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Contents

GENERAL PHARMACEUTICAL INDUSTRY’S OVERVIEW:

Market size

Major players

Exports

3-4

ANIMAL HEALTH CARE:

Market size

Major players

4-6

SEGMENTATION:

Based on species

Based on products

7-9

MARKET COMPOSITION 10-14

MARKET DRIVERS 15-16

STRATEGIES TO TAP ANIMAL HEALTH CARE INDUSTRY 16-17

CHALLENGES 17

OPPORTUNITIES 18

OUTSORCING AS AN OPPORTUNITY

-Big Pharmaceuticals

-Mid-Sized Pharmaceuticals

19-21

FUTURE 21

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Industry Overview

“The Indian 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.”

Richard Gerster

The Indian Pharmaceutical Industry today is in the front rank of India’s science-based

industries with wide ranging capabilities in the complex field of drug manufacture and

technology. India stands at the 4th position in terms of volume (8% of world's production),

13th in terms of value, and 17th in terms of pharmaceutical export value in the global

pharmaceutical industry.

Market Size

Indian Pharmaceutical Industry is estimated to be worth 34,000 crore, growing at about a

CAGR of 8 to 9 percent. Indian pharmaceutical industry is expected to reach the value of

US$ 12 billion by the year 2010. The domestic market of Indian pharmaceutical is expected

to grow at rate of 12-13%. Drug sales to retail consumers grew by 9.8% to $6.98bn (34,000

crore) in the calendar year 2008, according to research firm ORG IMS research.

The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered

units. The market is highly fragmented with only 300 companies being in the organised

sector and controlling 70% of the market with market leader holding nearly 7% of the market

share. It is an extremely fragmented market with severe price competition and government

price control.

Major Players

The domestic pharmaceutical market is quite fragmented with the top five companies

commanding only 22% market share. Cipla Ltd has become the largest and the fastest

growing company among the top five companies, outclassing Ranbaxy Laboratories Ltd.

Even the top 20 companies have a total market share of about 57% only in contrast to the

global drug market dominated by the 10 largest companies that account for about 40% of

global sales.

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India’s domestic pharmaceutical industry(12 months year ended 2009)

Company Size($ billion) Market share(%) Growth rate(%)

Total Pharma Market

6.9 100 9.9

Cipla .36 5.3 13.4

Ranbaxy .34 5.0 11.5

Galaxo Smithkline .29 4.3 -1.2

Piramal health care .27 3.9 11.7

Zydus cadilla .24 3.6 6.8

Total top 5 1.53 22.1 -

Animal Health Care Industry

India’s livestock population is among the highest in the world. The livestock sector

contributes 4% to the GDP and 27% to the agriculture GDP. In addition to providing

nutritional security to the poor, it provides employment to millions in the rural areas.

The multi-billion veterinary health products market, though smaller in Opportunity as

compared with the human health sector, offers significant return on investment, primarily

driven by lower risk and faster product development cycles. The veterinary health products

market has remained resilient over the economic downturns of the past 2 decades.

Market Size

Globally the animal health industry in 2008 was valued at $19.2 billion with a nominal

growth of 7.2% and a real growth of 2.8%. In comparison the animal health industry in

India is worth 1200 crores in comparison to the pharmaceutical industry of worth 34000

crores. Increasing growth in demand and supply of products is one reason why there is

drastic change in size of Indian animal healthcare market.

More than 85% of global animal health sales are generated in 15 major markets.The

dominant sectors served by the Animal Health Product industry are cattle, poultry,

aquaculture and small ruminants. Pets, equine and others are comparatively insignificant

contributors whereas in countries like US the contribution of companion animals towards

animal health product industry is up to 37%.

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Market Structure

The structure of individual markets varies widely, reflecting a combination of factors such as

climate, the prevalence of particular animal diseases and the relative importance of individual

species to national livestock agriculture. Products for use in companion animals are

responsible for over half of all sales in some developed markets such as the US and UK, but

generate less than 5% of sales in emerging markets such as China and India, for example.

The US will remain the animal health industry's main growth engine, with sales to rise at a

compound annual rate of 5%. The US will be responsible for 40% of global market growth,

and will reach a value of US$8 billion by 2010. China will cement its position as the world's

second largest market for animal health products, while Brazil will replace France as the

sector's third biggest market.

Major Players

One of the silent contributors to the balance sheets of some Indian pharmaceutical companies

is the animal healthcare market. Off late, for a variety of reasons, there has been a paradigm

shift from being a silent player to a more aggressive positioning.

In India

Zydus Cadila

Alembic

Vetnex

Virbac Animal Health India

Intas Pharmaceuticals

Intervet India

Concept Pharmaceuticals

Wockhardt

Page | 6   

Generic Market In Animal Health Care Industry

Globally the major names in this industry comprises of:

Pfizer

Merial

Schering Plough

DSM Nutritional Products

BASF Animal Nutrition

Bayer Animal Health

Elanco

Novartis

Ceva Sante.

threat of new entrants-2nd tier companies, local companies

customer bargaining power-strong as customer segment that comprises of

distributors and wholesalers is consolidated

supplier bargaining in this industry will remain low

threat from substitutes-authorised generics, self generics

industry competition intensely competetive and highly fragmented

 

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Page | 7  

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Page | 8   

Poultry contributes a huge share of 38% of the animal health care market. In poultry, growth

is mainly projected in segments like pelleted feeds, vitamin premix and fed additives like

enzymes, pro-biotic, toxin binders, amino acids and coccidiostat.

Livestock

The ""livestock"" segment, a high-volume market that represents around 57% of the

international animal health market is guided mostly by economic concerns as the market has

to meet the growing demand in protein requirements in developing countries. Increase in

demand for protein inevitably leads to increase in demand for food-producing animals.

The cattle population for CY 2009 is forecast at 281.4 million head, continuing the multiyear

declining trend. However, the decline is specific to the cow population only and not to

buffalo population. The production of milk in India has been estimated as 104 million tonne

for the year 2008 in comparison to the world production of 684 million tonne (as per Indian

dairy association). Post forecasts, the CY beef production up by 4.5 percent to 2.7 million

tons (USDA FAS Livestock and Products Annual 2008 report) as it is cheapest compared to

all other meats. Demand for Indian buffalo meat is gradually growing in export markets due

to its cost competitiveness, perceived organic nature and proportion of less fat.

Companion Animals

Products for use in companion animals have been the main driver of growth in the world

market for veterinary pharmaceuticals and vaccines since the mid-1990s.  Growth of the

global market for companion animal health products is forecasted at a compound annual rate

of 4.9% in the period to 2010 (at actual prices, and calculated at constant rates of exchange),

with sales in the sector reaching $8.6 billion in 2010.

The current overall size of Indian pet care and pet food market, in terms of current price

value, is Rs 1739.9 million, expecting to grow up to Rs 3,687.5 million by 2012. Of this, the

pet care segment occupies Rs 507.5 million. Pet care market accounts for all categories of

products ranging from toys to grooming products like shampoo, harnesses, collars, etc. Year-

on-year average CGAR of pet shops in India accounts for 0.4 percent during 2002-07.

The common factors that will act as drivers or constraints on rates of growth in the

companion animal products market during the second half of this decade include companion

animal populations; economic, social and demographic trends; new products and

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technologies; promotion and marketing strategies; companion animal health and disease

trends; patent expiries and generic penetration of the companion animal products market;

product safety issues; regulatory factors; and companion animal health insurance.

In companion animal products, the market is relatively concentrated, with almost two-thirds

of global sales by value generated by ten leading companies. Merial is the outright market

leader, claiming a share of almost 17%, while Pfizer is its closest competitor with a 12%

share. Bayer, Novartis and Fort Dodge complete the top five rankings.

Indian leading pet care companies, which are predominantly sub-divisions of pharma majors,

are significantly contributing to the booming industry. Major players like Vetnex-RFCL,

PetCare, Venky’s Pet, Intas, and Pfizer are potential boosters of the growing pet care market.

Their products, which are categorised from premium and super premium range, are widely

distributed all over India covering the country’s remotest regions.

 

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Page | 10  

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Animal Therapeutics And Diagnostics-  

The animal health industry is responsible for maintaining the health and productivity of the

over 3.3 billion livestock and 16 billion poultry worldwide, and ensuring the wholesomeness

and abundance of the food they produce. In addition, the industry must also cater to the health

and well being of companion animals. Despite this, the human healthcare market is 35 times

larger than the combined market for all nonhuman species. The reality is that the global

animal health market is very complex, operating under stringent and increasingly strict

regulations similar to those for human health, yet the market opportunities are considerably

smaller. In an increasingly risky environment for new product development, the difference

between success and failure in the future usually lies in successfully identifying the next

growth segment, developing the right product candidates, and being the first to market.

Despite all these risks, the industry continues to grow.

In contrast to human blockbuster-oriented pharmaceuticals, animal health is dominated by

large numbers of products with small revenues. Although there are hundreds of products

involved in this market, only about 20 products have sales exceeding $100 million per year.

However, the industry continues to forge on. The fastest growing therapeutic categories are in

the area of companion animals, specifically in the arthritis and pain segments of the market.

Antiparasitics In Animal Health Industry- Companion animals and all of the major livestock species are exposed to challenge from a

broad range of parasites. Most compromise the health and wellbeing of animals directly,

while some present broader risks by acting as vectors for other pathogens. In livestock,

parasite infestations exert a major impact on levels of productivity and profitability. Losses

inflicted on producers at a global level run to many billions of dollars (liver fluke infestation

alone causes losses of an estimated $3 billion worldwide).

The main weapons available to farmers and companion animal owners in the fight against

parasites are chemotherapeutic drugs which either kill parasite populations or prevent the

development of immature parasites into adult forms. Parasites that survive the application of

these products are those with a natural tendency to resistance against the active ingredient or

class in question. Over time, this results in the development of resistant populations. Drugs

from different chemical classes are used in rotation programmes to slow the development of

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resistance, but the efficacy of some major antiparasitic groups against certain parasite species

has nevertheless declined significantly as a result of resistance. This is driving the search for

new chemical classes, and has also encouraged continued efforts to develop alternative

parasite control methods, including immunological approaches.

It has been a major source of growth in real terms over the past 10 years - due in large part to

the impact of new products commercialised in the companion animal ectoparasiticides

segment.

While new products have boosted values in the companion animal ectoparasiticides segment,

sales in other parts of the market have been affected by growing generic penetration of the

market. Ivermectin has been the most popular target for generic manufacturers since Merial's

patents on the molecule began to expire in major developed markets towards the end of the

1990s. Patents on several other leading antiparasitic brands have also expired during the past

five years, however, generic penetration of the antiparasitics market is set to increase further

through the remainder of this decade, as exclusivity periods for a number of other key

products reach an end.

With generic penetration expected to offset the impact of new drug launches in the sector,

increases in market value will be dependent largely on broad economic conditions and the

operating environment facing livestock producers in major markets. The further development

of existing products, through the application of formulation and delivery technologies or the

commercialisation of multi-ingredient treatments, will also help to bolster market values.

Real growth across the antiparasitic sector as a whole will be limited in most major markets,

however, and gains at global level are forecasted at a modest 2.5% a year, with sales expected

to total just under $5.3 billion in 2009.

Just as a relatively small number of major markets generate major shares of the total global

antiparasitic sales, so the sector is also dominated by a handful of companies. Merial alone

realises annual sales of more than $1.1 billion in the antiparasitics market, giving it a share in

the sector of almost 25%, while seven leading companies are responsible together for

approximately 62% of global antiparasitic product sales. While substantial shares of the

market are concentrated in the hands of a few market leaders, the antiparasitics sector is

becoming increasingly crowded as patents on major products expire. The range of companies

attempting to cash in on new generic opportunities is extremely broad, but a few specialist

generic manufacturers have emerged as major players in the sector.

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Animal Biotechnology: Technologies, Markets and Companies  

Knowledge of animal genetics is important in the application of biotechnology to manage

genetic disorders and improve animal breeding. Genomics, proteomics and bioinformatics are

also being applied to animal biotechnology. Biotechnology has potential applications in the

management of several animal diseases such as foot-and-mouth disease, classical swine

fever, avian flu and bovine spongiform encephalopathy. The most important biotechnology-

based products consist of vaccines, particularly genetically engineered or DNA vaccines.

Gene therapy for diseases of pet animals is a fast developing area because many of the

technologies used in clinical trials humans were developed in animals and many of the

diseases of cats and dogs are similar to those in humans. RNA interference technology is now

being applied for research in veterinary medicine.

Nutraceuticals-

Nutritional and dietary supplements - often named nutraceuticals as an amalgamation of the

terms nutritional and pharmaceutical - have come a long way since a new trend in the care of

companion animals emerged in the 1990s. This trend reflected a shift in the mindset of both

veterinarians and animal owners: rather than relying purely on medicinal products for the

prevention and treatment of diseases they started searching for nutritional and dietary

alternatives. Consequently, disease management was increasingly perceived as health

management, and the field of animal nutrition as such established itself as an important factor

in the achievement and maintenance of the well-being of animals.

Commercially available nutraceutical products for animals include the traditional substances

such as vitamins, minerals and amino acids, but also an increasing number of essential fatty

acids, antioxidants, probiotics, enzymes, and herbs. However, there has also been some

controversy regarding their safety and efficacy and it has been repeatedly suggested that they

should be classified as drugs.

New nutraceutical products for use in animals are in development, which mostly are spin-offs

from according research in the human field. Examples are fatty acid compounds for

applications in the joint health sector, compounds derived from mushrooms and novel

antioxidant substances. The development in the nutraceutical market sector has also had an

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impact on the pet food industry where manufacturers were able to identify a variety of

substances that could be employed in order to add value to their existing product lines, or to

develop new fortified food products.

There are generally three types of companies producing nutraceuticals for animals, the

dedicated nutraceutical manufacturers including herbal specialists, the pet food companies,

and the pharmaceutical manufacturers including both R&D-based and generic companies. All

these different types of companies have their different angles to access the new segment of

nutraceuticals for animals. While in the early stages of this industry sector, nutraceuticals for

animals were produced mainly by small-scale or niche manufacturers, both pharmaceutical

and nutritional companies have had an enter in this segment, with varying success. Those that

have managed to gain a stronghold in this market certainly have injected respectability, more

vigorous competition and technical knowledge into it.

Global Animal Health Market: Emerging Markets Driving Growth-

The animal health market is growing, albeit at a slower rate, in the recessionary economic

phase. Two factors are working in favour of the industry - pet owners' love for their

companion animals and the economic reasons for the treatment of livestock or farm animals.

The ""livestock"" segment, a high-volume market that represents around 57% of the

international animal health market is guided mostly by economic concerns as the market has

to meet the growing demand in protein requirements in developing countries. Increase in

demand for protein inevitably leads to increase in demand for food-producing animals.

Emerging markets such as Eastern Europe, Latin America and Asia are witnessing an

increase in share of the total pie of the animal health industry because of the increasing

importance given to animal health by the livestock breeders. As these regions are showing

very strong economic growth in the past few years, livestock breeders are giving due

importance to the better management of livestock to cater to the growing nutritional needs of

populations. But with various kinds of diseases reducing global animal production, animal

healthcare is gaining significant importance. Emerging economies thus offer significant

potential for animal health industry in the near future.

Page | 15   

The mature markets of North America and Western Europe, however, are supporting the

growth of animal health market as these regions are characterized by strong growth,

particularly in the ""companion animals"" sector.

The animal health market is highly concentrated, with the top nine players controlling more

than 80% of the total market. Recent acquisitions of Fort Dodge (Wyeth) by Pfizer and

Intervet by Schering-Plough have further consolidated the market.

Market Drivers

The reasons which have attracted different pharmaceutical industries to venture into animal

health care.

• The robust growth pattern displayed by the poultry segment and the sheer size of the

cattle population has contributed largely to the growth of the animal health care

market.

• The 2009 annual report of the International Federation for Animal Health (IFAH), a

global body representing manufacturers of animal health products, stated that global

demand for animal protein is expected to rise by 50% by 2020 as the animal

population grows, and as more households in emerging economies join the world’s

‘middle classes’.

• With increasing awareness about diseases that are spreading from unhealthy livestock

and poultry to humans like bird flu, livestock owners are showing increased interest to

ensure that their cattle are properly cared for. It is this growing awareness in emerging

economies like India that is attracting pharma companies.

• Growing demand for new products and industry's investment in awareness of pet

owners. Although animal population has increased only marginally, the key driver for

growth is the willingness of owners to spend more on the health of their animals and

the ability of veterinarians to meet that need. The human-pet bond has a high

economic ceiling, and both veterinarians and the animal health industry have

recognised the potential of this market segment.

• Emergence of new diseases.

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• Change in animal production patterns and increase in productivity-Exposure to

international standards has brought about a heightened awareness of productivity and

best farm practices around the globe. Indian farmers are now conscious of the need to

increase profits by cutting costs and improving productivity levels. Animal health

products especially nutritional supplements have become important inputs to boost

productivity.

• Ongoing food safety concerns-There is a growing awareness in the livestock industry

of the need for clean and healthy production. Many concepts like HACCP, clean milk

production and issues like antibiotic and pesticide residues have raised levels of

awareness. This has given a boost to the growth of the animal health care industry in

the country.

There are certain factors which can account as heyday for animal health care industry in

future:

• Product development for certain segments like parasiticides for companion animals.

• Increased shopping at retail outlets and through internet and over-the-counter (OTC)

products posing stiff competition to prescription.

• Increased spending, better pet monitoring services, pet insurance, and owner lifestyles

will also shape the growth of the animal healthcare market.

• Increasing professionalism of poultry industry.

• Growth of organised dairy production and changing focus of farmers from treating to

preventing diseases.

Strategies To Tap Animal Health Care Industry

India's role as a leading milk producer has long been recognised at a global level and animal

health and management forms an inseparable element of the country's agronomy. Most often,

this has been the reason why pharmaceutical companies decided to foray into the animal

healthcare market. This focus has shaped market strategy, since the customer base was

mostly rural.

Accordingly, the animal healthcare industry focuses on aggressive promotion and marketing

strategies, emphasising animal health benefits.

Page | 17   

• Concept Pharmaceuticals promotes their products through specialised and well-

trained veterinary sales officers located in different parts of the country. Their strategy

is based on direct contact with consumers and indirect selling through veterinarians,

livestock supervisors’ etc organising farmer meetings in rural areas and selling

preventive vaccination and de-worming generates demand for our products through

these customers.

• It is this growing awareness in emerging economies like India that is attracting

pharma companies. The only way to meet this enormous increase in demand is by

intensifying livestock production. But with disease currently reducing potential global

animal production by at least 20% a year, animal healthcare is gaining significant

importance.

• Intas animal division has its own full-fledged marketing and sales strength, which

constantly inject promotion, techno-commercial services and awareness delivery to

veterinarians, dairy farmers and various rural based customer segments. provide well-

appointed distribution network of chemists and dealers who smoothly disseminate the

entire product basket in urban, semi-urban, village towns and micro-interiors levels

• Co-marketing efforts with milk co-operative societies and various NGOs also create a

vital channel that helps players penetrate the grass-root levels.

• Customer segmentation based on products and wider coverage plans to call veterinary

doctors, associated paramedicals, trade channel partners and farmer meetings on

regular basis remains a key strategic essence to generate business

Challenges

The animal healthcare market faces challenges due to the fragmented nature of cattle

population and increasing distribution costs for animal health products. Stakeholders like

integrators in animal health business and established manufacturers of animal health

products, especially for the livestock segment, also pose challenges for pharmaceutical

companies who have animal health portfolios. Pharmaceutical companies who want to tap

veterinary markets, they may find it challenging because only the veterinary companies

would be able to provide enough resources in competitive markets. Patent expiration along

with pipeline products without ensured success, has created enormous pressure for big

players.

Page | 18   

Opportunities

A major portion of livestock population is devoid of effective veterinary services. India has a

pool of personnel with high managerial and technical competence along with skilled and

educated work force. Professional services are easily available. India has competitive

advantage in contract manufacturing due to- relative low cost of production availability of

raw material at competitive prices. It has a good network of world class education institutes

and established strengths in information and technology. Increase in the disposable income

both at rural and urban level is another impetus for the growing animal health care industry.

Changing lifestyle and increasing human- pet bond relationship where pharmaceutical

companies can cash upon. India’s commitment to free market economy and globalisation is

welcome opportunity for the multinational companies in the animal health care.

The OTC Animal Health Global Market Opportunity

Traditionally sales of animal health products have been via different retail channels, limited

by the regulatory classification of each specific product. Thus, products classified as being

suitable for "over-the-counter" (OTC) sales have been widely available across all outlets

(including pharmacies, veterinary clinics, supermarkets, and pet shops), while those restricted

to being only available with a prescription have been limited to distribution through the so-

called "ethical" channel of either a vet clinic or a pharmacy.

The different retail outlets represent separate marketing channels, and historically certain

companies are predominantly active in particular channels. Reputations are built up over time

and once forged these commercial relationships can provide a large degree of inertia within

each channel of distribution. Companies are continually seeking new product opportunities.

One potential opportunity for increasing sales volume would be to expand the number of

pharmaceutical products available on the OTC market.

Given the inherent difficulty and expense of developing new compounds, the simplest route

is via the reclassification as OTC of pharmaceuticals formerly requiring prescriptions. This

would then allow a much greater distribution across the range of retail outlets.

The interplay of the different commercial forces within each distribution channel provides

barriers to potential new entrants. As products come to the end of their patent life and generic

Page | 19   

manufacturers seek to capitalise on the commercial opportunities of supplying a newly

available compound, the reclassification of an existing prescription veterinary medicine as an

OTC product offers additional commercial opportunities. The outcome of such repositioning

may be optimised by working in partnership with an established company within a particular

distribution channel.

In order to implement a successful strategy when considering repositioning a product from

the ethical to the OTC market, it is essential that insight into successful marketing is obtained

and the core elements of potentially winning tactics are recognised.

Outsourcing to Grow Exponentially

Large generics companies have challenged the patent holders very aggressively and several

blockbuster drugs have lost patent protection due to successful patent challenges. Declining

R&D productivity and increasing patent expiries, coupled with generics competition has led

to a significant increase in the total number of drugs under development. More drugs under

development would imply that MNCs would need to outsource more services and

intermediates from cost-efficient regions (including India).

India as a destination for outsourcing:

1. World-class quality at 30-40% lower cost.

2. Proven chemistry and process innovation skills instilled by years of fierce competition in

the domestic market.

3. India has six times the number of trained chemists as the US, available at a tenth of the

cost.

4. India has up to 40% lower capital cost, resulting in lower initial capex on new facilities.

Contract manufacturing – the most scalable opportunity for Indian players

We believe that of the three broad outsourcing opportunities available to India – CCS(current

cost to supplier), clinical trials and contract manufacturing, the most scalable business

opportunity for Indian players would be contract manufacturing. This is because:

 

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Page | 20  

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