Specialty chemical firms pivot to pharma

Source: LiveMint.com, Sept 08, 2020

Specialty chemical firms are actively looking at the pharmaceutical sector as their next growth opportunity and to diversify from agrochemicals and technical textiles. They are seeing a surge in demand for intermediates or raw materials used for producing active pharmaceutical ingredients, following the coronavirus pandemic.

“In pharma, we have received a lot of enquiries to develop intermediates, especially after the pandemic. We developed an intermediate for a covid-19 drug, favipiravir, for some Indian and Japanese firms,” said PI Industries executive director Rajnish Sarna.

Specialty chemical firms, which were eyeing the intermediates business for the past few years, received a boost from the pandemic and the focus on localizing pharmaceutical supply chains.

PI Industries earns the bulk of its revenue from the agrochemical business. However, in the past three to four years, the company began to look at diversifying into other speciality chemicals such as pharmaceutical intermediates and imaging until it entered the segment this fiscal.

SRF Ltd, which is focused on the technical textiles segment, has also been focusing on pharmaceutical intermediates, a spokesperson said. In its annual report for 2019-20, the company said its pharma intermediates business is driven by its chemicals technology group division.

The global focus on a China Plus One strategy for investments will lead to a sharp rise in expansion of capacity in the chemicals sector in the coming years, said Deepak Nitrite Ltd CEO Maulik Mehta.

“Deepak Nitrite has several advanced intermediates that are used by the pharmaceutical industry. We are evaluating other chemical intermediates for the pharma segment and also plan brownfield investments to expand the existing business,” Mehta said.

Indian pharmaceutical firms at present source about two-thirds of their bulk drug supplies from China. However, the supplies, comprising active pharmaceutical ingredients and intermediates, saw several disruptions over the past few years. Supplies almost came to a halt in February and March because of the lockdown in China following the outbreak of coronavirus.

Analysts, however, foresee challenges for these speciality chemical makers as they move higher up into the pharmaceutical supply chains. “The jump from speciality chemicals to pharmaceuticals is not a big one in terms of technology, but meeting the stringent regulatory requirements in pharma will be a major hurdle. Also, because of India’s history of legal cases involving IP, changing large foreign drugmakers’ perspective would be a challenge for these firms,” said Vishal Manchanda, an analyst with Nirmal Bang Institutional Equities.

High sales, health focus make e-pharmacy hot

Source: ETRetail.com, Aug 23, 2020

Bengaluru: Consumer stickiness, average order size increasing to $15-20 and the possibility of selling other healthcare services like online doctor consultation and diagnostics services have caught the interest of large strategic names like Reliance Industries and Amazon, driving them to the e-pharmacy sector.

E-pharmacy had over 3 million users before the pandemic struck in India, according to a white paper from industry body Ficci and market research firm RedSeer, but added 6 million new customers since March. Industry executives said Reliance’s talks with Netmeds, which were on for at least six months, triggered the consolidation in the industry between two other established brands — PharmEasy and Medlife. The proposed merger came about after Medlife found it tough to raise capital from external investors.

“Our ecosystem was a crowded one and all the main four-five players were in the market to raise funds. Netmeds or Medlife were not able to raise from external investors and it reached a point that consolidation was inevitable. The ecosystem demanded there be fewer players and, on top of that, since Covid-19, digital health has become a top priority. So, the process got accelerated,” a top executive in the e-pharmacy industry said. The sector saw an investment of over $700 million in FY20, according to the white paper.

“What they (remaining players) are trying to do is build a break-even business here and then have a wider play on overall healthcare needs. So, this becomes a good customer acquisition channel, and then serve consumers with high gross margin products like a consultation and lab-test,” a former e-pharmacy entrepreneur said. According to him, medicine delivery platforms haven’t been able to top gross margin levels of 25-30%.

Ankur Pahwa, partner and national leader (e-commerce & consumer internet), EY India, echoed the views. “There is higher repeatability and retention for e-pharma, given the skew towards chronic ailments. Once on-boarded, customers tend to stay on even as discounts reduce over time. There is also the broader expansion into health tech around diagnostics, e-consultation, private labels, insurance, and wearables, which make it a larger opportunity,” he said. For most platforms, 60-70% of medicine order volumes are from chronic patients.

Top e-pharma founders and executives said, while online sales contribute just 3% of the total medicine market, the recent developments will have a lasting effect on the sector. This would include a gradual fall in discounts, which was 20-30% last year and is now already sliding towards 15%.

Giants like Amazon and Reliance would cautiously scale up the business amid the current regulatory framework. Industry executives said this will lead to a “mature” play by remaining players for the next one to two years. While all this happens, PharmEasy has also appointed JP Morgan for a new fund-raise of $100-200 million to prepare for the next round of battle in e-pharmacy. TOI had reported in its Friday edition that traditional chemists are alarmed by the recent developments and fear it could be monopolised over a period of time.

“The heavy competition and aggressive activity are all behind us now. No one can out-discount the others. The crazy discounting will certainly stop. Advertising spends might go up. This (aggressive discounts) only works when you are trying to be the last man standing,” said Prashant Tandon, co-founder and CEO, 1MG. “We expect the ecosystem to come to a steady and mature state. For us, pharmacy is a little over 50%. The other digital health business — since Covid-19 — has taken off, making us a much broader digital health platform,” he added.

“Reliance’s entry is a validation of the space and the online model. It’s good news for the sector and more people will try online medicine ordering,” said Dhaval Shah, co-founder of PharmEasy. He did not comment on his fund-raise initiatives, or the progress of the merger with Medlife.

Domestic pharma market to grow 12-14% in 3 years, exports by 8-14%: KPMG

Source: Business Standard, Aug 19, 2020

New Delhi: India’s domestic pharmaceuticals market is expected to grow by 12 to 14 per cent in the next three years while the export market may grow by 8 to 14 per cent, according to a new report by professional services firm KPMG.

Backed by a $41 billion pharma industry, the country ranks as the third-largest market globally by volume and 13 largest by value. The epidemiological transition from communicable diseases to noncommunicable diseases in the country is driving the pharma market.

At the same time, said the report, India is a key component of the global life sciences industry.

Its manufacturers are one of the largest sources of generic drugs, supplying 50 per cent of global demand for a range of vaccines, 40 per cent of generic demand in the United States — where Indian firms are expanding — and 25 per cent of UK medicines.

However, there have been calls for a more robust domestic industry. This is particularly timely as the Covid-19 crisis emphasises the importance of localising parts of the value chain and ensuring multiple sourcing close to consumers.

In March, the government announced a 1.3 billion fund to encourage domestic manufacture of pharma ingredients.

This follows severe supply chain disruption amid the coronavirus pandemic due to India’s dependence on imports from abroad. About 70 per cent of the country’s active pharma ingredients (APIs) and 60 per cent of penicillin are imported from other Asian countries.

The government is aiming to increase healthcare spending through schemes like Ayushman Bharat. The country also aims to increase its public health spending to 2.5 per cent of its GDP by 2025.

The rising level of health consciousness among people and their awareness of treatment options as well as modern medicines are also contributing towards the growth of the Indian pharma industry.

Long known as a low-cost manufacturing location, the confidence in product quality has been a challenge. However, said the KPMG report, new safeguards on manufacturing and product standards are providing much-needed reassurance to customers at home and abroad.

Amazon enters online pharmacy space in India

Source: Business Standard, Aug 14, 2020

E-commerce giant Amazon has forayed into the online medicine segment and launched Amazon Pharmacy. The service has been started in areas with select pin codes in Bengaluru, while the company is learnt to be mulling scaling it up to other cities across India in the near future.

The service would allow customers to order prescription-based medication in addition to over-the-counter medicines, basic health devices and Ayurveda medication from certified sellers.

“As a part of our commitment to fulfill the needs of customers, we are launching Amazon Pharmacy in Bangalore,” said an Amazon India spokesperson confirming the development. “This is particularly relevant in present times as it will help customers meet their essential needs while staying safe at home,” the spokesperson said.

Amazon’s foray into the online medicine segment puts it in direct competition with established local players including NetMeds, 1mg, PharmEasy and Medlife. Amazon has launched the service at a time when there is a tremendous demand for such services which are delivering essential medicines to patients amid the Covid-19 pandemic. An increasing number of people are buying products online and avoiding visiting the stores due to fears of catching the virus.

However, it is not going to be easy for Amazon to tap the e-pharmacy space due to the regulatory hurdles and the ongoing war between online and offline pharmacies and the delay in finalisation of e-pharmacy rules by the government.

Recently, the All India Organisation of Chemists and Druggists (AIOCD), representing more than 850,000 pharmacy outlets across the country wrote a letter to Prime Minister Narendra Modi with a request to ban the activities of e-pharmacies in the country.

Last December, the health ministry came up with revised draft regulations for online sales of drugs. It said e-pharmacies cannot stock drugs and will have to operate through retail chemist shops for doorstep supply of medicines just like food-delivery platforms Swiggy and Zomato. The draft regulations also make retail pharmacies eligible to deliver medicines at a customer’s residence.

The Indian e-health sector is expected to become a $16 billion opportunity by FY2025, growing from $1.2 billion, at a compound annual growth rate of 68 per cent, according to a report by research firm RedSeer Consulting. It is expected to touch 57 million households, driven by positive reception from both consumers and providers along with supportive government regulations and investments.

According to RedSeer, the overall Indian healthcare industry is set to grow at 17 per cent CAGR until FY2025 to reach $353 billion (7 per cent of the expected nominal gross domestic product). In May, Amazon also announced its entry into online food delivery in India. Customers are now allowed to order from select restaurants and cloud kitchens that have cleared the company’s hygiene certification bar.

Domestic pharmaceutical industry to clock 4-6% growth in FY21: Icra

Source: Business Standard, Aug 05, 2020

Mumbai: Indian pharma industry is likely to clock 4-6 per cent growth during the current fiscal, according to credit rating agency Icra.

The domestic pharma industry has been posting slow growth numbers since March after the coronavirus (Covid-19) pandemic hit prescription generation. However, green shoots started becoming visible in June when the sector clocked a 2.4 per cent growth after a near-9 per cent fall in May and an 11 per cent slump in April.

Gaurav Jain, vice president and co-head, Icra, said, “The global demand scenario is largely expected to remain stable for Indian pharmaceutical industry owing to the inelastic nature of prescription drugs, though some impact on volume growth will be felt owing to the lockdown (lesser OPDs/elective surgeries) and lower economic growth.”

He said that the impact of lower demand will be felt more in less developed countries which are additionally impacted owing to low crude oil prices.

Overall, Icra expects the domestic pharma industry to grow at 4-6 per cent in FY21 owing to the coronavirus impact.

Icra, however, estimates that through FY20-FY23, CAGR is expected to be in the range of 8-11 per cent on the back of healthy demand from the domestic market, given the increasing spend on healthcare along with improving access.

The growth in FY21 is expected to be supported by a 1.88 per cent wholesale price index-linked price hike for the domestic price controlled (products that fall under the National List of Essential Medicines) portfolio.

The Indian pharmaceutical industry’s growth remained stable at 8 per cent during FY20. According to Icra research, manufacturing activity has gradually started in China with shipments or air cargo arriving in India for APIs, intermediates and KSMs (Key Starting Materials). This has led to a resumption of production by Indian players though the capacity utilisation across plants is yet to reach pre-Covid-19 levels.

Centre plans on tweaking drug policy that exempts foreign medicines from price control

Source: The Economic Times, Aug 06, 2020

NEW DELHI: The government plans to tweak a provision that allows new medicines developed by foreign companies to be exempt from price control for five years after criticism that it goes against the Make in India policy and discourages local drug manufacturers.

The Department of Pharmaceuticals and the National Pharmaceuticals Pricing Authority are in discussions about revisiting paragraph 32 of the Drugs (Price Control) Order of 2013, which lists out the exemptions, people aware of the matter told ET.

The government broadened the five-year exemption from price control for new foreign drugs patented in India through an amendment in January 2019. The amendment removed a requirement that the drugs should have been developed through indigenous R&D. This included orphan drugs used to treat rare medical conditions.

Senior officials in the Department of Pharmaceuticals said the move was aimed at giving Indian patients access to drugs that are available only abroad.

However, domestic drug makers and civil rights activists criticised the amendment and complained of high prices and unequal treatment. Experts said the move went against the government’s Make in India policy because it discourages Indian companies from developing and producing patented drugs. The government would also be helpless in an emergency, they said.

“The move will restrict the government from putting expensive drugs under price control, regardless of a public health emergency. Most likely, it would encourage foreign pharmaceutical companies to manufacture and commercialise their new patented drugs and medical devices in India,” said a pharma expert.
The National Pharmaceuticals Pricing Authority also faces the problem of companies launching products and excluding them from the price control regime without first applying for exemption.

“The companies have tried to utilise it and the government is fighting cases in the court with these companies. The government should scrap this amendment as it has only helped multinationals to launch their products at exorbitant prices by claiming that they are patented products,” another expert said.

Indian API makers benefit as global buyers ditch China

Source: The Economic Times, Jul 29, 2020

MUMBAI: India’s bulk drug manufacturing companies have reported increased enquiries from global customers seeking to reduce their dependency on China, rating company India-Ra, a part of the Fitch Group, said in a report this week.

However, India and other countries still remain largely dependent on China for the raw material used to make drugs, known as active pharmaceutical ingredients (API).

“Indian API players are witnessing benefits of better inventory management and thrust on supply chain continuity from customers. Customers’ procurement strategies are recalibrating and are now moving away from China or seeking alternative sources for the same API,” said Krishnanath Munde, associate director at Ind-Ra.

Price sensitivity among formulation companies is declining amid a receding threat of supply chain disruptions from Chinese suppliers, which had also occurred in the past, he said. Considering that India has the highest number of API facilities approved by the US Food and Drug Administration, it will remain a critical part of the global supply channel, Munde noted.

Indian pharma companies have seen a rush of demand for key drugs used in the treatment of Covid-19 in the past two months.

Govt releases guidelines for schemes to boost domestic manufacturing of bulk drugs, med devices

Source: The Economic Times, Jul 27, 2020

NEW DELHI: The government on Monday released guidelines for four schemes to boost domestic manufacturing of bulk drugs and medical devices as part of its drive to reduce dependency on imports for these critical products.

“In line with the vision of Prime Minister Narendra Modi, the schemes have been conceptualised for making India ‘atmanirbhar (self-reliant) in the pharma sector, chemicals and fertilisers minister D V Sadananda Gowda said.

The schemes—a production-linked incentive (PLI) scheme and industry park scheme each for bulk drugs and medical devices—seek to make India self-reliant in pharmaceuticals raw materials such as drug intermediates, active pharmaceutical ingredients (APIs) and key starting materials (KSMs), and medical devices.

Currently the country almost entirely depends on imports—mostly from China—for production/supply of 53 critical bulk drugs, while 86% of medical devices, too, are imported.

Bulk drug parks “will be based on plug and play model with prior regulatory approvals, state of art infrastructure, excellent connectivity, affordable land, competitive utility charges, and strong R&D ecosystem and so on”, Gowda said.

This will significantly reduce time and investment cost for setting up new manufacturing units. In addition, new units will be eligible for PLI scheme of the government, he said. “Eligible manufacturers will be selected for the PLI scheme on the basis of marks obtained in the evaluation criteria as per the guidelines.”
Ashok Madan, executive director of Indian Drugs Manufacturers’ Association (IDMA), said the industry has been waiting for detailed guidelines of the schemes notified last week.

“It’s for the first time that an impetus of Rs 10,000 crore is being given to augment API production in the country,” he said.

“Limiting the import content for production of listed 41 APIs/KSMs up to 30% is to encourage local manufacture with value addition for the production Linked Incentive,” Madan said.

The list of 41 products will enable domestic production of 53 key bulk drugs.

“Given the right implementation, India can aspire to be selfreliant in APIs/KSMs in 8-10 years,” Madan said.

The industry would like the government to support utilisation of idle capacities of medium API units with blanket environment approvals “subject to their complying with the overall pollution loads”, he said.

Govt notifies incentive scheme for local API manufacturing to cut imports

Source: Business Standard, Jul 22, 2020

Mumbai: On Tuesday, the central government had notified a Rs 6,940-crore production linked incentive scheme to boost local bulk drug manufacturing and further reduce dependence on imports. Around 53 active pharmaceutical ingredients (APIs) — covering 41 products — have been identified by the government, for which companies will be eligible for financial incentives, provided they set up indigenous greenfield manufacturing.

According to a government notification, bulk drugs accounted for 63 per cent of total pharmaceutical imports in the country in 2018-19. “The Indian pharmaceutical industry is the third largest in the world by volume and 14th largest in terms of value. India contributes 3.5 per cent of total drugs and medicines exported globally. Despite these achievements, India is significantly dependent on import of some basic raw materials, viz., bulk drugs used to produce finished dosage formulations,” it read.

India imports bulk drugs largely for economic reasons. Chinese bulk drugs are cheaper by 25-30 per cent on average, compared to domestic products. However, the recent Covid-19 pandemic and escalation at the border have exposed India’s vulnerability in this area. One will have to invest Rs 20 crore to set up a new facility — this may be on the premises of an existing manufacturing plant and make the selected bulk drugs to avail of the scheme.

Industry sources felt the government needed to tap into the idle capacity of existing API units. “Around 35-40 per cent of the capacity is sitting idle. The environment ministry’s blanket permission will be subject to complying permitted pollution load norms,” observed an industry insider.

The government also notified a scheme to promote bulk drug parks. For selected parks, financial assistance to the tune of 70 per cent of the project cost of common infrastructure facilities will be provided. In the case of Northeast states and hilly states (Himachal Pradesh, Uttarakhand, Union Territory of Jammu & Kashmir, and Union Territory of Ladakh), financial assistance will be 90 per cent of the project cost. The maximum assistance under the scheme for one bulk drug park will be limited to Rs 1,000 crore. The total financial outlay of the scheme is Rs 3,000 crore.

E-health cos Medlife and PharmEasy in talks for $200 million merger deal

Source: Business Standard, Jul 20, 2020

Bengaluru: E-health companies Medlife and PharmEasy are in talks for a merger deal valued at $200-$250 million, according to sources. The aim is to create one of the world’s largest healthcare companies.

“The modalities are being worked out. Medlife will retain 20-30 per cent stake in the combined entity,” said a person with direct knowledge about the development.

While PharmEasy co-founder and CEO Dharmil Sheth declined to comment on the development, Medlife cofounder and CEO Ananth Narayanan could not be reached for comment.

Co-founded by Tushar Kumar, Prashanth Singh and former Myntra-Jabong CEO Ananth Narayanan in 2014, Medlife provides services such as e-consultation, lab tests and health supplements and generics. The Bengaluru-based company has crossed Rs 100-crore in gross merchandise value (GMV) per month. It is delivering medicines to 29 states, 4,000 cities and 20,000 pin codes in India. It fulfils over 30,000 deliveries daily. Medlife has raised a total funding of $32.7 million. It is backed by Wilson Global Opportunities Fund and Prasid Uno Family Trust, according to data platform Crunchbase.

The other company PharmEasy was founded a year later in 2015 and has its network in over 700 cities. The Mumbai-based online medicine and healthcare ordering app, has raised total funding of $328.5 million. It is backed by investors such as Temasek Holdings and Bessemer Venture Partners and Infosys co-founder Nandan Nilekani. As a marketplace, PharmEasy works with 35,000 retail partners in Tier-1 and Tier-2 cities across the country.

There are several discussions going around in the e-health sector for consolidation with key players being PharmEasy, 1mg, Medlife and Netmeds. According to reports, Reliance Jio is in talks with Netmeds to acquire the latter.

“There are talks of consolidation happening in multiple sectors where large amounts of funding typically in excess of $150 million have been raised by leading players. But nothing is concluded at this point of time,” said Anup Jain, managing partner at Orios Venture Partners, which is one of the early-stage investors in PharmEasy.

Last month, Bessemer Venture Partners-backed doctor consultation platform DocsApp had merged its services with cashless digital healthcare platform MediBuddy’s digital consumer health business to create an entity for end-to-end services in digital healthcare. The combined entity will have over 90,000 doctors, 7,000 hospitals, 3,000 diagnostic centres and 2,500 pharmacies covering over 95 per cent of all pin codes in India.

The Indian e-health sector is expected to become a $16 billion opportunity by FY 2025, growing from $1.2 billion, at a compound annual growth rate of 68 per cent, according to a report by research firm RedSeer Consulting. It is expected to touch 57 million households, driven by positive reception from both consumers and providers along with supportive government regulations and investments.

As per RedSeer, the overall Indian healthcare industry is set to grow at 17 per cent CAGR until FY 2025 to reach $353 billion (7 per cent of the expected nominal gross domestic product).