes s generic generic and private private label pharmaceutica pharmaceuticals* ls* and markets markets them throughout the United States. The corporation's present portfolio consists of a numb number er of prod produc ucts ts in vario various us stre streng ngth ths s and and pack packag age e size sizes, s, acro across ss a variety of therapeutic segments, including epilepsy and hypertension. For the most recent year ending March 2008, Caraco had sales of over ov er $350 mill. Caraco's Caraco's manufacturi manufacturing ng facility facility and executive executive offices were constructed constructed in 1991, after a $9.1 million loan from the Economic Development Corporation of the city of Detroit. Since August 1997, capital infusions and loans have primarily come from Sun Pharma. Sun Pharma's investment in and support of Caraco has resulted in, since the second quarter of 2002, Caraco achieving the sales to support its operations. As on March 2008, Sun Pharma owns approx 76% on a diluted basis of the outstanding common shares of Caraco. Sun Pharma has two R&D centers in Baroda and Mumbai, where development work for generics is done.
Sun Pharmaceutical Industries Inc. (SPI) Sun Pharmaceutical Industries Inc is a Michigan Corporation and a wholly owned subsidiary of Sun Pharmaceutical Industries Ltd, India. In the the seco second nd half alf of 2004, Sun Sun Ph Phar arm ma acqu acquir ire ed the trade radem marks arks,, manu manufa fact ctur urin ing g know know-h -how ow and and othe otherr inte intell llec ectu tual al prop proper erty ty of cert certai ain n pharma pharmaceu ceutic tical al produc products ts from from Women' Women's s First First Health Healthcar care, e, Inc, Inc, which which was unde underr bank bankru rupt ptcy cy proc procee eedi ding ngs. s. On comp comple leti tion on of the the acqu acquis isit itio ion n in December 2004, these products were assigned to Sun Pharma Inc. In December 2005, Sun Pharma Inc completed the purchase of dosage form manufacturi manufacturing ng operations operations of Able Labs in the US for USD 23.15 million million from the the US Bankr Bankrup uptc tcy y Cour Courtt of the the Dist Distri rict ct of New New Jers Jersey ey,, Tren Trento ton. n. A plant plant spread over 35,000 sq ft, in Bryan, Ohio, manufacture manufactures s liquids, liquids, creams, and ointments. This plant was purchased from Valeant Pharma. 11 | P a g e
The The Ohio Ohio plan plantt is now now appr approv oved ed by the the USFD USFDA A and and the the Cranb Cranbur ury y plan plantt expects to receive approval shortly. In January 2005, the company entered into a distribution and sale agreement with with Carac Caraco. o. Unde Underr the the agre agreem emen ent, t, Carac Caraco o dist distri ribu bute tes s and and sell sells s SP SPI’ I’s s prod produc ucts ts us usin ing g its its busi busine ness ss organ organiz izat atio ion, n, mana manage geme ment nt perso personn nnel el,, and and distribution set up.
Sun Pharmaceutical (Bangladesh) Sun Pharmaceutical (Bangladesh) is a private limited company incorporated in March 2001 under the Companies Act 1994. This company was formed joi joint ntly ly with with Sun Sun Ph Pharm arma, a, City City Over Overse seas as Ltd, Ltd, a comp compan any y inco incorp rpora orate ted d in Bangladesh and Sun Pharma Global Inc, a company incorporated under the laws of the British Virgin Islands. The company began commercial operations in October 2004. The company owns and operates a pharmaceutical factory and makes pharmaceutical products that are sold in the local market. It currently markets 58 products and had reported a turnover of 105 mill Rs with a profit of Rs.22 mill Rs for the year ending March 08.
Alkaloida Chemical Company Exclusive Group Ltd. ICN Hungary, purchased from Valeant Pharmaceuticals in 2005, is one of the few units worldwide, authorized to make controlled substances. ICN Hungary has now been renamed Alkaloida Chemical Company. This 170 acre site has facilities spread over 1,75,000 sq ft for the manufacture of bulk actives, with 500 KL capacity and designated areas to make controlled substances. It has a 150,000 sq ft facility for different dosage forms such as film coated and effervescent tablets, capsules, etc. A large 65,000 sq ft research center has labs across synthetic chemistry, chemistry, instrumentatio instrumentation n analytical analytical and structural structural eluc elucid idat atio ion. n. The The site site is oper operat atio iona nall with with 45 450 0 peop people le and and addi additi tion onal al recruitments are planned over time.
MILESTONES-MAJOR STRATEGIC STEPS 1983 Sun Pharma begins operations in Kolkata with 5 psychiatry - based products, first with 2 people and then with a 10 - employee team. Year 1 turnover - Rs. 1 million. Within a year, the marketing effort is expanded to cover all eastern states states.. A compac compactt manufa manufactu cturin ring g facili facility ty for tablet tablets/c s/caps apsule ules s is set up at Vapi. 12 | P a g e
1986 Administrative office is set up in Mumbai. Customer coverage extends to select cities in Western India. 1987 Marketing operations are rolled out nation-wide. 1988 With With the the laun launch ch of the the bran brands ds Mono Monotr trat ate e and and An Angi gize zem, m, the the firs firstt few few cardiology products are launched. We feature for the first time in a market audit by the prescription tracking company, ORG* at rank 107th with 0.1% market share. 1989 The corporate office is shifted to Baroda, in the western state of Gujarat. Products Products used in gastroenter gastroenterology ology are introduced introduced.. Exports Exports to neighboring neighboring countries begin. 1991 Cons Constr truc ucti tion on begi begins ns at the the firs firstt rese resear arch ch cent center er SP SPAR ARC C (Sun (Sun Ph Phar arma ma Advan Ad vance ced d Rese Resear arch ch cent center er), ), with with 46 46,0 ,000 00 sq ft of rese resear arch ch space space,, and and investments of almost the size of that year's profits. The company's turnover is Rs. 9.74 cr, and market rank is 70th. 1993 SPARC, the first research center, is inaugurated by His Excellency Shri K. R. Naraya Narayana nan, n, the the Vice Vice Pres Presid iden entt of Indi India. a. An offi office ce is begu begun n in Mosc Moscow ow.. Products are now registered across 10 markets. 1994 After an IPO in October, we are listed on the major stock exchanges in India. The offering is oversubscribed 55 times. A dosage form plant at Silvassa starts production. Major expansion at the plant in Vapi is completed. For the first time, a brand from the company, Monotrate, features among the top 250 25 0 pharma pharma brands brands in the Indian market market.. Experi Experimen mentin ting g with with a focuse focused d marketing approach, a separate division, Synergy, is carved out to market Psychiatry/ Neurology products. 1995 Our first API plant at Panoli starts production. A new division, Aztec, now renamed Azura, is begun for cardiology products, with a further reallocation of products across divisions. Inca, a new division 13 | P a g e
to market critical care medication to intensive care units begins operations. International marketing is strengthened with offices in Ukraine and Belarus.
1996 An API-manufacturing unit at Ahmednagar, the first of the our acquisitions, is bought bought from Knoll Pharma. An equity stake is also picked picked up in Gujarat Lyka Organics Ltd., a manufacturer of Cephalexin Active with a USFDA approval for the intermediate, 7ADCA. At the close of the year, we rank 27th with 2 prod produc ucts ts amon among g the the coun countr try's y's top top sell sellin ing g 30 300 0 pharm pharma a brand brands. s. Prod Produc uctt registrations are now in place across 24 countries. 1997 We begin the first of our international acquisitions. As part of a technologyforfor-eq equi uity ty agre agreem emen ent, t, a stak stake e is acqu acquir ired ed in a gene generi ric c dosa dosage ge form form manufa manufactu cturer rer;; the Detroi Detroit-ba t-based sed Caraco Caraco Pharm Pharm Labs. Labs. An equity equity stake stake is taken in MJ Pharma, a manufacturer of several dosage form lines with UK MHRA approval for Cephalexin capsules. TDPL, TDPL, a company company with with an extens extensive ive produc productt offeri offering ng (oncol (oncology ogy,, ferti fertilit lity, y, anes anesth thes esio iolo logy gy,, pain pain manag anagem emen ent) t) is merg merged ed with with Sun Sun Ph Phar arm ma. Non Non profit profitabl able/sm e/small all generi generic c lines lines and several several small smaller er brands brands are droppe dropped d to rationaliz rationalize e the product mix. TDPL's products products offer a ready entry with known known bran brands ds and and cust custom omer er equi equity ty into into new new high high grow growth th ther therap apy y area areas s like like oncology and gynecology. Marketing is reorganized once again, this time into 6 specia specialit lity-fo y-focus cused ed divisi divisions ons.. A resear research ch and develo developme pment nt facili facility ty over over 6,000 sq ft in Mumbai, our second research site, is established. This center is equip quippe ped d to make ake dos dosage age form forms s and and creat reate e su supp ppo ortin rting g techn echnic ical al documentation for the generic markets in North America and Europe. 1998 A basket of brands, which include several in the respiratory/asthma area, are acqu acquir ired ed from from Natc Natco o Ph Phar arma ma.. Our Our new new form formul ulat atio ion n plan plantt at Silv Silvas assa sa commences operations.
1999 Rank moves within the top 10 in the domestic market. For a quick entry in ophthalmology, Milmet Labs is merged into Sun Pharma. The Cephalexin API manufacturer Gujarat Lyka Organics is merged with Sun Pharma. 6 brands now feature among the leading 300 prescription pharma brands in India. 14 | P a g e
2000 Ranked 5th among all companies in the domestic market on a monthly basis. Pradeep Drug company, a Chennai based API manufacturer is merged with Sun Pharma. Plans are shared to set up a new research campus in Chennai, which is later dropped as a suitable site is found in Baroda where we have an existing base.
2001 A new formulation plant is built in Dadra. This new plant is spread over a 5acre site with built up area of 120,000-sq. ft. and has been designed and built built to comply comply with with intern internati ationa onall regula regulator tory y requir requirem ement ents, s, such such as the UKMHRA and USFDA. The The erst erstwh whil ile e TDPL TDPL divi divisi sion on is rena rename med d Spec Spectr tra. a. A new new divi divisi sion on,, Aria Arian, n, targeting cardiologists/physicians and diabetologists, is launched. 2002 Forbes Global ranks Sun Pharma in the list of best small 200 companies for 2002 (turnover less than $500 million). Sun Pharma is selected as the best company by Express Pharma Pulse, for overall performance for 2002 (in the category A - market share over 2.5%). 4 manufacturing sites win the prestigious IDMA awards. Work Work comm commen ence ces s on a new, new, stat statee-of of-th -thee-ar artt drug drug disc discov over ery y camp campus us in Baroda; this 16-acre site, with space for 400+ scientists on completion, will be commissioned over the next two years. Work begins on a new R&D center in Mumbai, with 50,000 sq. ft. floor area for projects aimed at the North American and European markets.
2003 Forbes Global ranks Sun Pharma in the list of the best small 200 companies for 2003 (turnover less than $500million). $500million). Sun Pharma is rated amongst the best-managed companies for 2003 across all sectors. (Business Today-AT Kearney study of best-managed companies) 2004
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Sun Pharma acquires common stock and options from 2 large shareholders of Caraco, increasing stake to over 60% from 44% at a total outlay of about $42 million. By 2007, this stake has reached 75% on a diluted basis. The formulation site in Halol, India (the erstwhile MJ Pharma site) receives approval from USFDA, UK MHRA, South African MCC, Brazilian ANVISA and Columbian INVIMA. The BT Stern Stewart survey places Sun Pharma among the top 20 wealth creators in India and among the top 3 wealth creators in the pharma sector. Construction at a formulation manufacturing site at Jammu is completed. Our Our firs firstt join jointt vent ventur ure e manuf anufac actu turi ring ng unit unit,, in Dhak Dhaka, a, Bang Bangla lade desh sh is commissioned. This modern site is spread over 25,000 sq. ft. Two of Sun Pharma's API factories receive USFDA approval, taking the total number of US FDA approved sites to three. Sun Pharma acquires a Cephalosporin Actives manufacturer, Phlox Pharma, with with Euro Europe pean an appr approv oval al for for cefu cefuro roxi xime me axeti axetill amor amorph phou ous. s. By 20 2007 07,, a formulations facility to make sterile and non sterile formulations have been buil built, t, and and the the AP APII and and nonnon-st ster eril ile e sect sectio ions ns have have been been appr approv oved ed by the the USFDA. Nich Niche e bran brands ds are boug bought ht from from the the San San Dieg Diego, o, US base based d Wome Women's n's First First Healthcare. (WFHC, not listed). These brands are the gynecological OrthoEst® (estropipate), and the antimigraine a ntimigraine preparation Midrin®. Forbes Global ranks Sun Pharma in the list of most valuable companies for 2004 (turnover less than $2bill).
2005 Sun Sun Ph Phar arma ma buys buys a plan plantt in Brya Bryan, n, Ohio Ohio,, US and and the the busi busine ness ss of ICN, ICN, Hungary from Valeant Pharma.Sun Pharma acquires the intellectual property and assets of Able Labs from the US District Bankruptcy Bankruptcy court in New Jersey in December 2005. Dilip Shanghvi, the CMD, receives the E&Y Entrepreneur of the Year award in healthcare and life sciences for 2005. Sun Pharma is selected by Forbes amongst the best 200 companies (sales less than USD 1 billion) in Asia. This is the fourth time in 5 years that the company has been selected.
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2006 Announ Announced ced the demerg demerger er of innovat innovative ive busine business ss with with pipeli pipelines nes,, people people,, equipment and funding, into a new company. 2007 Completed the demerger of the innovative business, with requisite legal and regulatory approvals. SPARC ltd, the new company, is listed on the stock exchanges in India, the first pure research company to be so listed. In May 2007, we, along with our subsidiaries, signed definitive agreements to acqu acquir ire e Taro Taro Ph Pharm armac aceu euti tica call Indu Industr strie ies s Ltd. Ltd.,, (TAR (TAROF OF,, Pink Pink Shee Sheets ts), ), a mult multin inat atio iona nall gene generi ric c manu manufa fact ctur urer er with with esta establ blis ishe hed d subs su bsid idia iari ries es,, manufacturing and products across the U.S., Israel, Canada for $454 mill. This This all-ca all-cash sh deal deal is subjec subjectt to Taro Taro shareho shareholde lderr approva approvall and requis requisite ite regulatory clearances 2008 In November 2008, we along with our subsidiaries, acquired 100% ownership of Chatt hatte em Chem hemical cals, Inc Inc.,a .,a narco arcottic raw raw mater ateriial import porte er and and manufacturer of controlled substances with a approved facility in Tennessee. This will offer vertical integration for our controlled substance dosage form busi busine ness ss in the the US. US. (*OR (*ORG G - Oper Operati ation ons s Rese Researc arch h Grou Group p Au Audi ditt of Reta Retail il Chemist Sales, later renamed the IMS - ORG Retail Store Audit. Both ORG and IMS are the trademarks of their registered owners).
LOOKING AHEAD Over the last few years, we have been moving towards a profile that is much more international and formulation-driven. The Sun Pharma of tomorrow will have brands registered in major markets of the world, and in most markets, promoted by a high quality field force. In Indi India, a, we expe expect ct to reta retain in our our posi positi tion on of mark market et leade leaders rshi hip p in our our key key therapy areas, and reach leadership in newer therapy areas that we entered after 1997. In key international markets across Asia, South East Asia, Russia, China, the Middle East, Latam and Africa we would be a strong speciality comp compan any y with with pres prescr crip ipti tion on driv driven en sale sales. s. With With a stro strong ng netw networ ork k and and esta establ blis ishe hed d comp compan any y equi equity ty,, we woul would d be an exce excell llen entt part partne nerr for for a company seeking to license out products across markets.
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In the the high high valu value e gene generi ric c mark market ets s of the the US we expe expect ct to beco become me a respected generic company, with a portfolio comprising both of complex and simp simple le-t -too-fi file le gene generi rics cs,, buil buildi ding ng an edge edge with with tech techno nolo logy gy and the the cost cost advant advantage age of vertic vertical al integr integrati ation. on. While While we have have recent recently ly comple completed ted our fourth acquisition in the US, we believe there are excellent opportunities in the US generic space, where we can affect a turnaround and add value to a business. We have about $400 million earmarked for acquisitions in the US generic/drug discovery space.
ANALYSIS Swot analysis Strengths: •
•
•
Sun Pharma is highly regarded for its ability to launch new products with a great amount of speed and consistency. The company has only 20% exposure to the DPCO. The past growth rate of the company has always been double that of the industry as a whole.
Weaknesses: •
•
Cont Contin inuo uous us loss losses es of Cara Caraco co Ph Phar arma ma is a majo majorr conc concer ern n for for Sun Sun Pharma. The profit margins are declining for the company
Opportunities: •
•
•
The relaxation of DPCO will be a big boost for the company and this might marginally improve the profit margin. The The comp compan any y has has alre alread ady y made made ANDA ANDAs s (A (Abb bbre revi viat ated ed new new drug drug application) in USA and it provides a great opportunity for growth for the company. The company has entered the US market through its subsidiary Caraco Pharma. This provides a great opportunity for the company to make the most out of the expiring patents in USA.
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•
Expanding the generic drugs market in USA
•
New venture in animal drug.
Threats: •
•
The entry of foreign players will pose a major threat to the company. The company is more into acquisition based growth and this might lead to a stage of financial crunch as it has already happened in the case of Caraco pharma. Sun pharma provided debt to Caraco and is facing problems due to the continuous losses made by the latter.
Numerous opportunities for
Support a turn around oriented
Sun Pharm a
Support an aggressive strategy
Critical weaknesses for Sun Pharma is
Substantial strength for Sun Support defensive strategy
Supports diversification 19 | P a g e
Major threats for Sun Pharma is (2)
Five force model in Industry Competition: Pharma Pharmaceu ceutic tical al indust industry ry is one of the most most compet competiti itive ve indust industrie ries s in the country with as many as 10,000 different players fighting for the same pie. The rivalry in the industry can be gauged from the fact that the top player in the country has only 6% market share, and the top five players together have about 18% market share. Thus, the concentration ratio for this industry is very low. High growth prospects make it attractive for new players to enter in the industry. Another major factor that adds to the industry rivalry is the fact that the entry barriers to pharmaceutical industry are very low. The fixed cost requirement is low but the need for working capital is high. The fixed asset turnover, turnover, which which is one of the gauges of fixed cost requirements requirements,, tells us that in bigger companies this ratio is in the range of 3.5 to 4 times. For smaller companies, it would be even higher. Many smaller players that are focused on a particular region, have a better hang of the distribution channel, making it easier to succeed, albeit in a limited way. An important fact is that pharmaceutical industry is a stable market and its growth rate generally tracks the economic growth of the country with some multiple (1.2 times average in India). Though volume growth has been consistent over a peri period od of time time,, valu value e grow growth th has has not not foll follow owed ed in tand tandem em.T .The he prod produc uctt differentiation is one key factor, which gives competitive advantage to the firm firms s in any any indu indust stry ry.. Howe Howeve ver, r, in phar pharma mace ceut utic ical al indu indust stry ry prod produc uctt differentiation is not possible since India has followed process patents till date, with laws favoring imitators. Consequently, product differentiation is not the driver, cost competitiveness is. However, companies like Pfizer and Glaxo Glaxo have have crea create ted d big big brand brands s in over over the the years years,, whic which h act act as prod produc uctt differentiation tools. This will enhance over the long term, as product patents come into play from 2005. Bargaining Power Of Buyers
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The unique feature of pharmaceutical industry is that the end user of the product is different from the influencer (read doctor). The consumer has no choice but to buy what doctor says. However, when we look at the buyer's power, we look at the influence they have on the prices of the product. In pharma industry, the buyers are scattered and they as such does not wield much power in the pricing of the products. However, government with its polici policies, es, plays plays an import important ant role role in regula regulatin ting g pricin pricing g throug through h the NPPA NPPA (National Pharmaceutical Pricing Authority). Bargaining Power Of Suppliers The pharmaceutical industry depends upon several organic chemicals. The chemical industry is again very competitive and fragmented. The chemicals used in the pharmaceutical industry are largely a commodity. The suppliers have very low bargaining power and the companies in the pharmaceutical industry can switch from their suppliers without incurring a very high cost. However, what can happen is that the supplier can go for forward integration to become a pharmaceutical company. Companies like Orchid Chemicals and Sash Sashun un Chem Chemic ical als s were were basi basica call lly y chem chemic ical al comp compan anie ies, s, who who turn turned ed themselves into pharmaceutical companies.
Barriers To Entry Pharmaceutical industry is one of the most easily accessible industries for an entrepreneur in India. The capital requirement for the industry is very low, creating a regional distribution network is easy, since the point of sales is restricted in this industry in India. However, creating brand awareness and franchisee amongst doctors is the key for long-term survival. Also, quality regulations by the government may put some hindrance for establishing new manufacturing operations. Going forward, the impending new patent regime will raise the barriers to entry. entry. But it is unlikely to discourage new entrants, as market for generics will be as huge. Threat Of Substitutes Thi This s is one one of the the grea greatt adva advant ntag ages es of the the phar pharm maceu aceuti tica call indu indust stry ry.. Whatever happens, demand for pharmaceutical products continues and the industry thrives. One of the key reasons for high competitiveness in the industry is that as an on going concern, pharmaceutical industry seems to 21 | P a g e
have an infinite infinite future. However, However, in recent recent times, the advances advances made in the field of biotechnology, can prove to be a threat to the synthetic pharmaceutical industry.
General interpretation
1. Strategy Strategy and Approach Approach a. Create sustainabl sustainable e revenu revenue e streams streams i. Focu Focus s : Chro Chroni nic c ther therapi apies es ii. Differentia Differentiation tion : Techni Technically cally complex complex produc products ts iii. iii. Spee Speed d to to mar marke kett b. Seek Seek cost cost leader leadershi ship p
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i. Vertic Vertical al integr integrati ation on : Develo Developme pment nt throug through h Manufa Manufactu cturin ring g (API and Finished Dosage) to Marketing ii. Optim Optimise ise operati operationa onall costs costs c. Balance Balance profitabi profitability lity and and investme investments nts for for future future i. Acquis Acquisiti itions ons yieldi yielding ng high high ROI ROI ii. Develo Developme pment nt of of compl complex ex gene generic rics s
2. Growin Growing g Stead Steadily ily Revenu Revenue e double doubles s and Net profit profit triple triples s in 4 years; years; contin continuin uing g the trend despite increasing size. 42,723
45,000 40,000 35,000 30,000 25,000
18,177
20,000 15,000
11,853 10,000 5,435 3,962 1,706 491
5,000
1,352 -
93-94
94-95
95-96
96-97
97-98
98-99
99-00
00-01
Net Sales (CAGR 35%)
01-02
02-03
03-04
04-05
Net Profit (CAGR 42%)
3. Relentles Relentless s Custome Customerr Focus Focus 1998 Market Share indexed to 100 for all companies
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05-06
06-07
07-08
08-09
220
180
140
100
60 1998
1999 Sun
•
•
2000 Cipla
2001
2002
2003
Ranbaxy
2004
2005
Nicholas
2006
2007
Cadila
2008 DRL
Therapy Therapy focused focused marketing marketing by 2500 2500 sales representative representatives s covering covering 125,000 specialist doctors Strong increase in prescription and sales market share
4. Successfu Successfull At Acqui Acquisiti sitions ons Acquir Acquired ed 14 high high potent potential ial yet underunder-per perfor formi ming ng busines businesses; ses; succe successfu ssfull turnarounds.
5. Research Research and Developm Development ent •
Generic R&D spend around 8% of net sales sa les 24 | P a g e
•
•
•
Strong Strong resear research ch teams teams in generi generics, cs, finish finished ed dosage dosage develo developme pment, nt, biological support, chemistry Balancing the risk o
Immediate term : ANDA, DMF, Products for India
o
Medium term : Drug delivery systems
2 R&D centers with about a bout 600 scientists.
6. Sustained Sustained Profitab Profitabili ility ty •
Superior business model
•
Margins consistently higher than peers
90% 80%
80% 70%
62%
60% 50%
44% 40%
43%
30% 20% 11% 10%
10% 0% 2004-05
2005-06
2006-07
2007-08
2008-09
Gross Margin (Sun) EBITDA Margin (Sun)
Gross Margin (Other top 10) EBITDA Margin (Other top 10)
Net Margin (Sun)
Net Margin (Other top 10)
Gross margin= (Net Sales – Material Cost) / Net Sales * 100 Other top 10 Indian Pharma companies include Ranbaxy, DRL, Cipla, Piramal Healthcare, Lupin, Wockhardt, Cadila, Aurobindo, Glenmark and Torrent 25 | P a g e
References •
www.timesofindia.com
•
www.economictimes.com
•
Magazines-Business Today and Outlook
•
www.sunpharma.com
•
http://www.karvy.com/compresearch/company/sunpharma/sun.htm
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