Global strategy for Indian pharmacy companies and the opportunity in emerging markets: A case study on Aurobindo Pharma
To understand the trends in Indian pharmacy companies which have been recently going global by investing abroad with an intention for market expansion?
To find out the strengths of the Indian Pharmaceutical Industry and analyse the pattern of Mergers and Acquisitions by various companies across the globe.
To throw light on the strategies followed by Aurobindo Pharma in acquiring other pharma companies.
The research includes strategy of the emerging pharmaceutical companies in India and understands the trends and process of the companies that have been going global to expand their market in the world-wide.
In pharmaceutical sector around the world, India ranks 4th in terms of volume and 13th in terms of value. In the year 2006 the value was USD 7.42 billion, the growth has been increased by 12.9% over the previous year. In this total sales 90% of the sales are accounted as generics and the remaining are patented drugs. Now a dayâ€™s governments of various countries, patients and industries are pulling attention towards generic drugs, due to lower in cost and less R&D investment than compares to that of the patented drugs. In the year 2005 the generic market has been increased by 20% in the world which is four times that of the patented drugs and three times that of the pharmaceuticals market. US market alone had acquired 44% of the generic drugs (Pharmabiz, 2009). The Compound Annual Growth Rate (CAGR) of generic drugs in Indian pharmaceuticals has been increased by 16.6% during the period of 2001-05. The expected CAGR during the period of 2009-14 would be 13.2% and approximately the total value may reach $15,490m in 2014 (Research and Markets, 2009). In the year 2009 in India there were more than 80 FDA approved plants, Italy (55) and China (27). The Indian pharmaceuticals companies like Cipla, Dr. Reddyâ€™s lab; Wockhardt, Lupin and Nicholas Piramal are doing well in developed market such as US and Europe. These companies have exciting values in formulation, bulk drugs, generics, novel drug delivery system, new chemical entities, biotechnology etc (Research and Markets, 2007).
4.1 Indian pharmaceutical market structure:
Source: Cygnus, 2007
According to Dr. Richard Gerster, â€œThe IndianÂ pharmaceutical industry is a success story providing employment for millions and ensuring that essential drugs at affordable prices are available to the vast population of this sub-continent.â€? The Indian pharmaceuticals ranks very high in terms of quality, technology and the range of medicines manufactured. Indian pharmaceuticals market will grow 10-14%, to touch $40 billion by 2015 (Mckinsey, 2009).
India has a powerful biotechnology that can overthrow by the revolution of agriculture, healthcare, industrial processing and environmental sustainability. In India there are 100 research laboratories and more than 400 educational and training institutes across the country (Pharma India, 2005).
Major companies in India 2006
Source: company annual report FY 2006-07, *annual report 2006 December ending.
In the above figure y-axis indicates to turnover (Rs.bn)
Indian pharmaceuticals is divided into two benefits, one is strong domestic consumption growth and robust export opportunities (Indus view, 2009).
4.2 Mergers and acquisitions of Indian pharmaceutical companies
The major reason for acquisitions is to attaining access to new technologies, clinical research, catapulting the market share and platform for improving custom synthesis and working with new clients. The major companies acquiring acquisitions in India are Ranbaxy, Dr. Reddyâ€™s, Dishman and Wockhardt.
Value USD million
Beta pharm (Germany)
Ethimed NV (Spain)
Allen spa (Italy )
Target research association (US)
In branded formulation
Able laboratories (US)
Valeant pharma (2 facilities) (Hungary, US)
Active pharmaceuticals ingredients (API)
Rocheâ€™s API business (Mexico)
Over the last decade the outsourcing has become the important part for the pharmaceutical companies. The main reason for the outsourcing is rising pressure to reduce costs, and time-to-market, this leads to the increasing the technical demanding areas such as drug discovery and biotech R&D. Outsourcing opportunities has been rapidly growing in the market like Eastern Europe, China, India. Indian pharmaceutical industries are putting effort on the development of the product for global generic market and this will be visible with the DMF filing at the US FDA (DMFs are generic dossiers filed with the FDA in order to allow the API to appear in marketed drugs). 30% of the DMF filings at US FDA are filed by Indian companies. Dr. Reddyâ€™s, aurobindo, cipla, Ranbaxy, matrix and lupin are the leading Indian companies of DMFs filed in US.
From the sources of US and European countries they made research on Indian based pharmaceuticals companies regarding merging and acquisitions and they were pleased to announce some name to the Indian companies and decided to name as â€œIndian Pharmaceutical MNCâ€?.
Mainly US and European countries have focused on Indian due to the vast change in research work done and the main plus points for them were the laws of Indian government have changed drastically like providing new opportunities to launch patented molecules this point made them interest in investing Indian pharmaceuticals, and likewise India pharma is becoming strong manufacturing stand and with low-cost development, manufacturing destination.
Source: Shivani Shukla, 2006.
The global has been rapidly changing into the generic market; here are some companies that have been invested, acquired and deals in 2008-09. Green cross Pharma in Singapore was acquired by Ascent; Pfizer plant in Ireland was acquired by Hovione, PharmaPro manufacturing facility was acquired by URL Pharma, ECR pharmaceuticals was acquired by HI-Tech pharmacal.
Â Source: Research and Markets, 2009.
Indian pharmaceutical market in U.S., has been continuously increasing, a $440 billion market appoints 47% of the global pharmaceutical market. In February 2009, Indian pharmaceutical companies including large and mid-sized all together have assured approvals for 15 Abbreviated New Drug Applications (ANDAs) (Indus view, 2009).
In order to expand their market some companies have entered into foreign markets in generic drugs segment. Some companies have entered directly by setting their own sales and marketing organisation, either in organic manner or through acquisitions and others have entered these market through partnership or merging with well established companies. Ranbaxy acquired Ohm Laboratories in US in 1995, Jubilant Organosys acquired Cadista pharmaceuticals (formerly Trigen Laboratories) an US generic company in 2005. Aurobindo Pharma gained an FDA-compliment formulations manufacturing plant in Dayton, New Jersey in 2006, in the same year the company acquired Milpharm LTD in UK. Dr. Reddyâ€™s approved as a MHRA manufacturing facilities in UK. Wockhardt has a manufacturing facility in UK, Ireland and France (espicom, 2009).
Aurobindo was founded in the year 1986, by Mr P.V. Ramaprasad reddy, Mr. K. Nithyananda reddy and some highly committed group professionals. Aurobindo pharma launches Asiaâ€™s largest formulation facility in India in 2009. Vision of the company is â€œTo become Asia's leading and one among the top 15 generic Pharma companies in the world, by 2015" (aurobindo, 2009). R&D of the company lies in developing intellectual property in non-infringing processes and resolving complex chemistry challenges. Aurobindo pharma expects to reach $2 billion by the end of the year 2013, the company licensing deal with Pfizer to sell generics drugs in more than 70 emerging companies and developing market in India (Fierce pharma, 2009).
Aurobindo pharma is the first company that makes acquisition in Europe acquires Milpharm in UK in 2006, on agreement with the U.K. Whyte group LTD and Iracot LTD. This acquisition makes the company to gain immediate access to European markets. This company is profit making company in generic; it takes ownership over hundred Marketing Authorizations (MAs) Medicines, and Health care products Regulatory Agency, UK (UK MHRA). Milpharm records Â£7.7 million in 12 months of period ended 30th September 2005 (Aurobindo, 2006).
Source: THE HINDU, journal, 2006
Source: PR Domain News Release, 2006
The above pie chart indicates that Aurobindo pharma exports break-up in the year 2006
â€˜Researchâ€™ the term fundamentally means expedition for information or data collection. It certainly means to accumulate the information regarding certain queries and to build up a convinced scheme for that question. If there is no such a word like research all the scientific and social projects could be resulted in guess work and inexact data.Â
The descriptive or relative, qualitative research work is typically probing, in concern it can either contain some or all the criterion mentioned below. (Miles, 1994)
Extremely intensified and drawn out contact in the field.
Designed to attain a holistic or complete picture.
Little consistent instrumentation is used.
Most analysis is done with words.
Take into account the experiences, opinions and feelings of the participants.
The research strategies generally used are the chosen case study and the grounded theory.
5.1 Research paradigm
A research paradigm is expanded to the critical thinking of the students that may help the students to gain a clear view about the research with the different examples.
Positivist paradigm is based on the philosophical idea which explores the social reality. Positivism paradigm has been influencing the educational research for a long time, later half twentieth it is criticized due to the lack in subjective states of individual.
5.2 Research approach
There are four different types of research approaches, they are specification of a theory, design based on the theory, implementation, and evaluation. This research includes deductive and inductive quantitative comes under deductive and qualitative comes under inductive. Quantitative method mainly includes objectively, caution and types of questions in this are pre-specified and outcome oriented. Qualitative mainly includes subjectively, meaning of the report. Types of questions are open-ended and process oriented.
5.3 Research method
The research study is basically to understand the impact of pharmaceutical industries that have been going global to increase their market. Thus, given the research aim and objectives of the study, methodology that is employed for this study is basically to desk study rather going for primary survey method. The Aurobindo Pharma chosen for the case study is taken into account with a view point and to review how the company acquired and merged with other companies.
5.4 Sampling procedure
A sample is a finite part of statistical population, whose properties are studied to gain the information of the whole (Webster, 1985). When it comes in case of dealing with people, it can be defined as a set of respondents picked out from a larger group for the reason of survey. So as a part of sampling technique the questionnaire is to be conducted between a selected group of actual client and non client households during the course of the survey.
5.5 Method of data Analysis
The published data collected on the pharmaceutical industry will be analysed with the help of diagrams, graphs and pie charts and draw conclusions based on the results obtained. Saunders et al (2003) claims that there is no standard models to analyzing qualitative data but discuss one technique where the data are disaggregated into meaningful categories that are subsequently rearranged and analyzed for related data and key themes.
Secondary data collection
The data is mostly collected from the secondary form of publications like articles, Indus view, InPharma publishers, Cygnus business consulting and research, Pharmaceutical journal newspapers, Pharmabiz, market and research.
Primary data collection
Primary data is the collection of ideas all the way through the chain of various semi-structured consultations conducted by the researcher. This data can be collected by conducting interviews and by daily written record of experiences and observations. The research includes questionnaire, case
2. Read Literature
4. Draft Literature Review
5. Read Methodology Literature
6. Devise Research Approach
7. Draft Research Strategy and Method
8. Develop Questionnaire
9. Pilot Test and Revise Questionnaire
10. Administer Questionnaire
11. Enter Data into Computer
12. Analyse Data
13. Update literature read
14. Complete remaining chapters
15. Submit to tutor and await feedback
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