Transcript No Slide Title

Presentation by Ganesh Nayak, COO and Executive Director, Zydus Cadila
Challenges for healthcare system
• Expectation of high quality healthcare
– Facilities and infrastructure
– High quality affordable medicines
• Demographic changes
– more people will require prolonged care
• Lifestyle changes
– Increased prevalence of chronic diseases (substantial part of overall
healthcare costs)
• Rising healthcare costs
Pharmaceutical spending
Pharmaceutical spending, as % of total health spending
Pharmaceutical spending, as % of total health spending
Greece
Germany
Italy
France
Spain
Denmark
UK
United States
Netherlands
Norway
Developed countries
(7 - 20%)
Bulgaria
Czech Rep.
Hungary
Croatia
Poland
Estonia
Slovenia
Lithuania
Transitional countries
(15 - 30%)
India
Egypt
China
Indonesia
Thailand
Tunisia
Jordan
Argentina
South Africa
Developing countries
(24 - 66 %)
0
10
20
30
40
50
60
In developing countries drugs are largest household and second
largest public expenditure for health
Source: WHO statistics
70
How to control pharmaceutical spending?
“Generics” are the key to reducing pharmaceutical expenditure by
offering a low cost alternative to expensive “Brands”
Generics
• Generics are pharmaceutical products that contain already
marketed and well established drugs, they are
– Intended to be interchangeable with originator products
– Usually manufactured without a license from original manufacturer
or originator
– Marketed after patent validity or any other market exclusivity of
original product is over
– Marketed under a non-proprietary name (INN or other approved
name) or under brand names (branded generics)
• Generics makes government or household spend less without any
compromise on quality or safety
– Depending on the market prices of generics could be 30%-90% lower
than originator products
– US even provides 180 days market exclusivity to a generic product
that challenges an existing granted patent
Role of Generics
Introduction of generic products reduced cost of antiretroviral therapy
by as much as 95% in just three years
Indicative annual cost per person for triple therapy in
Africa (US $)
$10,000
$8,000
UN Drug Access Initiative
$6,000
Domestic production
$4,000
Accelerated access initiative
$2,000
??
Generic offers
$0
1996
Source = UNAIDS, B. Samb, 2000
1997
1998
1999
2000
2001
2002
Emergence of India
Unavailable
Sophisticated industry, significant research
Innovative capability
Active ingredients & finished products
Finished products from imported ingredients
No pharmaceutical industry
(23)
(10)
(17)
(13)
(84)
(42)
In early nineties India was recognized as an
insignificant player in terms of pharma
manufacturing capabilities
Source: UNIDO: The world's pharmaceutical industries. an international perspective on innovation , competition and policy. 1992
Transformation in less than 10 years
Unavailable
Sophisticated industry, significant research
Innovative capability
Active ingredients & finished products
Finished products from imported ingredients
No pharmaceutical industry
(23)
(10)
(17)
(13)
(84)
(42)
In less than ten years India is ranked at par with
US, Japan and many European countries in
terms of manufacturing and innovation
capabilities but with an “EDGE”
The Indian Pharma Evolution
Phase V
Phase III
Development
Phase
Phase II
Government Control
Phase I
Early Years
•Market share
domination by
foreign
companies
•Relative absence
of organized
Indian companies
1970
Phase IV
Innovation and Research
Growth Phase
•New IP law
•Rapid expansion of
domestic market
•Discovery Research
•International market
development
•Process
development
•Research orientation
•Indian Patent Act –
1970
•Production
infrastructure
creation
•Process patents
•Export initiatives
•Drug prices capped
•Local companies
begin to make an
impact
1980
1990
2000
2010
The Indian advantage
 Large skill base
– Experts in process chemistry
– Long history of reverse engineering
 Vast talent pool
– Sheer number of scientists
– Motivated & English speaking
– Large number of trained Indians returning home from North
America and Europe
 Unmatched cost competitiveness
– Lower cost of infrastructure and skilled manpower
– Vertical integration
The Indian advantage
 Strong local industry
– Growing expertise with international regulatory compliance
– High quality manufacturing with abundant capacities
 Speed
– Very strong entrepreneurial spirit
– Hungry for growth and recognition
– Quick learners and fast movers
 Availability of capital
– Stock market has seen unprecedented growth in the last decade
– Continues to be bullish on the pharma industry
India - Value proposition
Process
chemistry
skills
Vast talent
pool
Innovation
World class
manufacturing
base
Quality
Price
Lower costs
Globally
harmonized
regulations
Compliance
This is how the India Advantage transforms into four critical
components of value proposition for the customer “INNOVATION”.
“QUALITY”, “PRICE” and “COMPLIANCE"
India - Building capabilities
3000
Huge investments in building USFDA plants
Values in US$ Mio
Capex
Net Fixed assets
2600
2500
capex of over US$2.60 Bn between FY05 and
2000
1606
1500
FY09
1291
1087
• The net fixed assets have grown by about
900
1000
500
• Indian companies have taken combined total
50% to US$1.6 Bn between this period
424
375
252
• Most of the capex have been in USFDA
0
FY03
FY04
FY05
FY06-FY09
approved plants in anticipation of huge
generic opportunity
Source: Company Reports, CLSA Asia Pacific
80
72
Highest number of USFDA approved plants
70
60
50
40
• India has the highest number of USFDA
40
approved plants outside US
25
30
20
22
10
10
0
India
Italy
Spain
China
• Low cost manufacturing and huge capacities
5
Taiwan Hungary
are likely to put severe pricing constraints
• Capabilities are being built across the
spectrum of dosage forms
Source: USFDA, Internal Analysis, Industry Reports
India - Building capabilities
High Backward Integration Capabilities
• Number of API facilities approved between
2000 and 2009 quadrupled
• More than 170 API facilities approved by
USFDA existed till 2009
• Number of these projects were backward
integration projects
Largest number of DMF filings
• Gaining dominance in global API business by
filing almost 40% of all DMFs filed with
USFDA (share of only 2% in 1996)
• Cumulative filings at the end of 2009 stands
at 1200 and significant number of filings have
Annual
Cumulative
173
105
61
Source: USFDA, Internal Analysis, Industry Reports
68
44
33
11
1
0
0
1985
10
1
1990
1995
1400
DMF Filings from India
1200
% of total filings
2000
2004
2009
50%
40%
1000
800
30%
600
20%
400
200
0
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
09
happened till date
200
180
160
140
120
100
80
60
40
20
0
10%
0%
India - Building capabilities
More companies entering global markets
Large contribution in ANDA filings
• Significant increase in the number of
• Indian companies are filing close to 250
companies directly filing ANDAs
ANDAs compared to 30-40 in 2001 (this is
• Each company has been filing around on
32% of total filings with USFDA)
an average 18-20 ANDAs every year
• Many of these filings are for niche dosage
including niche dosage forms
forms where Indian companies had not be
• Host of these companies are vertically
traditionally strong
integrated and have strong domestic
business to manufacturing scale
300
250
25
20
20
15
5
% of total filings
230
200
5
50
32%
160
40%
35%
30%
60
40 12%
80
20%
15%
14%
10%
0
0
2001
2002
2003
2004
2009
Source: USFDA, Internal Analysis, Industry Reports
50%
25%
100
8
4
260
150
12
10
ANDA Filings from India
0%
2001
2002
2003
2004
2005
2009
India - Leading pricing revolution
Indian drug prices are lowest in the world
Brand
Generic
Lipitor
Atorvastatin
Pfizer
US Price
(US$ per
unit) per unit
3.10
Zocor
Simvastatin
Merck
Norvasc
Pfizer
Celebrex
Company
Indian Price
(US$ per unit)
Indian Price as %
to US Price
0.35
11.30
3.80
0.35
9.30
Pfizer
1.30
0.11
8.50
Celecoxib
Pfizer
2.40
0.11
4.60
Zyprexa
Olanzapine
Eli Lilly
8.30
0.18
2.10
Paxil
Paroxetine
Glaxo
2.44
0.24
9.90
Vioxx
Rofecoxib
Merck
2.47
0.11
4.40
Zoloft
Sertraline
Pfizer
2.21
0.26
11.90
Pravachol
Pravastatin
BMS
2.50
0.33
13.20
Fosamax
Alendronate
Merck
15.3
0.70
4.60
Source: CLSA Asia Pacific-Markets
India - Where the cost advantage comes from?
Cost advantage extends well beyond labour cost
Capital Efficiency
Process Engineering
• Upfront capital costs of setting
up a project 25%-50% lower than
in other developed markets
• Easy access to locally fabricated
cost effective equipment
• High quality technology &
engineering skills
Filing Costs
• Cost of developing an ANDA is
lower due to lower input costs
and lost cost of scientific &
intellectual capital
• Cost of filing DMFs and ANDAs
is 50%-60% lower than in US,
Europe and many other
regulated markets
• Continuous process improvement
by the Indian companies due to
highly competitive local market
and low pricing
Cumulative
impact (costs
are lower by
30%-40%)
• This Achieved through either an
efficient manufacturing process
or through better yields
Manpower Costs
• Huge talent pool of scientists
and skilled workforce available
• Average labour costs are
approximately one-fifth of costs
in developed countries
• Quality at par with the
international standards
Product development costs - A case example
R&D spend
on Generics
(US$ Mio)
ANDAs
Filed
Spend/ANDA
(US$ Mio)
Teva
247
53
4.70
Mylan
69
17
4.10
Alpharma
81
10
8.10
Ranbaxy
39
29
1.30
Dr.Reddy’s
33
14
2.50
Zydus Cadila
17
12
1.40
• Indian companies spend significantly lower than amount their global counterparts in developing
ANDAs due to lower upfront capital investments in building R&D infrastructure and low cost
talent pool of high quality scientists
• Indian companies can derive good returns even on products where market size is small and not
of much interest to larger companies (this is evident from increasing trend to file DMFs for offpatent products
Source: Annual Reports, CLSA Asia Pacific-Markets
India – Presence across value chain
NCE
NDDS
Leverage
Skills
Specialty
Formulations
Commodity Generic
Formulations
High end APIs
Commodity bulk actives
Chemicals & intermediates
Leverage
Costs
• Indian companies have
strong presence across the
pharma value chain thus
increasing scope of areas
where India advantage can be
successfully leveraged
• Contract manufacturing and
outsourcing of the APIs and
commodity generics is
attractive option to leverage
costs advantage of Indian
companies
• Product development &
marketing alliances, custom
synthesis, contract research
and clinical trails are good
options to leverage both cost
and skills
Thank You