Bio-pharma

Comprehensive Pack

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•Market Size :3

•Segments : 17

•Products and Services : 25

•Competitive Scenario : 39

•Regulations : 48

•Key Success Factors and Risks : 61

•Review of Industry Growth and Outlook : 74

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 Market Size

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• In 2015-16, the biopharmaceutical industry's revenue is estimated to have
grown 12%, compared with 9% in 2014-15.
• The improvement in performance was powered by high growth in sales of
pentavalent vaccines (primarily in Panacea Biotech and Shantha Biotech) and
insulin (products such as Mixtard).
• Realising the opportunity offered by biopharmaceuticals, companies have
increased their focus on biosimilars (generic versions of innovator
biopharmaceuticals) and new pentavalent vaccines.
• Industry revenue rose to almost Rs 123 billion over 2010-11 to 2015-16 at a 13%
CAGR.
• The industry grew at a robust 18% CAGR between 2010-11 and 2012-13.
However, growth slowed down dramatically after this period.
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• According to secondary sources, the slowdown in 2013-14 was the result of
trade channel disruptions caused by a Drug Pricing Control Policy (DPCO) in
May 2013 and currency depreciation in semi-regulated markets, which partially
impacted domestic and export demand.
• In 2014-15, domestic sales and exports grew in single digits, because of supply
issues and macroeconomic challenges in a few markets.
• For example, Biocon's revenue is estimated to have grown in single digits due
to supply constraints on products, such as insulin, and geopolitical challenges
in the Middle East and North Africa.
• Serum Institute of India's revenue is estimated to have grown in single digits,
because of portfolio rejig in the domestic market and the inability to gain
marketing approvals on time
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• Its performance is estimated to have averaged out on a high base in the export
market.
• However, aggregate revenue growth for companies, such as Bharat Serum and
Vaccines, is estimated in excess of 30%, aided by new vaccine launches.

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Biopharmaceutical market growth trend

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Patented drugs beyond the reach of many
• Large multinationals, such as Novartis, Eli Lilly, GSK, Johnson & Johnson,
Merck and Roche, directly market their products in India.
• Most of the products are innovator (patented) drugs priced at a premium
and are unaffordable for many.
• Therefore, Indian biopharma manufacturers are betting big on biosimilars.
• For example, Wockhardt and Biocon have established themselves in
manufacturing low-cost variants of insulin, which is otherwise the forte of
a few large MNCs, such as Eli Lilly and Novo Nordisk.
• Similarly, Cadila Healthcare is developing a portfolio of 20 biological
products and has filed dossiers for first-generation biosimilars in some
export markets.
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Patented drugs beyond the reach of many
• Within the domestic market, the company has gained marketing approvals
for Exemptia (Adalimumab), EPO, G-CSF and PEG-GCSF.
• The focus on biosimilars has fetched huge benefits for domestic
biopharmaceutical players.
• Despite the slowdown in 2013-14 and 2014-15, the domestic market grew at
a CAGR of 8% to nearly Rs 66.4 billion over 2012-13 to 2015-16.

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Biopharmaceuticals: A look

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Exports grow steadily; players look to tap regulated markets
• India's biopharmaceutical exports recorded a 14% CAGR over 2010-11 to
2015-16, aided by demand for usual products in vaccines and biologics,
especially in semi-regulated markets.
• Indian companies remain the largest suppliers of vaccines to the World
Health Organisation (WHO) and other such programmes, supported by
demand from Asia, Latin America, East Europe and Africa.
• Drugs being sold in these regions include vaccines, insulin and some other
therapeutics, such as Filgrastim, granulocyte colony stimulating factor
(GCSF), follicle-stimulating hormone and erythropoietin.

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Exports grow steadily; players look to tap regulated markets
• Despite technological capabilities and the ability to invest huge capital,
players' reach in regulated markets has been limited.
• Complex regulatory approvals, which require companies to conduct clinical
studies to prove biosimilarity to the original biological, pose a roadblock.
• For example, in the US, the government has introduced the Biologics Price
Competition and Innovation Act (BPCIA), 2009. (Read the chapter Industry
Information >> Regulations for details.)

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The evolution of the regulatory approval process has been slow,
with a few approvals. Notable approvals are:
• The US Food and Drug Administration (FDA) has so far approved only one
biosimilar drug - Zarxio (Filgrastim) – in March 2015.
• Only 20 biosimilars have been approved by the European Medical Agency
(EMA) up to January 2016 - the latest approval was on January 14, 2016, for
Etanercept (Benepali) for Samsung Bioepis UK Ltd, despite the guidelines
on certain categories of biosimilars having been published in March 2006.

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The evolution of the regulatory approval process has been slow,
with a few approvals. Notable approvals are:
• In the coming years, biosimilars offer a huge opportunity.
• They comprised a mere 1.9% (or $3.5 billion) of the total biopharmaceutical
market, which is worth $180 billion as of 2016.
• The share is likely to expand to nearly 5% by 2020-21, when the total market is
expected to be worth roughly $290 billion.
• Already, Intas Pharmaceuticals, through its subsidiary Accord Healthcare, has
launched Filgastrim (Accofil) in Europe in February 2015.
• Hence, Indian companies are expected to launch biosimilars, such as
monoclonal antibodies, insulins and other therapeutics, to tap regulated
markets, as regulations become more standardised in these regions.
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The evolution of the regulatory approval process has been slow,
with a few approvals. Notable approvals are:
• Earlier, the lack of regulatory clarity hindered the penetration of players in
regulated markets for biosimilars, which have high demand and offer better
margins.

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Indian players step up their presence

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 Segments

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• Biopharmaceuticals are substances produced by manipulating living
organisms via techniques such as genomics (mapping of genes), proteomics
(study of structure of proteins), mutation analysis (change in the DNA
sequence of a cell) and systems biology (study of complex interactions in a
biological system) intended for human/animal treatment.
• Globally, these techniques are referred to as biotechnology, which in other
words is a process technology or a drug discovery research tool.
• Biopharmaceuticals are drugs developed by applying biotechnology on living
organisms / biologics for treatment of diseases.

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Classification of drugs

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Classification of drugs
• Biologics are composed of sugars, proteins, nucleic acids or complex
combinations of these substances, or may be living entities such as cells and
issues.
• As per the US FDA, biological products include a wide range of products such
as vaccines, blood and blood components, allergenics, somatic cells, gene
therapy, tissues, and recombinant therapeutic proteins.
• Biologics are separated from a variety of natural sources - human, animal, or
microorganism - and are transformed into consumable drugs by applying
biotechnology.
• For example, gene-based and cellular-based biologics are often at the forefront
of biomedical research, and used to treat a variety of medical conditions for
20which no other treatments are available.
Classification of drugs
• Following categories of medicines are within the ambit of the domestic
biopharmaceutical market.
• These drugs can be used to treat diseases and have fewer side effects unlike
the small molecule traditional medicines.
• These drugs may be used for therapeutic or diagnostic purposes, and are
produced by means other than direct extraction from a native biological
source:
• Vaccines (developed through recombinant techniques, but excluding
vaccines meant for preventive treatments such as polio, tetanus, diphtheria
etc.)

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Classification of drugs
• Therapeutics (proteins and antibodies)
• Oligonucleotides (nucleic acid polymer)

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Biological products differ from conventional drugs in application
and delivery
• Traditional chemical drugs (pharmaceuticals) are used to treat a particular
disease or indication while biologics prevent the occurrence of a particular
disease. F
• urther, pharmaceuticals are delivered mainly through tablets, capsules or
injections and biological drugs are supplied primarily through injectables.
• Biological drugs also differ from conventional pharmaceutical (chemical)
drugs in terms of their structure and manufacturing processes:
• Structure - Conventional drugs are chemically synthesised and their
structures are known, while most biologics are complex mixtures that are
not easily identified or characterised.
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Biological products differ from conventional drugs in application
and delivery
• Biologics are obtained through the identification of targets (genes), which
are mapped to prevent the occurrence of a disease.
• Manufacturing - Production of biopharmaceuticals involve application of
aseptic (free from contamination) principles right from the initial stages of
manufacturing to the final packaging stage as they are heat sensitive and
susceptible to microbial contamination, in contrast with most conventional
drugs.

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 Products and Services

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• A biopharmaceutical is any drug product manufactured, extracted or semi-
synthesized from biological (human, animal or micro-organism) sources.
• On a broad scale, biopharmaceuticals include vaccines, allergenics, somatic
cells, gene therapies, recombinant therapeutic proteins and living cells used
in cell therapy.
• The products available in the biopharmaceutical segment can be classified on
the basis of the source of their production:
• Extracted from living systems: These products are derived from living
organisms and they include vaccines, antibodies for passive immunization
(e.g. to treat a viral infection), stem cell therapy, organ & tissue transplants

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• Produced by using recombinant DNA: Deoxyribonucleic acid (DNA) is a
molecule that carries genetic instructions used to determine the features
(growth, development, functioning, etc.) exhibited by an organism.
• By using modern technology to alter gene patterns in the DNA, a desirable
trait can be introduced in the organism.
• By doing this, biopharmaceutical companies create vaccines, monoclonal
antibodies (identical immune cells that are clones of a unique parent cell),
oligonucleotides (short nucleic acid polymers used for genetic testing),
therapeutic proteins (proteins engineered for pharmaceutical use; for e.g.
insulin), etc. which are utilized for therapeutic (curative) as well as
preventive purposes.

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• Moving from traditional vaccines (BCG vaccines, etc.), the Indian
biopharmaceutical industry is now making strides on introducing biosimilar
therapeutic proteins (biologically identical copies of original therapeutic
proteins) and monoclonal antibodies, in domestic and semi-regulated export
markets.

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Domestic players expanding their bio-similar portfolio
• The Indian biotechnology industry can be roughly categorised under
traditional vaccine makers and manufacturers focused more on therapeutic
biologicals.
• Most players such as Serum Institute of India, Panacea Biotech, Bharat
Serum and Vaccines etc. operate mainly in areas of preventive vaccines
(meant for polio, tetanus, diphtheria etc.) and therapeutics to treat chronic
diseases.
• Preventive vaccines are mainly supplied to semiregulated markets under
immunisation programmes sponsored by World Health Organisation
(WHO) / United Nations Children`s Fund (UNICEF) etc.

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Domestic players expanding their bio-similar portfolio
• These players are now focusing on more complex vaccines like pentavalent
vaccines which are produced by combining five individual vaccines,
intended to actively protect individuals from five potentially life-threatening
diseases.
• This is done by using recombinant biotechnology. For e.g., Pentavac PFS
(product of Serum Institute of India) is a pentavalent vaccine intended to
prevent Diphtheria, Tetanus, Pertussis, Hepatitis B and Haemophilus Type
b.

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Product portfolio of Indian companies focused on biosimilars

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Product portfolio of Indian companies focused on biosimilars
• Further, there are players primarily focusing on recombinant therapeutics
and monoclonal antibodies.
• For instance, companies such as Biocon and Reliance Life Sciences and
traditional generic drug manufacturers such as Dr. Reddy's, Lupin etc. are
currently marketing their indigenously developed recombinant drugs in
domestic and semi-regulated markets.
• Erythropoietin (used in severe anemia/cancer), Streptokinase and
recombinant human Insulin, Filgrastim etc. are the most common
recombinant drugs currently marketed in India.
• In the therapeutic category, Indian companies are present only in areas such
as oncology, osteoarthritis, anti-diabetic etc.
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Tapping biosimilars opportunity in regulated global markets
• In 2012, the overall biopharmaceutical market was estimated to be valued
between $ 164-169 billion, with biosimilars accounting for 1.4%.
• A growth in the biosimilar segment of biopharmaceuticals will be aided by
the expiring patents of existing innovator biopharmaceutical products thus
giving rise to huge opportunities in regulated markets such as Europe,
USA, Japan etc.
• However, stringent regulatory requirements have slowed approvals for
biosimilars in recent years.
• The need to conduct clinical trials to prove biosimilarity to the original
biological and a nascent regulatory framework have necessitated higher
investments and longer gestation periods.
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Tapping biosimilars opportunity in regulated global markets
• Nonetheless, the Indian industry is not lacking in action.
• For example, in 2014, Lupin has signed a joint venture with Yoshindo Inc
to tap the market for regulated biosimilars in Japan.
• Biosimilar approvals in these regulated markets is expected to open up a
big opportunity for Indian companies in future.

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Exploring outsourcing opportunities in biotechnology research
• Drug discovery in biotechnology involve research in both biology and
chemistry.
• Biological research primarily involves identification and validation of the
target.
• India`s strength lies in undertaking basic research in biology, which
involves genetic research, proteomics (protein expression and purification),
chemoinformatics/bioinformatics and gene sequencing (through
application of molecular biology technologies).
• Once the target is identified and validated, chemistry skills are applied to
generate and screen compounds and lead optimisation.

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Exploring outsourcing opportunities in biotechnology research
• India has strong capabilities in chemical synthesis and analog preparation
of compounds.
• Going ahead, players are likely to be actively involved in drug design and
lead optimisation processes as well.

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Pre-clinical development
• Indian players currently have a negligible presence in pre-clinical studies
of biotechnology drug discovery due to stringent regulations for pr clinical
testing on animals in India.
• This phase involves pharmacology and toxicology studies on non-human
subjects.
• If the government streamlines protocols relating to animal research, Indian
players could benefit by conducting pre-clinical studies.

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Clinical development
• Clinical development broadly involves performing trials and data
management, while adhering to regulatory standards.
• India has developed clinical expertise in this field, given the favourable
demographics - a large population base with tropical diseases, low trial
costs and excellent data management skills (via information technology).

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 Competitive scenario

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 Indian biopharmaceutical industry continue to witness steady
growth
• Indian bio-pharma industry is in the growth stage.
• The aggregate revenue of the industry has been growing at a CAGR of 18-
20% over the past 5 years, which is coupled with a profitability of 14-16%.
• This growth is primarily driven by the export of Indian biopharmaceutical
products along with an increasing demand for the same in the domestic
market.

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 Indian biopharmaceutical industry continue to witness steady
growth
• Notwithstanding the stringent regulations, the industry is continuously
evolving, with companies increasing their foothold in the supply of
recombinant vaccines, along with limited number of therapeutic bio-similar
proteins in the domestic as well as semi-regulated markets.
• The industry consists of 50-100 players, with the top seven companies
accounting for more than 60% of revenues.
• Most players such as Serum Institute of India, Panacea Biotech, Bharat
Serum and Vaccines etc operate primarily in the relatively simpler area of
vaccines.

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 Indian biopharmaceutical industry continue to witness steady
growth
• Vaccines include preventive ones (meant for polio, tetanus, diphtheria etc.)
and therapeutic ones to treat chronic diseases.
• This segment requires relatively lower capital investments in research &
development and has moderate amounts of technical complexities in
manufacturing.

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 Semi-regulated markets provide ideal platform to expand
vaccines market....
• Majority of Indian biopharmaceutical players directly export preventive
vaccines (for immunization programs) to semi-regulated markets via
tenders raised by international health organisations (such as WHO,
UNICEF, GAVI etc).
• To qualify for such contracts, Indian players have to maintain current GMP
(good manufacturing practices) compliant manufacturing facilities and be
capable of providing vaccines on a large scale at low prices.
• Over the last 2-3 decades, Indian players have developed capacity to meet
such requirements, while at the same time, built strong relationship with
such organisations aiding in consistent order flows. For e.g.:
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 Semi-regulated markets provide ideal platform to expand
vaccines market....
• IPCA supplies artemisinin based combination therapy (ACTs), useful for
combating malaria, to donor organisations like UNICEF, WHO,
IDA,Mission Pharma, etc.
• In February 2015, Panacea Biotech signed a $13.49 million contract with the
Pan American Health Organisation for the supply of 5.99 million dosages of
pentavalent vaccine (Easy5-TT) -for 2015 and 2016.
• In 2013, the company announced it had bagged a supply order from
UNICEF for its pentavalent vaccine from 2014 to 2016
• In 2015, Shantha Biotechnics ltd delivered 22 million doses of its
pentavalent vaccine, Shan5, under UNICEF's global vaccination
programme.
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 ....yet competition remains low in complex categories

• In the present scenario, the segment is steadily witnessing a shift towards

more complex recombinant vaccines such as pentavalent and other
recombinants.
• However, competition remains low on account of smaller number of players
having such a complex vaccine portfolio.
• The industry has a co-existence of traditional players such as Dr Reddy's,
Cadila Healthcare and Wockhardt, as well as standalone biopharmaceutical
players, such as Biocon and Reliance Life Sciences, who focus on therapeutic
biotechnology drugs.

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 ....yet competition remains low in complex categories

• However, these players are still evolving and are yet to market their
indigenously developed recombinant drugs in regulated markets.
• Currently, they sell products (therapeutic vaccines and drugs) mainly in the
domestic and semi-regulated markets of Africa and Latin America.

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 Biosimilars remain sparsely populated due to low risk appetite
of companies
• There is low competition observed in the industry as far as biosimilars are
concerned.
• To develop a biosimilar, Indian players have to conduct animal studies, clinical
trials etc prior to an approval.
• On an average, the time required for developing biosimilars is 6-7 years with
low success rate thereby, keeping potential new entrants at bay.
• However, off late, competition is increasing with several Indian
pharmaceutical manufacturers expanding their product portfolio in the
domestic and semi-regulated therapeutic biosimilar markets.
• Yet, the extent of competition remains lower than that witnessed in traditional
generics, largely due to technical barriers and the gestation period.
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 Regulations

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Regulations governing biopharmaceutical industry

• Similar to pharmaceuticals, the biopharmaceuticals market also caters to

both regulated and semi-regulated markets, where the level of stringency
varies for drug approvals, post-approval surveillance etc.

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Snapshot of global biopharmaceutical industry

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Export markets (regulated and semi-regulated)
• The US and European markets are the most regulated, with stringent
guidelines governing drug discovery, clinical trials and marketing of drugs.
• Similar to pharmaceutical drugs, the US FDA regulates approval and
marketing of biopharmaceuticals.
• Guidelines relating to manufacturing - CGMP and GLP applies to the
biotechnology industry as well.
• Within the FDA, the Centre of Drug Evaluation and Research (CDER) reviews
therapeutic biological products and pharmaceutical (chemical) drugs.
• The Centre for Biologics Evaluation and Research (CBER) reviews blood
products, vaccines and tissue-based products.

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BPCIA Act allows introduction of biosimilars in the US market

• The BPCI Act creates an abbreviated pathway for licensing of biosimilar

products on the lines of the Hatch-Waxman Act.
• To gain approval, the biosimilar product would need to establish
similarity to the original biological drug.
• This will require both, animal studies and clinical studies to establish that
the biosimilar product will have potency, purity and safety comparable
with the referenced innovator drug.

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BPCIA Act allows introduction of biosimilars in the US market

• Moreover, the mechanism of action and approved labelling of the

biosimilar product must be similar to the original biological drug.
• The BPCIA allows 12 years of market exclusivity to new biological(s)
discovered and manufactured by any innovator, as compared to 3-5 years
given for traditional pharmaceuticals.

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BPCIA Act allows introduction of biosimilars in the US market

• Moreover, no biosimilar application can be submitted until four years after

licensing of the original biological and even post acceptance of such
application, marketing approval will only be granted upon expiry of the
12-year period for the original biopharmaceutical.
• A biosimilar product may be granted one year of market exclusivity upon
approval.

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BPCIA Act allows introduction of biosimilars in the US market

• The FDA's guidance documents - required for more clarity on procedures

and requirements for filing biosimilar submissions in the US - are at draft
stages, as industry inputs are being gathered prior to issuing the final
guidance.
• This, coupled with technological complexities and huge investments
required for manufacturing biosimilar products, could delay introduction
of a large number of biosimilar products in the US, over the medium term.
• In Europe too, technological complexities and huge investments could
deter large product introductions, despite the fact that Europe published
its guidelines on certain categories of biosimilars in March 2006.
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 India
India is yet to establish a common protocol for regulating biopharmaceutical
drugs.

• The Department of Biotechnology (DBT) oversees the biotechnology

industry.
• The Genetic Engineering Approval Committee (GEAC), under Ministry of
Environment and Forests, is responsible for approval of biotechnology
products,
• The DBT and others (Drug Controller General of India abbreviated as DCGI)
regulate and monitor clinical trials.

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India

• Based on recommendations of the Mashelkar Committee Task Force

(effective April 1, 2006) - set up to streamline regulation of
biopharmaceuticals - timelines for approval of all recombinant DNA
products have been set (as stated in graphic below).
• These products also undergo processes similar to a chemical drug in terms of
animal studies, clinical trials, etc. On an average, the time involved for
approving biosimilars is 6-9 months.

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Timelines for approval of biopharmaceuticals in India

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Other initiatives taken by the government to facilitate growth
of the sector:a
• Proposed Biotech Strategy Policy, which primarily aims at establishing a
National Biotechnology Regulatory Authority to approve all biotechnology
products, to streamline and strengthen the regulatory structure
• Policies framed for establishment of biotech parks; biotech companies
located in these parks are given concessions such as a tax holiday under
chapter U/S 10B of the 1961 Income Tax Act and duty-free imports of
equipment and instruments.
• Promotion of biotechnology clusters in close proximity of industries,
academic institutions, and research laboratories.

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Other initiatives taken by the government to facilitate growth
of the sector:a
• Approval of the National Biotechnology Development Strategy in November
2007.
• Key goals are to ensure speedy approvals, promote research and
development, build academic excellence in biotechnology, and so on.

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 Key Success Factors and Risks

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 Key success factors
R&D strength

• The success of a biopharmaceutical company largely depends on its ability

to continuously introduce drugs for newer indications and to develop
costeffective drugs that are therapeutically equivalent to those existing.
• The global biotech on-patent drug market is yet to mature with substantial
money being currently directed towards research and development (R&D)
and impending breakthroughs.
• Currently, a few Indian companies are focused on producing bio-similars
and traditional vaccines, which are mainly exported to semi-regulated
markets and also used domestically.

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Strong product pipeline
• A strong product pipeline is an important determinant of a
biopharmaceutical company`s ability to garner high market share.
• This applies to both an innovative drug-maker and a bio-similar drug
manufacturer.
• In the former case, the innovator should aim at introducing drugs for
diseases that do not have effective therapeutic/preventive solutions (mainly
for chronic and life-threatening ailments such as cancers).
• R&D is being undertaken in segments such as oncology, infectious diseases,
autoimmune disorders and diabetes.
• On the bio-similars front, players are targeting diseases that are widespread
but lack cost-effective remedies.
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Strong product pipeline
• A company with a product portfolio featuring a higher proportion of
therapeutics and access to regulated markets such as Europe and the US can
reap high benefits both in terms of volumes and realisations.
• Indian players have found it difficult to crack the regulated market of
Europe and US for bio-similars due to stringent and complex regulations.
• However, in the long run, more efforts in this area will yield positive
outcomes.
• For example, in 2015, Intas pharmaceutical became the first Indian company
to receive marketing approval for a bio-similar (filgrastim) in a regulated
market (Europe).

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Well-equipped infrastructure
• Establishment of advanced and adequate infrastructure is crucial for
evaluating the ability of a company to research, manufacture and supply
drugs in the market.
• Infrastructure includes establishment of laboratory and bio-manufacturing
facilities conforming to the regulatory standards of the market a player
operates in, such as the good laboratory practice (GLP) and current good
manufacturing practice (cGMP) laid down by US FDA.
• Currently, only a handful of bio-manufacturing facilities in the country cater
to both the domestic and export markets.

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Well-equipped infrastructure
• Typically, a manufacturing facility involves upstream and downstream
processes (occurring later in the production sequence).
• While the upstream processes comprise bio-reactors, the downstream
processes include centrifugation, filtration, precipitation, lyophillization, etc.
• Bio-reactor processing is the initial step of the manufacturing stage, primarily
meant to grow cells or tissues in conformance to a developed cell line.
• Going ahead, it is also essential to set up multi-product bio-reactors with the
rising spectrum of bio-pharmaceutical drugs available in the market.
• A well-equipped infrastructure is important for players who would like to tap
contract manufacturing/research services from global biotechnology
companies.
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Prior experience in the market
• The capability of a company to effectively function in different markets
(domestic and export) will be a differentiating factor in determining its
ability to penetrate newer markets while retaining existing ones.
• This will be determined largely by the number of years players have been
operating in a particular market as they would be aware of the regulatory
requirements and consequences of non-compliance.
• This factor is becoming increasingly critical with growing stringency in
terms of safety and efficacy, particularly in the regulated markets.
• A single case of non-compliance is expected to have a larger impact not only
on a company`s existing product portfolio but also on its future portfolio.
• This, in turn, will act as a major impediment in its expansion with newer
product introductions (bio-similars).
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Risks and structural weaknesses

• To tap the bio-similars market, it is essential to direct substantial

investments towards building requisite infrastructure, including the
establishment of laboratory and manufacturing facilities.
• Currently, India has only a handful of laboratories and bio-manufacturing
facilities that conform to international standards.
• Thus, neither the research nor the manufacturing facilities are geared to
develop and market indigenous bio-similars in regulated markets.

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Lack of skilled manpower
• A well-equipped infrastructure facility must be backed by an adequate
number of skilled and trained personnel.
• This is a pre-requisite both in the developmental and manufacturing
stages of a biopharmaceutical company.
• In case of the former, a doctorate or post-graduation is the minimum
acceptable qualification for conducting research & development (R&D),
while a graduation or post-graduation in chemical or bio-chemical
engineering is a compulsory requirement in the manufacturing front.
• Further, the manufacturing personnel have to undergo intensive training
to operate a bioreactor or similar equipment in a manufacturing facility.

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Lack of skilled manpower
• The Indian industry currently faces the challenge of inadequate human
capital in terms of experienced qualified personnel, both on the
developmental and manufacturing fronts.
• There is a dearth of experienced and skilled manpower, which is a pre-
requisite to building a strong presence in this market.
• India does not have a strong system for nurturing post-doctoral students
who can become a significant research workforce in this sector.
• Currently, most of the academic research leading up to the development
of bio-pharmaceuticals is conducted by students pursuing their PhDs.

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Regulatory and government backing
• The approval time for clinical research in India has significantly become
longer compared to other markets on account of several regulatory
changes that are yet to become completely streamlined.
• This, coupled with new rules pertaining to compensations in clinical
trials, may dissuade global bio- pharmaceutical players from conducting
clinical trials in India.
• There is an increased need for greater government support for research
grants to conduct biomedical research.
• The government spends about 1.5% of India`s GDP on healthcare, which
is considerably lower than the 7-9% spent by developed nations such as

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the US and Europe.
Regulatory and government backing
• Moreover, it is important to nurture entrepreneurship through industry-
research associations, to enable commercialisation of basic research.
• Innovative financial solutions such as venture capital need to be
developed, to help bio-pharma companies commercialise their products.

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Funding, a core issue
• Funding to be the primary concern for growth in this sector.
• Indian banks and financial institutions are skeptical of providing finances
to players in this sector, owing to the high risks involved and the long and
uncertain payback period.
• This is in contrast to developed economies such as the US and Europe,
where the biotech industry is adequately supported by private funds such
as venture capital and private equity.

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 Review of Industry
Growth and Outlook

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• New products, especially therapeutics, and complex vaccines will be the
growth engine for Indian biopharmaceutical players over the next few years.
• Companies are expected to focus on drugs for ailments, such as hepatitis,
rheumatoid arthritis, anaemia, fertility disorders, cancer and diabetes.

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Biopharmaceutical growth outlook

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Product pipeline of Indian pharma companies

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Product pipeline of Indian pharma companies
• Recombinant vaccines, such as pentavalent and rotavirus vaccines, and
monoclonal anti-bodies, such as Adalimumab (rheumatoid arthritis) and
Rituximab (oncology), will drive domestic demand.
• The domestic market is likely to see better growth prospects from 2016-17,
on the back of an improvement in product registrations and launches by
companies since 2015-16.
• Further, continued sales of pentavalent vaccines by companies, such as
Shantha Biotech, are likely to support growth momentum going ahead as
well, with domestic demand likely to chart a steady 12-14% CAGR, reaching
Rs 120-130 billion by 2020-21.

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Product pipeline of Indian pharma companies
• A caveat, however, remains on the performance of large companies, such as
Biocon and Serum.
• Failure to get timely product approvals/launches or a slow ramp-up in sales
of new products could impact domestic growth.
• On the other hand, exports are likely to grow at a relatively faster pace, as
players build their product portfolios to target export opportunities.
• Players such as Biocon are filing for more product approvals, such as for
insulin (Glargine), in semiregulated markets. An improvement in exports of
these products to aid growth recovery in 2016-17 and beyond.

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Indian companies widen their product portfolios
• Large and medium-sized pharmaceutical companies have been building
strong portfolios with low-cost therapeutic drugs (biosimilars); the most
recent was launched in 2014-15 and 2015-16.
• These products will compete with their patented variants. A few launches by
large pharmaceuticals players are: Reditux by Dr. Reddy's and Zotide by
Cipla.
• Concord Biotech has a lucrative portfolio of drugs in the
immunosuppressants category, coupled with the company's focus on
expanding its product basket.

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Indian companies widen their product portfolios
• In fact, the company has been earning margins in the range of 40-45% over
the past three years.
• Growing competition in the core pharmaceuticals segment and the need to
diversify for expansion have attracted large pharmaceutical companies, such
as Cadila Healthcare, Wockhardt, Glenmark, Dr Reddy's, Lupin and Cipla,
to this segment.
• For these companies, the choice of a product portfolio in the
biopharmaceutical segment will determine the margin they can earn.
• Therapeutics and other biosimilars to help large formulation companies
penetrate the domestic market better.

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Players firming up presence in semi-regulated markets
• Cost advantage is expected to drive demand for Indian biosimilars in key
export markets in Asia (Vietnam, Nepal, Bhutan and Sri Lanka), Latin
America and Africa.
• The lack of stringent regulations and faster marketing approvals have
helped Indian players to directly retail biosimilars.
• Major products sold by Indian players in semi-regulated markets include
insulin, epogen, granulocyte colony stimulating factor (G-CSF),
streptokinase, interferon and rituximab.

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Regulated markets offer next growth opportunity
• Patents on biopharmaceuticals, which recorded sales of $51-54 billion in
2015-16, are set to expire over 2017 to 2021 in the US and Europe.
• Further, even among the drugs where patents have already expired, the
penetration of biosimilars is very low due to regulatory challenges and
difficult procedural requirements of all-phase clinical trials (in core
pharmaceuticals, all-phase clinical trials are not required for generic
launches).
• These expiries will present a lucrative opportunity for Indian players to
launch biosimilar versions in regulated markets.

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Regulated markets offer next growth opportunity
• Compared with a generic chemical molecule, such biopharmaceutical drugs can
contribute higher revenue realisation due to better effectiveness and generally
higher probability of success.
• For example, based on secondary information, a typical small molecule, such as
Metformin (to treat diabetes), may be priced at $0.6 per tablet in the US.
• While at the same time, a biological molecule such as insulin (Glargine-to treat
diabetes) could be priced at $13 to $ 27 per millilitre of dose (prices are based on
the cash purchase medicine segment).
• Players such as Biocon are already stepping up to file for biosimilars in the US.
• In fact, its partnership with Mylan has moved closer to filing marketing

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approval dossiers for four biosimilars in the US and Europe in 2016-17.
Regulated markets offer next growth opportunity
• However, regulatory approvals will be a key monitorable, especially in the
US, the largest biopharmaceutical market.
• While regulations are already in place in Europe for marketing certain
categories of biosimilars, the US Food and Drug Administration (FDA) has
granted its first biosimilar approval in 2015 and had only two approvals as
of September, 2016.
• However, regulations have become more standardised in the US to facilitate
filings for biosimilars.

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Global value of biopharmaceutical drugs going off-patent

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Global value of biopharmaceutical drugs going off-patent
• Indian players have strong capabilities to re-engineer patented products and
supply them globally at a lower cost, even in regulated markets.
• However, as building a product portfolio for regulated markets will also
require clinical studies with extensive approvals,
• Revenue growth from these regions to remain limited in the medium term.
• To resolve the regulatory fix, Indian players have opted for tie-ups as well
as in-house R&D to develop biosimilars. Some examples:

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Global value of biopharmaceutical drugs going off-patent
• Intas Pharmaceuticals launched its first biosimilar, Accofil, in Europe in
February 2015 through its subsidiary, Accord Healthcare, followed by Reditux
by Dr. Reddy's and Zotide by Cipla Cipla and Serum Institute of India entered
into a vaccine distribution agreement to cater to the European market.
• Lupin entered into a joint venture with Yoshindo Inc to target the Japanese
biosimilar market.
• Biocon and Dr. Reddy's have tied up with Mylan and Merck Serono,
respectively, to jointly develop and sell biosimilars in Europe and the US.
• Further, Biocon plans to file for regulatory marketing approvals for four of its
biosimilars in regulated markets in 2016-17.

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Growth in recombinant vaccines to be led by new launches
• Revenue from recombinant vaccines is estimated to grow steadily over the
next three years, driven by demand for pentavalent and traditional vaccines.
• This product category largely comprises Hepatitis B and combination
vaccines (e.g., pentavalent vaccines).
• Their inclusion in the government's immunisation programmes ensures
bulk demand, which will drive sales volume.

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Recent vaccine launches and approvals for companies

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Recent vaccine launches and approvals for companies
• Higher margins will also attract players to recombinant products.
• For example, players such as Bharat Immunologicals & Biologicals Ltd, had a
negative operating margin of 5% in 2015-16, because of a limited product
portfolio and slowdown in sales of traditional oral polio vaccines (OPV) in
the wake of the growing acceptance of injectable/inactivated polio vaccine
(IPV).
• On the other hand, Bharat Biotech, armed with recombinant vaccines, has
been witnessing an operating margin of more than 20% over the past three
years up to 2015-16.
• The low-cost advantage for Indian vaccines - 30-40% lower than in the US
and Europe - will be another growth driver.
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Recent vaccine launches and approvals for companies
• Availability of low-cost skilled labour and lower material and equipment
costs give India an edge.
• Moreover, over the years, India has established itself among the top vaccine
suppliers globally, especially to organisations such as the WHO and
UNICEF.

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Funds committed to various GAVI programmes - thrust on
immunisation continues

93
Funds committed to various GAVI programmes - thrust on
immunisation continues
• An analysis of Global Alliance for Vaccines and Immunisation (GAVI) funds
being deployed over 2015 shows increasing funding support for vaccines
throughout the world.
• With the thrust on global immunisation expected to continue over the next
three years, India is expected to increasingly supply to such programmes,
thereby boosting companies' growth prospects.

94
• Indian biopharmaceutical manufacturers' revenue to rise to Rs 230-240
billion by 2020-21, at a healthy compound annual growth rate (CAGR) of
13-15%, as they launch price-competitive biotherapeutics and recombinant
vaccines (pentavalent and hepatitis).
• Such a move marks a steady shift from traditional vaccines.
• The significant cost advantage will help Indian players score over
multinationals' drugs in both the segments.

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•In the past couple of years, companies have taken several steps to enhance their
presence in the domestic and semiregulated markets by increasing product
registrations. Such opportunities can boost Indian companies' revenue and are a
key monitorable.

• Growth is expected to be driven by bio-therapeutic drugs, such as

insulin and monoclonal antibodies, besides products treating critical
ailments, such as:
• Diabetes
• Rheumatoid arthritis
• Cancer
• Anaemia
• Female fertility
• Hepatitis
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• Growth is expected to be driven by bio-therapeutic drugs, such as
insulin and monoclonal antibodies, besides products treating critical
ailments, such as:

• On the other hand, demand for vaccines is likely to be driven by the

launch of complex recombinant and pentavalent vaccines.

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 Regulated markets could be next growth frontier
• In regulated markets, such as Europe and the US, there is a significant
growth opportunity for biosimilars, as drugs worth more than $50
billion are expected to go off-patent over the next few years until 2021,
and those worth more than an estimated $70 billion having already
expired up to 2016.
• However, stringent regulatory requirements have slowed approvals for
biosimilars in recent years.
• The need to conduct clinical trials to prove 'biosimilarity' to the original
product and a nascent regulatory framework have necessitated higher
investments and longer gestation periods.

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Regulated markets could be next growth frontier
• Nonetheless, Indian players are not lacking in action.
• For example, Intas Pharmaceuticals gained approval and launched
Accofil in Europe in February 2015.
• Lupin has signed a joint venture with Yoshindo Inc to tap the Japanese
market for regulated biosimilars.
• The Biocon-Mylan partnership has moved closer to filing marketing
approval dossiers for four biosimilars in the US and Europe in 2016-17.

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