India Pharma Sector - Sector Update
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Edel Pulse: Pharmaceuticals
Executive Summary The domestic branded generics market, a critical cog in the growth wheel for most Indian companies, is currently in spate. Unlike the apprehension of market participants about the sustainability of growth, our survey findings indicate that growth is not only sustainable but will move into the next orbit of 18-20% viz-a-viz current growth of 14-15%. Higher growth in domestic market will not only improve growth prospects of pharma companies (c30-50% to revenue), but will also improve overall profitability (margins are relatively higher). Further, as is the norm, when all companies are in expansion mode, only a handful will potentially emerge as winners. Hence, to understand these changing dynamics, we commissioned an extensive and unique study across 27 cities in 11 states (all four zones— North, South, East, and West), covering more than 100 distributors, representing notably 4550% of the total pharma market. These distributors, with more than 10-15 years of presence in the market, ideally connect suppliers on one hand and consumers on the other. We covered all tiers of geographies in each zone including metros, tier-I to IV cities. We travelled across the length and breadth of the country to gain incisive insights into the future of the domestic pharma market, performance of various Indian companies, strategies adopted and ground level challenges impacting growth. We have tied our observations to industry data from AIOCD to overcome individual distributor’s bias over companies. We further highlight that views of distributors are restricted to their coverage companies, which differ, but collectively represent 80% of the total market. ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF. Key questions addressed from the survey include:
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What is the potential growth in domestic market and key drivers of this growth?
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How sustainable is the current market growth over next three-four years?
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Which therapeutic areas are growing faster?
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What are the key strategies adopted by various companies?
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What are the key changes in the activity level of MNCs?
We conclude that, Sun Pharma and Lupin are ranked by 94% and 74% of coverage distributors, respectively, as preferred players in the large–cap space, while IPCA and Torrent Pharma are ranked by 86% and 70% of coverage distributors, respectively, as leading players in the mid-cap space. Interestingly, Sanofi-Aventis, among MNCs, is ahead of peers and is aggressively making its mark in tier III and IV cities. We also identified emerging new players such as Mankind, Eris, and Macleods, which are gaining strong traction in various markets. Combining the takeaways from our distributors survey and the prospects of Indian companies in emerging markets and US, we expect Lupin, Dr. Reddy’s, Cadila and Torrent Pharma to do well over the next 12-18 months. We are positive on Sun Pharma, however, current valuations do not leave much upside for investors. Overall, through this report, we have attempted to identify trends, drivers, and challenges faced in the ever-changing market scenario and effectiveness of current strategies adopted by various companies.
Edelweiss Securities Limited
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Edel Pulse: Pharmaceuticals
Contents At a Glance ................................................................................................................ 3 Ear to the ground: Verdict is Out ................................................................................... 4 Domestic Formulations: On a high ................................................................................. 7 Chronic Leads; Cosmetology New Avenue ...................................................................... 9 Metro, tier-I key markets; Semi urban and rural areas are new growth pockets ................ 13 Aggressive MNC expansion Poses High Risk .................................................................. 17 Differentiating ‘ Class from Mass’ ................................................................................ 20 Future Growth Drivers ............................................................................................... 29 Valuations: Rich, But Not Stretched ............................................................................. 31 Key Risks ................................................................................................................. 34 Appendix – I – Growth drivers: Pull and Push factors ..................................................... 37 Appendix – II – Survey Methodology ........................................................................... 43
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Companies Cadila Healthcare ................................................................................................ 53 Cipla.................................................................................................................. 71 Dr. Reddy’s Laboratories ...................................................................................... 79 Lupin ................................................................................................................. 89 Ranbaxy Laboratories .......................................................................................... 99 Sun Pharmaceuticals ......................................................................................... 119 Torrent Pharmaceuticals .................................................................................... 129
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321
1656
412
468
446
591
Cipla
Dr Reddy's*
Lupin Pharma
Ranbaxy*
Sun Pharma**
Torrent Pharma
CMP (INR)***
Cadila Healthcare
Company
AT A GLANCE
591
436
374
412
1,562
321
844
84.6
1,035.6
421.0
444.7
168.9
802.9
204.7
50,009
461,878
197,047
183,216
279,726
257,731
172,767
CMP (ExShares O/S Mkt cap NPV) (mn ) (INR mn) (INR)
Buy
Hold
Hold
Buy
Buy
Hold
Buy
Rating
16,307 19,040 22,586 26,616 32,142
FY11E FY12E FY13E
68,656 78,642
FY12E FY13E FY09
50,623
FY11E
FY10
35,141 32,546
80,682 90,331
CY11E CY12E FY09
72,273
CY10
FY10
73,610 68,725
64,939 75,280
FY12E FY13E CY08
56,693
FY11E
CY09
38,523 48,359
FY09
97,459
FY13E
FY10
72,724 84,371
FY11E FY12E
61,642
82,819
FY13E
67,624
71,260
FY12E
FY09
62,465
FY11E
FY10
52,343
65,929
FY13E
56,057
54,932
FY12E
FY09
44,991
FY11E
FY10
29,275 36,580
FY09 FY10
Revenue
9,705
6,679
5,323
4,414
4,087
2,999
20,941 24,504
15,186
8,545
12,190
11,291
8,472
6,108
1,801
7,873
13,710 16,121
11,594
9,728
7,541
21,186
17,982
15,297
13,510
9,718
19,311
16,128
13,569
62.4
4,614
3,608
2,973
2,687
2,154
17,576 20,658
26.0
20.8
17.8
42.6
16.8
20.4
35.6 14.5
55.5
(7.4)
31.0
12.0
11.6
5.2
(6.6)
8.0
14.5 15.9
17.2
25.5
40.0
15.5
16.0
7.5
9.7
35.0
16.2
14.1
11.4
7.1
23.7
20.0
22.1
23.0
25.0
18.6 54.5
Growth (%)
25.5
20.6
8.0
36.3
43.5
37.9 17.0
77.7
20.5
27.9
21.3
10.6
24.8
63.1
31.4 17.5
47.3
(31.9)
30.0
23.9
60.1
354.9
(58.4)
16.0
13.4 22.6
23.8
29.9
18.7
15.7
22.4
55.5
57.6
120.0
21.9
22.4
(0.8)
3.6
50.4
24.4
28.7
34.4
51.0
27.9
21.3
10.6
24.8
63.1
38.3 18.7
47.2
(31.9)
30.0
23.9
60.1
354.9
(58.4)
16.0
13.4 22.6
23.8
21.0
17.6
15.7
22.4
55.5
57.1
120.0
21.9
22.4
(0.8)
3.6
50.4
24.4
28.7
34.4
51.0
20.5
EPS
7.3
9.4
11.6
12.6
17.5
20.2 16.7
28.7
52.3
35.8
14.0
19.9
27.5
100.5
22.4
12.3 10.5
15.4
19.2
23.5
11.4
14.1
17.3
20.1
28.6
12.9
15.7
18.8
18.6
21.5
11.4
14.3
18.2
23.2
30.2
EV / EBITDA (x)
10.8
13.9
16.8
18.6
23.2
24.4 20.5
33.7
49.7
33.8
22.2
27.5
44.0
200.0
83.3
19.1 15.6
21.6
26.8
32.4
17.7
20.5
25.0
38.9
61.2
17.3
21.1
25.9
25.6
26.6
16.7
20.8
26.7
35.9
54.3
2.9
3.7
4.7
6.0
7.7
4.3 3.7
4.9
5.8
6.4
2.5
3.0
3.5
4.5
4.6
4.2 3.4
5.3
7.1
12.0
3.7
4.5
6.0
7.4
7.9
3.0
3.4
3.9
4.4
5.7
4.4
5.7
7.5
6.9
9.2
P/E (x) P/B (x)
Valuations
41.4
38.7
38.5
42.5
32.6
31.0 34.3
27.2
16.5
29.6
26.2
29.1
22.4
6.7
4.0
24.5 25.2
23.8
25.7
24.9
28.4
33.5
23.4
20.4
19.3
20.4
19.1
18.0
21.6
22.4
37.8
34.3
30.7
25.9
22.9
ROCE (%)
20.8
20.0
19.5
21.5
18.4
30.5 31.2
30.0
26.3
34.7
12.5
10.5
8.5
2.6
10.7
21.1 21.4
20.5
20.1
19.6
21.7
21.3
21.0
20.0
15.8
23.3
22.6
21.7
24.6
23.7
22.8
22.4
21.9
21.3
20.7
EBITDA margins (%)
*** CMP as on 21st April 2011
Note: * Financials (ex-ROCE) represent base business (Ex one-off from para IV) **Financials for Sun pharma includes Taro but excludes one-off from Para-IV
(29.9)
31.0
33.3
38.7
239.1
(77.1)
18.0
18.3 17.6
19.2
29.0
49.0
17.8
17.6
13.2
39.0
44.0
19.7
18.9
(1.6)
11.2
45.5
22.1
24.7
26.4
28.7
33.0
Revenue EBITDA Net profit
35.1
31.8
25.5
17.9 21.2
12.9
8.8
13,377
12.9
9,084
16.9
13.6
8.5
1.9
4.5
21.6 26.5
19.1
15.4
12.7
88.4
13,340
7,104
5,735
3,583
788
1,891
9,608 11,781
8,472
6,841
5,266
14,926
76.4
10,539
12,901
40.1
25.5
18.5
15.2
12.4
12.5
12.1
50.5
40.6
31.6
23.5
15.6
EPS (INR)
6,777
4,300
14,867
12,195
9,967
10,050
12,411 13,795
10,345
8,319
6,462
4,808
3,184
Net profit
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12,289
9,856
7,798
6,058
EBITDA
Financials (INR mn)
Edel Pulse: Pharmaceuticals
Edelweiss Securities Limited
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Edel Pulse: Pharmaceuticals
Ear to the Ground: Verdict is Out India is projected to be the third-largest pharma market (after the US and China) in terms of incremental growth. It is also evident that the sub-continent, with the highest population and robust economic growth, offers attractive return to pharma companies due to its costeffective manufacturing capabilities and branded generics nature of the market. Historically, the non-regulated structure of market has enabled Indian companies to build strong market share, however, with changing market dynamics, companies have to adopt new strategic approach to grow and compete. Therefore, to gain a deeper understanding of this transformation, we set out to survey various markets, encompassing all zones and tiers. We selected a sample of 27 cities, ideally representing a mix of all geographies within India, and after meeting more than 100 distributors across cities, we gained the following insights:
Growth momentum to sustain and move into next orbit Indian pharma market is likely to sustain current growth momentum (14-15% versus historical run-rate of 10-12% over FY00-10) and a large number of distributors anticipate growth trajectory to move to the next level of 18-20%. This could potentially add USD 3 bn of incremental sales over the next four to five years. This strong growth is inclusive of metros, tier I and II cities and smaller or tier III and IV towns. However, one-third of this incremental growth will come from tier III-IV towns and rural markets, which constitute 20% of the total market, and are currently growing at 25-30%, higher than metros and tier-I cities. This is largely led by increase in income levels, higher penetration of healthcare, and increase in health awareness among masses. Cipla, with a strong portfolio in the acute and respiratory segment, is depicting strong growth in tier
while Cadila, Lupin, Sanofi-Aventis and IPCA are also aggressively ISIEmergingMarketsPDF in-sdmcpl01II-IV frommarkets, 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF. expanding in these regions.
Chronic therapies leading growth; cosmetology new growth avenue Chronic therapies including cardiac, diabetics and neuro-psychiatry, constitute 28% of the total market and are growing at 18-19% versus the current industry growth of 15% (MAT March 2011). Most distributors have observed that anti-diabetics is emerging as a high-growth segment, followed by cardiac and CNS. Further, rising discretionary spending and focus on personal care is driving growth in the cosmetology segment. This segment’s growth potential is large, given lower penetration, and it entails higher margins due to better pricing of products. Other super specialties such as oncology, pediatrics and nephrology are also picking up in selective markets. The competition in chronic therapies is increasing rapidly, leading to higher investments by players to retain market share. Consequently, specialty focused promotion is emerging as a strong and effective approach to build brand loyalty. As per our survey, most companies have carved new divisions for key specialties, while others have created dedicated field force or special tasks force (STFs) to promote high-value brands within segments. Most distributors view this as highly effective strategy to enhance market share and also results in higher field force productivity. Sun Pharma has pioneered the specialty focus model, resulting in higher market share in the chronic segment.
Expansion by MNCs could intensify competition for Indian counterparts Multinational pharma companies have become aggressive and have initiated meaningful investments in the domestic market. These investments, although at nascent stage, will eventually set the base for the next leg of growth. Most leading players have set bold aspirations for their Indian businesses and are adopting a more localised business model, including pan-India penetration, branded generics launches, and well-spread out distribution network. While recent branded generics launches are priced economically, our survey indicates that sales have not ramped up in most markets for these products.
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Edelweiss Securities Limited
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Edel Pulse: Pharmaceuticals Moreover, in-licensing of off-patented/patented molecules could incrementally drive higher revenues in the medium term. We believe that with aggressive expansion plans and deep pockets, MNCs could potentially emerge as strong competitors, compelling Indian companies to hike investments, while price wars could potentially hurt their profitability in the long term.
Higher attrition in field force poses risk to current growth
The cost of hiring competent field force is soaring and retention is posing a key challenge. Most markets are seeing more than 30% field force attrition. We have identified four key reasons behind high attrition: (a) increase in demand for medical representatives to increase doctor focus, coverage and number of divisions; (b) limited supply of talent pool with companies competing for high quality people; (c) setting up challenging field force targets with a mandate to aggressively capture market share; and (d) shift to other sectors like IT and financial services which offer higher incentives and growth. We perceive higher attrition as a potential risk for companies following the old incentive structure and inefficient policies to retain field force, which could dent their growth and profitability in the near term. Cadila, Cipla, IPCA and GSK are few players facing higher attrition, while Sun Pharma, Lupin and Torrent have been ranked by most distributors as companies possessing highly effective and stable field force.
Decline in success rate of new product introductions
Most large and mid-size companies, to actively expand coverage across molecules or therapies,
are
aggressively
launching
new
products.
New
product
introductions
contribute 4-5% of overall market growth. However, as per our survey, 70-80% of these products are failures. Most of these failures are in established segments, where more
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Hence, we observe companies that are more proactive and launch products ahead of the market are more successful in building brands, which potentially contributes to higher business growth. Most distributors suggest that new launches by Sun Pharma, SanofiAventis and Lupin have pent-up demand in the first week of launch. Also, companies with differentiated R&D pipeline like Sun Pharma and Dr. Reddy’s clearly have an edge over others.
Differentiating ‘class from mass’: End driver of survey
Through our distributor survey we tried to differentiate highly effective companies from others (‘class from mass’) on the basis of parameters such as: (a) portfolio concentration (chronic versus acute); (b) growth relative to the market; (c) field force stability and productivity; (d) field force penetration; (e) success of new product launches; and (f) ability to build brands. The survey questionnaire was designed to gauge top 30 companies (as per market share) on the basis of these key parameters. We conclude that, Sun Pharma and Lupin are ranked by 94% and 74% of coverage distributors, respectively, as preferred players in the large–cap space, while IPCA and Torrent are ranked by 86% and 70% of coverage distributors, respectively, as leading players in the mid-cap space. MNCs are adopting a more localised approach to build market presence and are building infrastructure for the next leg of growth. Interestingly Sanofi-Aventis, among MNC pharma, is ahead of peers and is aggressively coming up in tier III–IV cities. Moreover, we also identified some key emerging small-mid size players, such as Macleods, Aristo, Eris and Mankind, who are scaling up and capturing incrementally higher market share.
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Edel Pulse: Pharmaceuticals Fig. 1: Competitive scorecard Domestic growth CAGR (5yr)
Company Name
Portfolio concentration
Success of Brand new product building ability launches
Field force stability
Field force productivity
Reach (Medical reps)
Large Cap Sun Pharma Dr Reddy's Cipla Lupin Cadila Mid-cap
Torrent Pharma IPCA Glenmark MNC
Ranbaxy
ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF. Sanofi-Aventis GSK India Pfizer India Scale:
Best 5
………………………………………………………………………………………………Least 1
Source: Edelweiss research
Table 1: Top picks - Lupin and Torrent Pharma offer highest upside CMP TP NPV of Reco Company one-offs
FY11E
FY12E
FY13E
14
26.7
20.8
16.7
9
25.9
21.1
17.3
BUY
18
25.0
20.5
17.7
BUY
21
21.6
19.1
15.6 22.2
844
960
BUY
Cipla
321
350
HOLD
1,656
1,950
412
500
Lupin
94
P/E (x)
(%)
Cadila Dr. Reddy's
(INR) Upside
Ranbaxy
468
432
94
HOLD
(8)
44.0
27.5
Sun pharma
446
477
10
HOLD
7
33.7
24.3
20.5
Torrent Pharma
591
760
29
16.8
13.9
10.9
BUY
Source: Edelweiss research Note: * PE multiple for Dr Reddy’s, Sun Pharma. and Ranbaxy is based on CMP adjusted for NPV of one-off exclusivity sales
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Edelweiss Securities Limited
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Edel Pulse: Pharmaceuticals
Domestic Formulations: On A High The Indian pharmaceutical market (IPM) has historically posted 10% CAGR over FY01-09. However, in the past two years market growth has been on a high trajectory at 15-16% indicating significant expansion in overall market base. To understand the trends and drivers of this growth, we commissioned an extensive survey of 100 distributors covering 27 cities in 11 states (all four zones—North, West, South, and East), representing notably 45-50% of the total pharma market. Chart 1: IPM growth has been robust over past two years 20.0
14.9
16.0 Sustainability of growth is not an issue
12.0
14.2
17.8 15.0
15.0
10.4
(%)
10.0 8.0
8.0
7.0 5.0
4.5
4.0 0.0 2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF.
2011 (MAT March)
Source: CRISIL, Edelweiss research
……Growth not only sustainable, but likely to move in higher orbit Most distributors (95%) believe that the growth is not only strong, but will sustain over the medium term. Over 60% respondents are of the view that growth is likely to sustain at an average 13-15%, while a relatively good number of distributors (27%) believe that it can be higher than the current average. Chart 2: Majority of distributors believe growth is sustainable
Average sustainable growth
>15% 27%
Sustainability of growth Not sustainable 5%
1 mn
Hyderabad, Chennai, Mumbai, Ahmedabad, Delhi, Kolkata
Tier-I
30%
500,000 to 15%
Tier-II
Gurgaon, Bhubaneshwar,Baroda, 1,000 to 3,000 Cuttak, Howrah 300,000 to 20% 500,000 Tier III Karimnagar, Warangal, 1,000 to 2,000 Nashik, ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on Noida 2011-11-09 01:19:45 EST. DownloadPDF. Tier IV 20% Rural/Micro Towns
up to 300,000
Vapi, Satara, Sangli, Abhore, Kolhapur, Miraj, Behrampur, Sikar, Chomu etc.
250 to 700
>15%
25-30%
Source: Edelweiss research
We highlight that metros are growing at an average rate of 13-15%, in line with the industry. Acute therapy still constitute ~60-65% of volumes, while the share of chronic therapies is increasing, which is driving higher number of specialty set ups. As a result, companies are expanding field force in these markets to target larger doctor population. Most distributors guide that growth in metros will sustain for the foreseeable future led by four key factors: (i) urbanisation (due to migration of people from lower tiers) resulting in higher population; (ii) rapid changes in lifestyle, leading to faulty eating habits, key driver of chronic disease; (iii) higher growth of middle income levels group driving affordability; and (iv) increase in diagnosis and treatment levels. Increase in health awareness is also resulting in higher self medication, which is driving most companies to switch leading brands from prescription to OTC (e.g., Pfizer is expanding its brand franchise by promoting Gelusil syrup as an OTC product). This strategy enables companies to get higher growth and return from established brands with lower investments. Moreover, companies like IPCA and Cadila are entering into nutraceuticals segment driven by higher demand for additional supplements to cope with rising stress levels. IPCA has introduced Nutralite to venture into the nutraceutical segment.
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Edel Pulse: Pharmaceuticals Growth in tier-I cities higher than metros We view, on the basis of our survey, higher growth in tier-I markets (at 15-20%) than metros, largely due to increasing base of chronic disease (diabetes and CNS) growing at a faster rate compared to metros and increasing penetration of better healthcare facilities such as higher secondary care and single specialty care hospitals. Semi-urban and rural markets: New growth pockets Semi-urban markets, comprising various tier II-IV cities, are potentially high growth markets, growing in the range of 15-30%, higher than average industry growth. Affordability is the biggest growth driver, led by higher disposable incomes, which has led to significant increase in pharmaceutical spending. Further, these markets are highly underpenetrated (70-75% of population comprising 40% of total market by value) which will enable it to sustain high double digit growth over the next four-five years. We believe this strong growth has positive implications for top tier pharma companies, majority of which have embryonic presence in these markets. However, the dynamics are different form metros (Table 4) entailing companies to tailor their marketing strategies to individual markets. Table 4: Dynamics of semi-urban and rural markets vary from metros and tier-I markets Semi-urban & Rural Metros & Tier -I towns Comments markets Chronic Acute therapies account for 80-90% of total Chronic (10-20%) (35-40%) consumption in semi urban areas Anit-infectives, gastro-intestinal and respiratory are high growth therapies, while chornic therapies are catching up with higher growth in towns withEST. moreDownloadPDF. urbanization ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 Therapeutic mix
Specialists (5-10%)
GPs and CPs (50%)
Doctor population GPs (MBBS), RMPs (90-95%)
Specialists (50%)
Nature of doctor population is largely GPs and CPs (90-95% of total), while specialists presence is limited to fewer class-II/III towns which are seeing higher urbanization and expansion of therapies like respiratory, neuropsychiatry and diabetics Poliferation of local players giving stiff competition to Top tier pharma companies
Local competition
Very high
Not much impact
Local playes have better relations with doctors, low pricing strategy and incentivise retailers with better schemes
Distribution set-up
Hub and spoke Multi-layered Lack of distribution set-up leading to higher cost (Hub is the Tier-III/IV town Wide spread and organized of distribution. (Sanofi Aventis does taxis tours which catrers to near by using own vehicles into micro interiors) micro towns)
Field force
Lack of quality in field force
More skillful with better Penetration and local presence is lower in tierproduct knowledge and III/IV cities understanding of the market
Source: Edelweiss research
Local field force presence is critical to gain market share in semi-urban and rural markets 14
We detail out three key strategies adopted by companies to penetrate tier III and IV markets. First, most companies are appointing local staff or setting up a local headquarter to cater to these markets, which was earlier addressed by field force from tier I and II towns in close proximity. As per distributors, local field force is essential to promote products effectively to local GPs and CPs which leads to higher volume growth. Second, existing
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Edel Pulse: Pharmaceuticals players are expanding their coverage (field force is doubled in most regions) to address larger pool of doctors and micro interiors, which were earlier not covered. For instance, to increase penetration, Sanofi Aventis is doing taxi tours in micro interiors which have no transport. Last, companies are organising more CMEs (medical education programmes by inviting senior physicians for local doctors) as well as healthcare awareness camps which are helping them reach targeted customers more effectively. Hence, by improving accessibility in under-penetrated markets, companies are creating higher demand for pharmaceuticals. We believe companies like Cipla, Cadila, IPCA, Ranbaxy, and Sanofi Aventis, which are adopting a more localized approach, are well positioned to take advantage of growing demand. Table 4, above, further depicts that the disease profile of tier III-IV cities is highly Companies primarily focus
concentrated on the acute segment. We believe companies in order to penetrate and build
on acute segment in tier
base in tier III–IV markets, will have to initially tailor their product portfolios to the acute
III-IV and rural markets
segment, while selectively positioning in the chronic segment. As per our analysis, chronic segments like respiratory (anti-asthma), cardiac, and diabetes are also picking up in selective markets which gives opportunities for growth to companies like Sun pharma, Torrent, and USV, who have selectively focused on neuropsychiatry, cardiac and anti-diabetic segments, respectively, in these markets.
(% of distributors)
Chart 9: Players becoming more active or expanding coverage in tier III-IV areas 75.0
60.0 45.0
ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF. 30.0
15.0
Torrent
Glenmark
Pfizer
GSK
Sanofi Aventis
Lupin
Dr Reddy's
Ranbaxy
IPCA
Cadila
Cipla
0.0
Source: Edelweiss research
As per our survey, larger players such as Cipla, Cadila, and Ranbaxy, with strong concentration in the acute segment, are doing well in semi-urban and rural areas, while players such as Lupin and IPCA are also expanding coverage and seeing positive traction from these regions (Chart 10). Moreover, MNCs (GSK, Pfizer and Sanofi Aventis) are also expanding field force, strengthening distribution networks, and launching economically priced branded generics products (such as Rabeprazole by Pfizer). We highlight that these products have initially not posted higher traction and will take longer gestation periods before building market share.
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15
Edel Pulse: Pharmaceuticals Chart 10: Relative performance in semi-urban and rural markets (Survey) 100.0
(%)
80.0 60.0 40.0 20.0
Gaining market share
GSK
Torrent
Sanofi Aventis
Glenmark
Macleods
Ranbaxy
Pfizer
Dr Reddy's
IPCA
Mankind
Lupin
Cadila
Cipla
0.0
Losing market share Source: Edelweiss research
Interestingly, Mankind and Macleods are prominently gaining market share, giving stiff competition to other players in these markets. While most companies have been traditionally focused on metros and tier-I towns, companies like Mankind and Macleods have expanded Mankind, Macleods have
penetration in smaller markets, thereby establishing strong hold in terms of prescription
strong foothold in semi-
share of doctors. However, the positioning is different than other peers and hence do not
urban and rural markets
directly compete with similar doctor population. To illustrate our point further, Mankind
strategy differentiates on two points: (a) lower prices; and (b) deeper penetration in doctors ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF. with a larger coverage list. Moreover, they have relatively better promotional strategies for retailers wherein the company offers schemes with higher incentives than other players. Finally, Mankind’s field force largely comprises people with non-science backgrounds and attrition is low due to higher incentive structure. We believe higher stability or lower attrition is critical to build market share in these markets. Chart 11: Field force stability of players in rural market (Survey)
Pfizer Mankind Lupin Ranbaxy Cadila Cipla IPCA 0%
20%
40%
60%
80%
100%
(% distributors) Better field force
Poor field force Source: Edelweiss research
16
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Edel Pulse: Pharmaceuticals
Aggressive MNC Expansion Poses High Risk MNC pharma companies are aggressively expanding with meaningful investments in the domestic market. These investments, although at a nascent stage, will set up base for the next leg of growth. Most leading MNC companies have set bold aspirations for their Indian businesses
and
are
adopting
a more localised business model
including
pan-India
penetration, well spread out competent field force, strong distribution network and branded generic presence. 65% of total distributors believe that MNCs are becoming aggressive in terms of launching new products, therapies, and competitive pricing of products. MNCs such as Aventis, MSD, and Abbott are transforming existing policies and aggressively building channel relations with distributors. For instance, Sanofi Aventis has directly interacted with all distributors across India (video conference call) to elucidate their business and future strategies. Moreover, senior management and area heads from MNCs are directly meeting key distributors to strengthen coverage. Chart 12: Strategies adopted by MNCs
(% of distributors)
100.0 80.0 60.0 40.0
ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF. 20.0
0.0 New product launches (incl branded generics)
Field force expasnion
Brand promotion
Building channel relations
Source: Edelweiss research
Chart 13: Most distributors perceive aggressive expansion by MNCs
Not much change in activity 35%
Higher activity level 65%
Source: Edelweiss research
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17
Edel Pulse: Pharmaceuticals Distinct shift in strategy by launching branded generics products MNCs are overhauling domestic portfolios by aggressively investing into branded generics, rebuilding the old/established brands through the OTC route and expanding into new therapies like CVS, CNS and Oncology. Table 5 shows, recent braded generic launches by some MNCs (GSK and Pfizer) and respective pricing of products versus Indian players. Table 5: MNCs are adopting aggressive pricing strategy in branded generics MNC
Molecules
Therapy
Brand name
Indian Competitive brands
Pricing (INR)
Company
Brand name
Ranbaxy
Glaxo
Pfizer
Atorvastatin
Rabeprazole
Gastrointestinal
180 (10 tablets)
Intas
125 (10 tablets)
Dr Reddy's
110 (10 tablets)
Cipla
157 (10 tablets)
43 (10 tablets)
CVS
Above 5
24 (7 tablets)
Pricing (INR)
Intas
55 (15 tablets)
Cipla
64 (15 tablets)
ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF. Dr Reddy's
70 (10 tablets)
Source: Edelweiss research
This, table, depicts that MNCs have entered into the branded generics segment with extremely competitive prices versus Indian companies. However, sales from these brands have not picked up due to lack of strategic bandwidth in promoting branded generics. Most distributors believe that branded generics launches by MNCs will take longer to build traction as there are cultural barriers which companies face while marketing a non-parent product. Moreover, in licensing of off- patented/patented drugs from parent pipeline (over next twothree years) are sought as key business drivers. For example, MSD has strong pipeline of in licensed molecules which are gaining traction in the market. Field force expansion to enhance penetration MNCs are rapidly expanding field force as part of their strategy to expand geographical reach into tier I and II cities. For instance, Pfizer has increased its field force from 1,100 reps in CY09 to 2,300 by CY2010 and further plans to add field force in CY11-12. Similarly, GSK has increased its field force from 2,000 in CY08 to 2,800 in CY10 (growth of 40%). Sanofi Aventis has also expanded its field force to 1,800 reps from 1,100 in CY08. These investments will reap benefits over the next three to four years, in our view.
18
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Edel Pulse: Pharmaceuticals Chart 14: Field force expansion by key MNC players
3,500 43%
force to expand geographical reach
2,800
(No. of reps.)
MNCs have doubled field
188% 64%
2,100 1,400 700 0 GSK
Pfizer 2008
Aventis
2010 Source: Edelweiss research
Sanofi-Aventis is preferred play in MNC space Sanofi Aventis is emerging as the most aggressive player, among MNCs, with an all inclusive strategy for growth. The company has positioned itself into the high growth chronic segment (50% of its total portfolio) with strong market share in anti-diabetics. Among the top 10 brands, six are in the chronic segment. Further, Aventis has active coverage across markets and is increasing reach into various tier II-IV markets. The company has adopted dual strategies each class of market. For instance, its focus in DownloadPDF. metros and tier-I markets is to ISIEmergingMarketsPDF in-sdmcpl01 fromfor 124.124.255.5 on 2011-11-09 01:19:45 EST. aggressively build brands and has employed a specialty task force (STF) for each of its brands. Lantus, Cardace and Allegra are few of the strong brands build by Sanofi despite stiff competition. For tier II to IV markets, the company is building upon its acute franchise by expanding reach and access through project Prayas (which underlines its strategy to reach micro interiors) and by launching line extensions of established brands such as combiflam cream. Chart 15: Relative performance of MNCs (Survey) 100%
80% Sanofi-Aventis is leading the MNC pack
60% 40% 20%
Growing above market
Ranbaxy
GSK
Pfizer
Abbott Piramal
Sanofi Aventis
0%
Growing below market
In line Source: Edelweiss research
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19
Edel Pulse: Pharmaceuticals
Differentiating ‘Class from Mass’ A strong and growing domestic market has opened floodgates of opportunities for Indian as well as MNC players, who are targeting these with multi-pronged approach. While some companies have been frontrunners in identifying future opportunities, others have lost momentum. To differentiate the former from the latter, we have contemplated various parameters which could be critical for growth. Further, we believe that historical execution is a realistic measure to differentiate players, but it may not be indicative of future growth and performance. Hence, these five key parameters (or critical success factors) could gauge the strength of a company’s domestic business and act as an effective tool to differentiate good from the bad (or winners from losers). These include: a)
Portfolio concentration or business mix (acute versus chronic)
b)
Ability to build brands
c)
Success of new product launches
d)
Field force penetration or coverage
e)
Field force stability and productivity
On the basis of above mentioned parameters and through our analysis from the survey, we have identified few highly effective companies which have strong execution and are growing ahead of market. Sun and Lupin emerge as on favored plays in large cap; Torrent/IPCA score in mid cap ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 2011-11-09 01:19:45 EST. DownloadPDF. Sun pharma and Lupin were ranked by most distributors as outperformers among large caps, We judge strength of while Torrent and IPCA scored in mid caps. Among MNCs, Aventis scored over other players domestic business of each such as GSK and Pfizer. Players such as Cipla, Ranbaxy and Cadila are facing some pressures player on the basis of five in terms of growth and stability but are likely to turnaround, in our view. key parameters Sun pharma has emerged as the undisputed choice among distributors primarily because of its ability to identify therapeutic gap areas and launch products ahead of competition, resulting in better mind share and market share. Second, the company has focus on medical colleges and has innovatively built its doctors franchise by engaging them at an early stage. Lupin scores over peers due to its focus on key opinion leaders (KOLs). The company has actively build a wider portfolio by entering into newer therapeutic areas and is growing ahead of peers in chronic segments such as CVS, CNS, and respiratory. Moreover, its aggressive and highly effective field force helps it sustain growth in a highly competitive market. Cipla, despite deep penetration and high field force productivity, has seen slow growth in domestic market. This is largely due to instability in the field force which has further impacted its ability to build big brands. However, we believe that Cipla can surprise the market positively due to its higher focus on tier II and IV markets, where the company has started witnessing high growth traction, and addressing of structural issues with reference to its mature and generic-generic portfolio in domestic market. Other companies like Cadila, Dr. Reddy’s, and Ranbaxy are also gearing up which is evident from the fact that they have ramped up their field force by 22%, 94%, and 72%, respectively, over the past two years. In the mid-cap space, Torrent is ahead of comparable peers on account of higher focus on the chronic segment, better field force stability, and ability to build brands. However, it lags in terms of launching new products. Moreover, IPCA is also gaining strong momentum in all 20
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Edel Pulse: Pharmaceuticals markets and has increased divisions (12 from earlier seven) to expand into newer therapies and tier II to IV towns. We highlight that Torrent and IPCA have expanded field force aggressively (by 64% and 58%, respectively) which has impacted their field force productivity (Fig. 3). In the MNC space, Sanofi-Aventis has a clear advantage over other MNCs because of high focus on the chronic segment, strong brand building abilities, competent sales force, and aggressive approach in metros as well as tier II to IV towns. Fig. 3: Competitive score card C ompany Name
Domestic growth C AGR (5yr)
Portfolio concentration
Brand building ability
Success of new product launches
Field force stability
Field force productivity
Reach (Medical reps)
Large Cap Sun Pharma Dr Reddy's C ipla Lupin C adila
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Torrent Pharma
IPC A Glenmark MNC
Ranbaxy Sanofi-Aventis GSK India Pfizer India Scale: Best 5
………………………………………………………………………………………Least 1
Source: Edelweiss research
The competitive score card, above, measures each company on the basis of its strength in each of the parameters, which is key end driver of our survey. We now illustrate our findings through discussion of each of these key parameters and substantiate our preferred plays over others.
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21
Edel Pulse: Pharmaceuticals
Portfolio concentration or business mix We prefer Sun Pharma, Lupin, and Torrent as they have higher concentration in chronic therapies, which contribute 45-60% of their total sales (Chart 16). The presence in the chronic segment has historically offered these players higher growth than industry. Further, chronic therapies provide better realization than acute, thereby rendering higher gross margins (80-90% versus 70% in acute segments). Companies which are largely focused on the acute segment such as Ranbaxy, Dr. Reddy’s, Cipla, and IPCA, are posting higher growth in micro markets. The acute segment continues to have larger share of IPM (~72% of total market) and has posted better growth in the past two years due to increased penetration of companies in tier II-IV towns and rural areas. Among MNCs, portfolio concentration is more skewed towards acute except Sanofi-Aventis which has build strong presence in the chronic segment, where we see growth picking up over the past six months. Chart 16: Players with strong focus on chronic segment to outperform market Torrent
Sun Pharma Sanofi… Lupin Cipla Sun, Lupin and Torrent have high focus on chronic segment
Dr Reddy's Cadila IPCA
Ranbaxy Glenmark ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF. Pfizer Glaxo 0.0
20.0 Chronic
40.0
60.0 (%)
80.0
100.0
Acute Source: Edelweiss research
We believe, within the chronic segment, companies with higher market share and ability to build successful brands will grow ahead of peers. As seen in charts 17-19, Sun Pharma has leading market share in most specialty segments, while Lupin has posted higher growth among peers. We highlight that the cardiovascular segment has become extremely competitive with older molecules facing pricing pressures. Cadila and Torrent have relatively underperformed in CVS due to pricing pressures in older molecules and lack of new product launches. As per our survey, Cadila is facing higher attrition among peers, leading to loss of market share in few divisions.
22
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Edel Pulse: Pharmaceuticals Chart 17: Key players in anti-diabetics market 40.0
12.0 36
29
9.6 7.2
Industry growth 17
16 16.0
4.8
0.0
Market share (RHS)
Torrent
Lupin
MSD
Piramal
0.0 SanofiAventis
2.4
Sun Pharma
8.0
USV
Growth (LHS)
Chart 18: Key players in cardiovascular market 40.0 35
5.2
32.0
higher market share and
(%)
24.0
Industry growth
19
19
16 segment 14 16.0 12 ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF.
14
2.6
Intas
Cipla
Lupin
Torrent Pharma
0.0
Ranbaxy
0.0
Cadila
1.3
Sun Pharma
8.0
Market share (RHS)
Growth (LHS)
Chart 19: Key players in neuro-psychiatry market 30.0
24.0
27 24
19
17.5 14.0
18
15
18.0
Industry growth
14
13 12.0
10
10.5 7.0
Market share (RHS)
SanofiAventis
GSK
Abbott
0.0
Torrent
0.0
Piramal
3.5
Intas
6.0
Sun Pharma
(%)
3.9
Lupin
We prefer players with growth within chronic
6.5
(%)
(%)
22
20
24.0
(%)
29
(%)
32.0
Growth (LHS) Source: Edelweiss research
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23
Edel Pulse: Pharmaceuticals
Ability to build brands: A key differentiator As new product launches dwindle, building big brands has assumed much greater importance and is rather necessary to improve profitability. To instill a culture and mindset of building large brands, companies need to focus on several aspects. First, for large brands, company’s require active life cycle management, while for scaling up medium sized brands they need to broaden coverage across doctors and geographies and finally for relatively new brands the focus should be to create credibility and generate prescriptions among KOLs (key opinion leaders). We recognize brand building as future growth driver and have identified companies with better track records in building brands. Our survey highlights that among domestic companies, Sun pharma leads the pack, followed by Lupin with 68% and 59% of distributors, respectively, gauging strong brand building capability. Among MNCs, respondents believe Sanofi-Aventis has better brand building ability. Similarly, in mid caps, Torrent, IPCA and Glenmark have better brand building ability compared to peers.
(% coverage distriibutors)
Chart 20: 68% respondents believe Sun Pharma has better brand building ability 75
60 45 30
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Ranbaxy
Pfizer
Cipla
Dr Reddy
Abbott Piramal
GSK
Torrent
Intas
Glenmark
IPCA
USV
Cadila
Mankind
Aventis
Lupin
Sun Pharma
0
Source: Edelweiss research
The table 6, below, further shows that the incremental growth in top 10 brands of most players is higher or in line with the overall growth of respective domestic business, except for Dr Reddy’s where growth is largely driven by new products. Sun pharma has shown highest growth in top 10 brands which further supports our preference.
24
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Edel Pulse: Pharmaceuticals Table 6: Top 10 brands are growing in line or higher than overall domestic growth Growth (MAT Mar 2011) (%) Top - 10 brands Overall Relative Cont. to sales domestic performance (%) Top 10 brands
Relative outperformance of Top 10 brands reflects higher focus on brand building by most players
Glenmark
36.9
27.6
22.4
5
Ranbaxy
36.6
15.7
9.1
7
Torrent
30.4
24.0
22.1
2
Cipla
27.9
25.0
20.6
4
Cadila
28.3
17.9
14.9
3
Sun Pharma
19.6
32.5
22.9
10
GSK
38.7
12.4
13.2
-1
Sanofi Aventis
55.1
20.0
21.2
-1
IPCA
34.7
22.0
24.4
-2
Lupin
21.0
21.6
24.3
-3
Pfizer
63.9
21.0
23.7
-3
Dr Reddy's
39.9
8.2
11.5
-3
Source: AIOCD, Edelweiss research
Success of new product launches Most large and mid-size companies, to actively expand coverage across molecules or therapies, are launching new products. However, as per our survey 70-80% of these products have been failures; most of these failures have been in established segments, where more than 10-15 players currently exist. Hence, we observe companies which are more proactive
and launch products ahead on of 2011-11-09 the market are more successful in building brands, which ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 01:19:45 EST. DownloadPDF. potentially contribute to higher growth of the business. The chart, below, indicates that companies like Sun Pharma and Lupin are equally successful in building new products, as Top 10 brands contribution to growth is relatively lower than the peers. However, companies like Ranbaxy and Glenmark still have high dependency on Top 10 brands. Ranbaxy’s Top 10 brands are driving ~50% of its incremental growth, primarily due to slower pace of new launches over the past two three years. Similarly, MNCs dependency on top 10 brands is relatively high due to fewer product launches compared to Indian peers. Chart 21: Lower contribution from Top 10 brands indicates higher traction from new launches Indian peers
MNC peers
65
42
Glenmark Cipla
34
Cadila Torrent IPCA
Dr Reddy's
26 Lupin 18
Sun Pharma
(Top 10 brands c ontribution to growth)
(Top 10 brands c ontribution to growth)
50
58
Pfizer
51
Ranbaxy
Sanofi Aventis
44 37
GSK
30
10 10 20 30 40 50 Top 10 brands contribution to total domestic sales (%)
10
30
50
70
90
Top 10 brands contribution to total domestic sales (%) Source: AIOCD, Edelweiss research
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25
Edel Pulse: Pharmaceuticals
(% of distributors)
Chart 22: Companies most aggressive in launching new products 65.0
52.0 39.0 26.0 13.0
Glenmark
Ranbaxy
Torrent
IPCA
Intas
Lupin
Pfizer
Mankind
Cipla
Sun Pharma
0.0
Source: Edelweiss research
Most distributors view higher traction from new launches by Sun Pharma , Sanofi Aventis and Lupin. Sun Pharma’s ability to identify therapeutic gap area and launch products ahead of the market are key differentiating factors behind its success. Also differentiated R&D pipeline of Sun Pharma and Dr Reddy’s clearly give them an edge over others. Dr. Reddy’s growth contribution from new products (78%) is highest among peers and higher than industry (40%).
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Higher field force penetration or coverage
Many pharma companies, including MNCs, have enhanced their field force over the past two years to expand their reach and penetration in existing as well as tier-II to IV markets. We believe there is a huge scope for higher coverage as modern medicine till date reaches only 35% of the population. India has approximately 8, 00,000 doctors, but most companies cover only 1,50,000-2,00,000 as these are the leading prescription generators. However, success of few pharma companies such as Mankind and Macleods has challenged the traditional model of top down approach and many companies (both Indian as well as MNCs) have expanded their reach to gain the incremental pie of growing opportunities. Chart 23: Field force penetration has increased over past four years
5,500 4,400 13%
(Field force)
Higher field force penetration to optimise reach to pharmacists, doctors and hospitals
CAGR (FY08-11)
23%
19% 25%
3,300
20%
18%
5%
19%
9%
2,200 1,100
Glenmark
FY11 (YTD)
Sun Pharma
Lupin
Torrent
Dr. Reddy's
FY08
Ranbaxy
Cadila
IPCA
Cipla
0
Source: Edelweiss research
26
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Edel Pulse: Pharmaceuticals As viewed in Chart 23, Cipla, IPCA, and Cadila have the largest field force, while Sun Pharma has not expanded its field force due to its restricted focus on Metro’s and tier I towns. Ranbaxy’s field force expansion, through its ‘Project Virat’, from 2,500 reps to 4,200 reps, over the past six months, has been the largest. Further, Glenmark lags its peers in terms of penetration, but expects to expand field force by 15-20% per annum over the next two years.
Field force stability critical for sustainable growth Field force stability is critical to maintain higher productivity and growth, while instability results in disruption of sales. Although retention has always been a challenge for the industry, off late, the attrition rate has zoomed owing to aggressive hiring. We believe, companies with strong and effective field force management have higher probability of sustaining market share and growth. Historically, MNCs were associated with better field force stability because of higher pay scale. However, as per the survey, Lupin, Sanofi-Aventis and Sun pharma have been ranked as companies possessing highly effective and stable field force compared to its large cap and MNC peers. Cipla has the highest attrition followed by Ranbaxy, while field force stability of Dr. Reddy’s and Cadila is above average. In the mid-cap space, Torrent and Glenmark have more stability than IPCA, Unichem, and FDC. In the unlisted space, Mankind has a stable field force because of its highly effective incentive policy. Chart 24: Companies with highly stable and effective field force (Survey) 100%
80% ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF. 60% 40% 20%
FDC
Unichem
Cipla
Ranbaxy
Cadila
IPCA
Dr Reddy's
GSK
USV
Glenmark
Pfizer
Average
Abbott Piramal
Satble field force
Torrent
Sun Pharma
Mankind
Lupin
Sanofi Aventis
0%
Poor field force stability Source: Edelweiss research
Field force productivity is of paramount importance Companies with higher field force stability and higher concentration in chronic segment has
Higher field force productivity yields higher margins
better productivity. Although, aggressive field force expansion has impacted per man productivity of many companies in the short term, we view these investments as positive as they lend long-term growth visibility. Analysing the long-term trend, we observe that Sun pharma, Cipla, and Lupin have higher productivity. Among MNCs, the field forces of Aventis and GSK are highly productive because of strong brand equity and concentration in a few therapies and geographies. Among mid caps, productivity of Torrent and IPCA has been impacted due to aggressive expansion in field force over the past two years. We highlight that it takes three to four years for new medical representatives to achieve company level productivity.
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27
Edel Pulse: Pharmaceuticals
Field force productivity (INR mn)
Chart 25: Recent expansion in field force has impacted productivity 12.0
9.6
Sun
7.2
GSK Aventis Glenmark
4.8
DRRD
2.4
Cipla
Ranbaxy
Lupin
Cadila
Torrent IPCA
0.0 1,000
2,000
3,000
4,000
5,000
6,000
Field force (no of reps) Source: Edelweiss research
Historical execution in domestic market Historical revenue growth reflects the effectiveness of strategies and strong execution capabilities of management. We highlight that companies which have scored well on all parameters, as discussed above, have also delivered strong revenue growth (over past five years). Chart 26 indicates that Lupin and IPCA have posted 24% CAGR over FY05-10, while Sun Pharma and Torrent have also registered strong growth of 22% and 20%, respectively.
ISIEmergingMarketsPDF in-sdmcpl01 from 124.124.255.5 on 2011-11-09 01:19:45 EST. DownloadPDF. Chart 26: Companies with strong historical growth scored well in our survey 30.0
24.1 23.7
21.9
20.1 19.9
18.4
18.0
11.6
12.0
10.0
9.3
7.2
6.8
Ranbaxy
14.5
Pfizer
Growth (%)
24.0
6.0
GSK
Sanofi Aventis
Cadila
Cipla
Dr Reddy's
Glenmark
Torrent Pharma
Sun Pharma
IPCA
Lupin
0.0
Source: Edelweiss research
28
Edelweiss Securities Limited
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Edel Pulse: Pharmaceuticals
Future Growth Drivers As the domestic pharma market grows in size and diversity, there are several opportunities that will scale up to their full potential. Some of these include biologics and vaccines, consumer healthcare, patented products and hospital segment, which are at an early stage of lifecycle, but are likely to scale up with upgradation of therapies, increased penetration of multi-specialty hospitals and changes in patients preference. According to industry sources, these opportunities will collectively grow to USD 25 bn by 2020 from the current USD 5 bn. Rising acceptability of new therapies As the domestic pharma market grows in size and diversity, we believe the acceptability of Acceptance of biologics and vaccines will increase
modern medicine (including biologics and vaccines) and new therapies will increase due to aggressive market creation by players and greater propensity of self medication. Investment in enhancing patient awareness and education will impact diagnosis and treatment levels. In addition patients will show greater propensity to self medicate. The consumer healthcare segment has the potential to grow at over 14% annually, provided players make large OTC brands easily available to consumers, differentiate their products, and establish an emotional connection with patients. Finally, the acceptance of biologics and vaccines will rise. The biologics market is expected to reach USD 3 bn by 2020 from the current USD 300 mn. Launch of patented products Although patented products’ contribution to the domestic market is negligible (USD 200 mn;
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