|
|
 | | | |
- close
- close
- close
- close
| |||||||||
Suggest other news sources for this topic
WIKI ANALYSIS
Piramal Healthcare (BSE:500302) is the fourth largest, by revenue, Indian pharmaceutical company in the Indian market with consolidated revenues of Rs.36.7 billion for FY10.[1] NPIL makes nearly 50% of its revenue (46.7%) from contract services that include molecule development, manufacturing and packaging. The other major source of revenue (44.5%) is their domestic formulations division that makes generic small molecule products for the Indian market. They have now expanded this division, by acquisitions to have products that cater to international markets.
Piramal Healthcare generates 46.7 % of its revenue from contract manufacturing deals. NPIL by its acquisitions of biologics manufacturing facilities is now able to manufacture both small molecules and biologics, allowing it be a strong competitor in this sector that grew by 85% in total value in the last 3 years.
On May 21, 2010, Abbott Laboratories (ABT) announced that it would acquire the branded generics business of Piramel Healthcare for $3.7 billion.[2]
Company Overview
NPIL was formed in 1988 and has its head office in Mumbai, India.[3] The company strategy for success has been to position itself as a partner of choice for global drug companies that want to leverage India’s low manufacturing cost advantage. Its core strength lies in its joint ventures and alliances with some of the key global players in the industry. Indian generics manufacturers are the largest exporters of generic drugs in the world. NPIL focuses on the research, development, manufacture and marketing of pharmaceuticals. It focuses on nine key therapeutic areas, including cardiovascular, neuro-psychiatry, oncology, diabetes management, respiratory, anti-infectives, gastro-intestinals, dermatology and NSAIDS (non-steroidal anti-inflammatory drugs). It offers bulk drugs for domestic and export markets, specialty labs and chemicals, pharmaceutical formulations, genomic information, and herbal products. NPIL has joint ventures and alliances with Roche, Allergan, Gilead Sciences, and Arkray Inc.. The Company operates three major divisions: Healthcare Solutions, Pharma Solutions and Diagnostics.
Business Segments[4]
Healthcare Business (44.9% of Sales)
The Healthcare business is centered on branded generics that are sold domestically. The enforcement of product patents along with process patents in India since 1995 have considerably slowed down new product introduction in this sector, with companies looking for in-licensing tie-ups with multi-national drug companies for growth. In addition to the lack of internal innovation this market is intensely competitive with only 36% of the market share belonging to Top-10 companies. In 2010, the segment's market share expanded from 4% to 4.2%. 32 new products and line extensions were launched. The company also acquired "I-Pill" brand from Cipla.
Pharma Business (46.7% of Sales)
Global innovator pharma companies are facing increased ‘'genericisation'’ of their key products, with blockbusters coming off patent protection valued at estimated $21 billion. Increased acceptance of Indian companies as manufacturing partners has resulted in higher growth. However, custom-manufacturing market is large and growing. Pharma Solutions is Piramal Healthcare’s division that provides Contract Research and Manufacturing Services (CRAMS) to big pharma.
Piramal widened its CMO capabilities by acquiring an injectible formulations manufacturing facility in Bangalore, India. This has increased its overall capability to now handle all 4 parts of CMO manufacturing (Clinical Phase API production, Clinical Phase Formulational, Commercial API production, Commercial Formulation along with Fill-finish), thus making them an option for both virtual/small biotechs and big pharma.
In 2010, the segment renewed the remaining contract with Pfizer.
Diagnostics (4.2% of Sales)
Piramal Diagnostics Services Limited (PDSL) is a subsidiary of Piramal Health care which now includes all diagnostic services operations. PDSL is India’s largest chain of Clinical Diagnostic Centers, with over 104 diagnostic centers in 48 cities and over 300 collection centers.
Business Growth
FY 2010[1]
- Operating income increased 12% to Rs. 36.7 billion.
- EBIDTA increased 26% to Rs. 7.4 billion.
- Profit After Tax (PAT) increased 52% to Rs. 4.8 billion.
Key Trends and Forces
The cost and risk of developing new drugs is ever increasing
Drug development is a time-consuming and costly endeavor. The entire time frame for developing a new drug and successfully bringing it to market takes anywhere from 10 to 15 years at a cost of around $800 million. Innovator companies take high risks when developing new drug therapies with the probability of drugs failing in the last stages of clinical trials being quite high. In addition to these risks the probability of discovering a new molecule is also low, making a blockbuster product pipeline extremely valuable.
Piramal Healthcare had its own R&D facilities that were focused on discovering and developing new chemical entities as drug products. The company has since de-merged its NCE R&D group, essentially reducing its exposure to pipeline risk. This move allows NPIL to achieve its strategic goal of becoming a lean long-term manufacturing partner for innovator companies for contract manufacturing rather than becoming an innovator company on their own.
In addition to the de-investing, NPIL acquired Minrad International Inc, an inhalation anaesthetic gas manufacturer. NPIL also bought the entire issued stock of RxElite Holdings Inc, an inhalation anaesthetic gas distribution company, thus complementing its earlier purchase and instantaneously having a product and proper marketing channels to sell it.
Government Price Control on Drugs
14.1% of sales of the Healthcare Solutions for NPIL fall under the Drug Price Control Order (DPCO). DPCO is an ordinance issued by the Indian government in 1995 that regulates the price of bulk drugs to ensure availability, at reasonable prices to the whole country. It provides the list of the price controlled drugs, procedures for fixation of the prices, method of implementation of prices and the penalties for failing to abide by these rules.[5] Such a high percentage of sales being dependent on government price control is a major risk, and how the company deals with such a scenario will determine its valuation.
Client Concentration and Payment Risks
Around half of sales for NPIL come from custom manufacturing contracts with big pharma and biotech companies. Such contracts usually have lumpy payment schedules and are also dependent on off-take contracts (customer will buy x quantity of product y at pre-set price for z number of years) exposing the company to revenue loss if any set back for the client company occurs.
NPIL has reduced the risk of client concentration and payment with its integrated capabilities (process development along with clinical and commercial scale manufacturing capacities) that allow the company to diversity its client list by offering unique full life-cycle partnership opportunities that has reduced its risk. It now offers not only small molecule process development and manufacturing capability but has also invested into providing manufacturing and research facilities for biologics. NPIL bought Avencia Biologics's Pharmaceutical custom synthesis business. It has since incorporated this business into its clinical and commercial API manufacturing divisions, thus offering its clients expertise in manufacturing monoclonal antibodies and cytotoxic API conjugates.
Competition
The pharmaceutical industry is characterized by rapid advances in scientific knowledge and ability to discover new drugs.The industry is therefore led by large manufacturers and marketers of drugs investing heavily in research & development, having clinical testing, marketing and distributing capabilities.
Piramal Healthcare is a unique company in regard to its diversification across fields of contract manufacturing, research and diagnostics.
Some of the main competitors of NPIL are:
- Sun Pharmaceuticals Industries - It is No.1 in India in specialty therapy areas like psychiatry, neurology, cardiology, gastroenterology, diabetology and respiratory by revenue. It has brands in 30 markets worldwide and also has a generic presence in the U.S. with Caraco Pharm Labs, Sun Pharmaceutical Industries Inc (subsidiary).
- Cipla - Cipla is a leader in the domestic retail pharmaceutical market. It also exports raw materials, intermediates, prescription drugs, over-the-counter products, and veterinary products to some 180 countries around the world.
- GlaxoSmithKline - It is one of the oldest pharma companies in India and with a turnover of Rs. 1500 crore is one of the market leaders(market share) in India with a share of 6.2 per cent. Its main portfolios consists of anti- infectives, dermatologicals and pain management drugs.
- Dr. Reddy's Laboratories - It is a global pharmaceutical company with it's headquarters in India and a presence in more than 100 countries. In India it the biggest drug maker by sales.
- Ranbaxy Labs - It is the largest generic pharmaceutical company in India by sales and a top 10 generic company globally. Ranbaxy was the first Indian company to license a product in this field to Bayer AG.
References
| |||||||
