Porter Five Force Model

Topics: Pharmacology, Pharmaceutical industry, Generic drug Pages: 10 (2107 words) Published: May 17, 2013
In the quarter that ended in September 2012 the pharmaceutical companies in India performed well in the US markets and this is expected to help them do well in the days ahead too. The local market is set to see some exclusive product introductions and is itself expected to record a decent level of growth.

India Pharmaceutical Industry Information

At present there are almost 24 thousand companies in this industry with almost 330 companies in the organized sector. The top 10 companies hold almost 33.33 percent of the market. In 2012, the industry saw a year-on-year growth of almost 16 percent and is presently worth around 10 percent of the global industry in terms of volume and 1.4 percent with regards to worth.

Exports provide a substantial amount of the revenue generated by the Indian companies. While certain companies are focusing on markets that are not fully regulated as well as the generic markets across Europe and the US, others are looking to operate as custom manufacturers for innovators.

Bio-pharmaceutical markets have lesser competition and the manufacturing process is rather complex. This is letting a number of companies focus in that area.

The 5 leading companies in this sector spend approximately 5 to 10 percent of their earnings in research and development related activities. However, in global circles this percentage is near 15 to 20 percent.

Indian companies have been taking various steps for their R&D operations like associating with innovators. Some other companies have changed their molecule license structure for making their milestone payments.

Some organizations are also preferring to make their research and development units into separate entities. However, with an overall decrease in research companies are now venturing into generics. In such a scenario the innovation-centric companies are purchasing such pharma houses or partnering with them.

The supply in the Indian market is high when it comes to the therapeutic medicines and this is typical for a market that is growing. The case is different for lifestyle drugs. The demand is rather high in certain therapy related segments. However, this is expected to change once the literacy and life expectancy levels increase. Future growth of Indian Pharmaceutical Sector

Compared to the similar quarter in 2011-12 the sector is expected to see a revenue growth ranging between 20 and 25 percent. The reduction in the value of the Indian currency is also expected to help the exports. However, the extent of benefit will depend on the level of exposure for each company to hedging.

It is expected that Ranbaxy will be making profits of at least 40 percent thanks to the sale of Lipitor’s generic version. Lipitor is the biggest seller among drugs in the world. It is also supposed to introduce Actos, a diabetes drug valued at 3 billion dollars. Sun Pharma has performed well in both India and the US and this is supposed to help its future performance.

The USFDA has lifted the ban on Caraco, its supplementary company, and this will help its revenues from the US. In July and August 2012, the Indian pharmaceutical market has grown by 15 to 16 percent. The segment for acute therapies has grown slowly because of the deferred monsoon. This is also likely to make sure that majority of these companies grow slowly in 2012.

Barclays Equity Research expects that in the quarter starting after September 2012 the Indian pharmaceutical companies will show an all round performance. Companies like Sun Pharma, Dr. Reddy’s Labs, Glenmark, and Lupin are supposed to perform better than the rest.

Angel Broking is expecting that the pharma companies listed in the Sensex will have a commendable growth rate of 23 percent in their sales compared on a year-on-year basis. In case of earnings the year-on-year growth has been estimated at 24 percent. The large cap companies are expected to win the race against the others.

ICICI Securities opines...
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