| Dishman Pharma-Global Ambitions
Globally, R & D driven pharmaceutical companies are under pressure to reduce research and development costs. A report by Pharmaceutical Research and Manufacturers of America, suggests that of every 10,000 screened compounds, only 250 enter pre-clinical testing, five enter clinical testing and only one is approved by the USFDA.
R & D outsourcing is driven by two major benefits a) reduced operating costs and b)an increased number of drugs moving into development. R & D outsourcing is expected to nearly double to US$ 24 billion by 2009 from US$ 13 billion in 2005.
Contract manufacturing includes outsourced manufacturing of intermediates and active pharmaceutical ingredients (APIs) as per the specific requirements of the innovator and generic companies. As per Frost & Sullivan research, contract manufacturing of pharmaceutical products generated US$ 26.2 billion revenues in 2004 and is expected to rise to US$ 43.9 billion in 2009.
Contract Manufacturing Organizations (CMO) have traditionally been in North America (nearly 50% market share) and Europe. In the past few years, this business has spread to Asia with significant focus on Active Pharmaceutical Ingredients (APIs) and Intermediates.
To ensure Company's long-term success, the management is appropriately placing its best on R & D with contract research leading to future manufacturing contracts. Given the pressure on innovators to cut costs and the long lead-time taken to ink a manufacturing deal, we believe there is a high probability that innovators will deal with their research partners for manufacturing as well.
Contract Research and Manufacturing (CRAM) business is the core of company's business model and company has undertaken a series of overseas acquisitions, through its wide spread subsidiaries to seize the opportunities in this field.
After accomplishing a successful small acquisitions of Synprotec DCR Ltd., in U.K. and I0 3S in Switzerland through its wholly owned subsidiary, Dishman Switzerland Ltd in February of 2005-06, the Company has acquired CarboGen and AMCIS, Switzerland-based process research on APIs and low-volume, high-value API and hypo Potency productsmanufacturing company in the month of August, 2006.
This has already added and will continue to add substantially to the company's consolidated revenue.
Dishman is well poised to participate in this opportunity. The Company is selling its products in Europe, USA, South Africa, Netherlands etc. through its subsidiaries and has an expanding international portfolio of affiliates, joint ventures and alliances.
Dishman has successfully achieved its goal of growth through CRAM business, and continue to grow in this business by entering into new long-term contracts.
With strong R&D experience and effective relationship developed with MNC Customers, the Company has emerged as a premier contract manufacturing organization (CMO). The CMO business model was envisaged in the year 1997 with setting up of a modern production facility at Bavla, near Ahmedabad, which is now a 100% EOU facility.
At present, the Company has eight-multi purpose production units at Bavla, out of which two are commercially dedicated for contract manufacturing for Solvay Pharmaceuticals B.V., Netherlands. This was your company's first long term contract as a CMO.
Your company has adopted various marketing strategies for sustained growth including increase in number of clients to reduce the dependency on any single client, increase the number of products range to reduce risk of product failure; to enter contract manufacturing through contract research of new molecules etc. and enter the specific market with marketing innovation, technology transfer in the developing markets, where technology is licensed to API manufacturer with a stipulation that the intermediates are to be procured from Dishman on a long term basis.
AN INDUSTRY OVERVIEW
IMS Health Inc., USA (IMS) reported that global prescription market grew 6.4% in the year 2007 over the prior year. This takes the estimated total global prescription market to US$ 712 billion based on sales, an increase of US$ 178 billion during the past five years.
The United States is the largest single market at US$ 286.50 billion, contributed 25.5% of the total growth to the global market in 2007. Across the five major European markets, France, Germany, the United Kingdom, Italy and Spain, the aggregate growth was 4.8%; the total market expanded to US$ 140 billion, largely reflecting the impact of health policy and funding initiatives.
European markets- apart from the five major developed markets- are now US$ 81.6 billion in size, and expanded by 10.9% in 2007. Asian markets (excluding Japan, including Australia and New Zealand) grew collectively by 13.3% and now represent 11% of the total global market.
Robust economic growth and expansion of access to healthcare remains the primary driver of these markets. China, Korea and India grew by 25.7%, 10.7% and 13.0% respectively in 2007. Globally, India, with a population of over one billion, is the second largest pharmaceutical market in terms of volumes consumed.
The Contract Research and Manufacturing Services (CRAMS) business provides manufacturing and research services to global pharmaceutical and agrochemical companies in both innovative and generic space.
Contract Manufacturing, Contract Research and Contract Sales are the broad segments of the industry. API manufacturing, Clinical Research and Basic research are the major outsourcing services to the extent which Indian service providers are utilized.
As a result, many global Pharma companies realize India as a potential hub for outsourcing their activities. India is emerging as a major destination for contract research and manufacturing services with its existing pool of skilled human resource, low cost advantage, technical expertise (Information Technology, Chemistry, Biotechnology and Process Engineering), manufacturing capability (with highest number of USFDA approved plants), diverse genetic pool, confidentiality and trust worthiness.
Dishman being the first mover is one of the major players in the field. According to IMS forecast, the global pharmaceutical market is expected to grow at a 5-6% in 2008, compared with 6-7% in 2007. In several respects, 2008 marks an important turning point for the global pharmaceutical market.
For the first time, the seven largest markets will contribute just half of overall pharmaceutical market growth, while seven emerging markets will contribute nearly 25% of growth worldwide. The seven "Pharma emerging" markets of China, Brazil, Mexico, South Korea, India, Turkey and Russia are expected to grow 12-13% next year to US$ 85-90 billion.
In the coming year, biopharmaceutical and generics companies will more aggressively adjust their business models to manage through these inflections, capturing new opportunities in this changing market environment. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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