EXPORTS PERFORMANCE OF INDIAN PHARMACEUTICALS INDUSTRY - 2008-09

1. India's Pharmaceutical Industry – A Overview

The domestic pharmaceutical Market size (at retail value excluding public procurement and exports), as per ORG-IMS reports stood at approx. US$12.2bn. (Rs.55,454crores) against Rs.50,410crores in 2007-08 (US$11.08bn.) growing by a healthy 10% year on year.

The Exports Drugs, Pharmaceuticals & fine chemicals stood at Rs.39,537.66 crores (US$8.61bn.) during the year 2008-09 growing at 28.54% (refer chart 1 & 2 below). The exports grew at a compounded annual growth rate (CAGR) of 21.98% during the five year period between 2004-05 to 2008-09.

Broadly, Asia is the largest importing region with a share of 30% of India's pharmaceutical exports followed by Europe (24%) and North America (21%) (refer chart 3& 4)

During 2008-09 United States of America is the top export destination with a share of approx. 18% in India's pharmaceutical exports valued at US$1.55bn. followed by Russia valued at US$0.33bn. with a share of 3.84%, Germany (US$.31bn. and 3.65%), Austria (US$0.31bn. and 3.58%) and UK (US$0.27bn. and 3.12%) (refer table 1).

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Table 1: Country-wise Exports of India's Drugs, Pharmceuticals & fine chemicals (figs. in Rs. Crores)

Rank Importing % Share Cumulative CAGR YoY Rank (2008 Country 2008-09 2007-08 (2008-09) % Share(2008- (2004-05 Growth (2007-09) 09) to 2008 (%) -08)

-09)

1 USA 7,103.27 5,839.35 17.97 17.97 27.18 21.64 1

2 Russia 1,519.20 1,243.81 3.84 21.81 18.37 22.14 3

3 Germany 1,441.87 1,448.01 3.65 25.46 193.90 1,172.37 58

5 UK 1,233.09 1,146.52 3.12 32.16 20.43 7.55 4

6 South Africa 1,126.75 684.27 2.85 35.01 51.02 64.67 8

7 Canada 1,090.43 789.15 2.76 37.77 21.81 38.18 6

8 Brazil 1,018.89 771.61 2.58 40.34 20.10 32.05 7

9 Nigeria 1,001.74 671.24 2.53 42.88 21.29 49.24 9

10 Ukraine 687.22 497.14 1.74 44.61 19.53 38.24 13

11 Israel 686.09 456.80 1.74 46.35 42.05 50.19 16

12 Netherlands 669.98 522.69 1.69 48.04 22.31 28.18 10

13 Spain 620.02 501.42 1.57 49.61 15.76 23.65 12

14 Turkey 614.20 502.10 1.55 51.17 26.64 22.32 11

15 China 561.53 879.42 1.42 52.59 0.76 -36.15 5

16 Kenya 543.86 366.60 1.38 53.96 43.65 48.35 23

17 Viet Nam 536.62 483.56 1.36 55.32 15.16 10.97 14

18 Belgium 520.90 273.28 1.32 56.64 36.19 90.61 33

19 Italy 507.85 471.28 1.28 57.92 13.66 7.76 15

20 Mexico 501.54 442.49 1.27 59.19 15.86 13.34 17

Source: DGCIS, Pharmexcil Research

Pharmaceutical exports occupy a share of 5.2% to 4.4% in India's total exports over the last 5 years (refer table 2).

Table 2: Principal Commodity Exports of India (figs. In Rs. Crores)

Rank Commodity Name 2006-07 2007-08 2008-09 CAGR % Share Cumulative % Share

1 Gems & jewellery 72,295.18 79,227.74 127,424.33 19.81 15.17 15.172 Petroleum & crude products 84,520.15 114,191.68 123,397.99 40.79 14.69 29.863 Transport equipment 22,398.22 28,282.06 51,246.30 41.69 6.10 35.964 Machinery & instruments 30,420.34 36,750.33 50,376.46 31.77 6.00 41.965 Drugs, pharmaceuticals & 26,895.18 30,759.64 39,537.66 21.98 4.71 46.67

fine chemicals6 Readymade garments 31,289.51 30,335.79 38,521.06 14.18 4.59 51.25

cotton incl. accessories7 Other commodities 13,919.72 16,146.56 35,208.23 36.42 4.19 55.448 Manufactures of metals 22,992.16 28,389.05 34,728.57 22.78 4.13 59.589 Electronic goods 12,914.31 13,532.16 31,227.70 39.57 3.72 63.3010 Primary & semi-finished 19,813.73 16,723.63 21,773.14 8.32 2.59 65.89

iron & steelSource: DGCIS, Pharmexcil Research

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1.1 Composition of India Pharmaceutical Exports

In the year 2008-09, 58% of India's pharmaceutical exports comprised formulations valued at Rs.23,146.31 crores followed by Bulk Drugs (48%) valued at Rs. 16,564.93 crores and herbals exports including medicants & medicaments of AYUSH products occupied a share of 3% valued at Rs.1,156.64 crores (refer chart 5 & 6).

1.2 State-wise Exports of Pharmaceuticals from IndiaPharmexcil has conducted an elaborate survey of its over member exporters from Pharmaceutical industry of India to gather company-wise exports. The analysis of data reveals that Maharashtra leads in overall exports including Merchant exports (38.98%) followed by Andhra Pradesh (20.5%) (refer table 3).

Table 3: Top 10 States in Exports of Bulk Drugs, Pharmaceuticals, Herbals (2007-08)

Rank State % Share (2007-08) Cumulative % share

1 Maharashtra 38.98 38.98

2 Andhra Pradesh 20.50 59.48

3 Haryana 9.58 69.06

4 Gujarat 7.92 76.98

5 Karnataka 6.66 83.64

6 Tamil Nadu 5.48 89.11

7 Delhi 4.29 93.41

8 Chandigarh 3.14 96.54

9 Madhya Pradesh 1.05 97.59

10 Kerala 1.04 98.63

Source: Pharmexcil Research

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2. India in Global Pharmaceutical IndustryThe global pharmaceutical markets are estimated at US$773.1bn (2008) growing at 4.8% percent over the previous year (refer chart 7). Top Therapeutic Category-wise Sales are also given at chart 8.

Source: IMS, Pharmexcil Research

Source: IMS, Pharmexcil Research

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As per the latest statistics available from United Nations 'Comtrade' the Global trade in Bulk Drugs and Pharmaceuticals in the year 2008 stood at US$ 404.2bn growing by 10.37 over the previous year. During that year, exports of Pharmaceuticals stood at US$374.69bn. growing by 10.38%.

India is the 15th largest exporter of Bulk Drugs & Formulations in value terms with a share of 1.44% during 2008. The country is 9th largest exporter of APIs/Bulk Drugs valued at US$819.1mn. and the country ranked 8th in terms of export volumes. The country also imported bulk drugs valued at US$968.27mn. during that year.

On the formulations front, the country exported US$5.00bn. worth of formulations in 2008 growing by 30.56% over the previous year when the country's formulations exports were valued at US$3.82bn. It ranked 14th in value terms and 3rd in volume terms.

Germany is the top exporting country with exports valued at US$67.44bn. followed by Belgium and Switzerland in that order (refer tables 4, 5 & 6). Bulk drugs have a meager share of 7.3% in the total trade at US$29.5bn. Germany was the largest exporter of formulations with exports valued at US$62.47bn. followed by Belgium (US$48.69bn.) and Switzerland (US$40.09bn.). In quantity terms also Germany was the largest exporting country followed by China and India. China was the largest bulk drugs exporting country with exports at US$5.25bn. followed by Germany (US$4.97bn.) and USA (US$4.11bn.).

Table 4: Top Exporting Countries of Bulk Drugs & Pharmaceuticals (figs. in US$mn.)

Rank Country 2007 2008 % share

1 Germany 55,520.78 67,438.88 16.68

2 Belgium 47,377.79 50,665.56 12.53

3 Switzerland 36,232.92 44,145.34 10.92

4 USA 33,379.84 38,076.67 9.42

5 France 28,291.37 33,189.47 8.21

6 United Kingdom 28,975.58 31,342.25 7.75

7 Ireland 18,749.69 22,546.15 5.58

8 Netherlands 15,361.05 17,231.52 4.26

9 Italy 15,646.15 16,595.01 4.11

10 Sweden 8,719.60 9,167.87 2.27

11 China 6,093.35 8,117.00 2.01

12 Denmark 7,237.12 8,076.41 2.00

13 Austria 6,303.99 7,382.23 1.83

14 Canada 6,188.93 6,191.10 1.53

15 India 4,475.95 5,822.45 1.44

Source: UN trade database 'Comtrade', Pharmexcil

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Table 5: Top Importing Countries of Bulk Drugs & Pharmaceuticals (figs. in US$mn.)

Rank Country 2007 2008 % share

1 USA 53,954.01 59,868.18 15.38

2 Germany 40,934.01 46,669.00 11.99

3 Belgium 41,602.36 44,332.86 11.39

4 France 22,068.56 24,820.57 6.37

5 United Kingdom 20,418.65 20,658.26 5.31

6 Italy 18,176.71 19,974.99 5.13

7 Switzerland 16,693.44 17,777.67 4.57

8 Netherlands 16,353.47 12,981.00 3.33

9 Japan 9,145.98 10,998.52 2.82

10 Canada 10,315.06 10,770.32 2.77

Source: UN trade database 'Comtrade', Pharmexcil

Table 6: Top 20 Importing Countries as per Imports Growth rates

Rank Country CAGR

1 Russian Federation 33.09

2 China 30.42

3 Brazil 23.39

4 Poland 22.62

5 Greece 17.76

6 Mexico 15.91

7 Germany 15.48

8 USA 14.06

9 Sweden 13.90

10 Austria 13.81

11 Turkey 12.60

12 France 11.68

13 Japan 11.51

14 Canada 11.38

15 Italy 11.36

16 Switzerland 11.09

17 Australia 10.17

18 Belgium 8.43

19 Netherlands 7.02

20 United Kingdom 6.91

Source: UN trade database 'Comtrade', Pharmexcil

2.1 Global trade in Herbal Medicines

The Global Exports of Medicinal Plants, Gums & Resins & Essential Oils last year is estimated at US$6.07bn. which is a decline of 3.2% for the second consecutive year as per the latest data available from International Trade Centre (ITC). The Global trade has been declining at Compounded annual rate of 1.71% over the five year period 2004-2008. Gums & resins constitute the largest traded segment with 49%

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share at US$2.99bn. followed by Crude herbs and Essential Oils (refer Chart 1). Country-wise top exporters and importers in each of the three segments are provided at Table 5, 6, 7, 8, 9 & 10 respectively.

1. India's Strengths in Pharma R&D

India is a globally acknowledged source of high quality affordable generic medicine with rich vendor base. India is not only an API and formulation manufacturing base, the country is poised to become manufacturing hub for pharmaceutical industry of the world and an emerging hub for Contract research, Bio-technology, Clinical trials and Clinical data management. The country's pharmaceutical industry has shown tremendous progress in terms of infrastructure development, technology base creation and a wide range of production covering almost all therapeutic categories and dosage forms.

The above fact is further firmly demonstrated by the trends in:

1. The number of product approvals received from various major regulatory authorities of the world

2. The cost advantage India offers in comparison with developed markets and

3. Other technical strengths of our country in development and production of pharmaceuticals.

The country has 814 WHO CGMP approved pharmaceutical plants (as on Apr. 2009 available in the website of DCGI). It has 153 European Directorate of Quality Medicine (EDQM) approved pharmaceutical manufacturing facilities.

Table 7: Number of Indian Companies Approved by Various Regulatory Agency of World

Name of Regulatory Agency No. of Companies Approved from India

WHO GMP Certified Plant 814

EDQM (European Directorate of 153Quality Medicine) (Bulk drug)

MHRA (Medicines Healthcare 15Regulatory Agency), UK

U.S. FDA (Formulation plant) 23

Source: Websites of Drug Regulatory Agencies of respective countries, Pharmexcil Research

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These DMFs have been filed from 169 facilities by a total of 136 Indian companies. India has 1,735 Type-II active DMFs filings with US FDA of all 6,482 DMFs filed which is 26.76% as on Sep. 2008 (refer chart 9). India has DMFs for 462 products of the total 1,117 products filed with U.S. FDA.

India, currently accounts for one out of every four Abbreviated New Drug Applications (ANDAs) (Generic products approvals) in the years 2007 & 2008, more than one fourth of total Drug Master Files (DMFs) (Active Pharmaceutical Ingredient approvals) with US FDA, the largest share in registrations granted in the world including USA. It also received 31% of all tentative approvals as at the end of December 2008. The resilience can be seen in the number of approvals received in both OTC & Prescription drugs as also in various therapeutic categories (refer chart 10 and Table 8).

Table 8: Therapeutic Category-wise Product Approvals of India (Prescription Products) in U.S.A (As on 12.11.2008)

Sl. No. Therapeutic Category Total % share(Product-wise)

1. Anti-HIV 13 18.05

2. Anti-Microbial 274 14.77

3. CVS 254 11.12

4. Anti-Diabetic 37 10.57

5. CNS 247 10.27

6. Dermatological 9 10.22

7. GI Tract 60 9.88

8. Other Anti-Viral 12 9.09

9. Anti-Allergic 10 7.87

10. Analgesic 53 5.03

Source: U.S. FDA, Pharmexcil Research

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1. Clinical Trials in IndiaAs per United States National Institute of Health, India ranks 25th in number of Clinical trials initiated in the country with a total of 1,101 with a share of 0.93% in the total clinical trials initiated around the world. USA is leader in the segment with a share of 36.75% followed by Canada (5.45%), Germany (4.57%), France (3.91%) & United Kingdom (3.44%). China stood at 20th position with a share of 1.14%. The number of Clinical trials initiated in India were growing at CAGR of 83.5% during the five year period 2004-2008 which declined by 83.52% during the last year (refer chart 11). Of the total 1,101 clinical trials initiated in the country, 419 were completed and 272 studies were at recruitment stage as at the end of Nov. 2009. India thus far conducted Phase III clinical trials accounting for 49% followed by Phase II and Phase IV (refer chart 12). Clinical trials pertaining to drugs stood at 851, followed by biological (68), medical devices (41), procedure related (42), behavioural 24 and others (75). Pfizer is the leading sponsor followed by Sanofi-Aventis, Hoehringer, Novo Nordisk and AIIMS in that order.

Source: U.S. NIH, Pharmexcil Research

Source: U.S. NIH, Pharmexcil Research

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India's Exports of Medical, Surgical & Diagnostic Equipment and Diagnostic Reagents

India's Exports of Medical, Surgical & Diagnostic Equipment and Diagnostic Reagents for the year 2007-08 stood at Rs. 2,753.26 crores (US$600mn ) growing a CAGR of 13.94% over the 5 year period between 2004-05 to 2008-09 (Refer Table). A brief analysis on Composition of exports, growth rates, and their percentage share are given in the Table below.

India's Exports of Medical Devices, equipment, Diagnostic reagents & Surgical Dressings (in Rs. Crores)

Product categories 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR % Share

Medical Devices & 1,064.71 1,188.27 1,321.17 1,151.43 1,434.89 7.75% 52.12%

Diagnostic Equipment

Orthopedic Appliance 149.08 221.64 244.44 223.35 252.22 14.05% 9.16%

& Medical instruments

Surgical Dressings 379.53 572.67 653.22 689.99 972.80 26.53% 35.33%

Diagnostic Reagents 40.09 63.15 76.24 60.87 93.35 23.53% 3.39%

Total 1,633.40 2,045.73 2,295.08 2,125.63 2,753.26 13.94% 100.00%