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Section B: Pharmaceutical Industry

The Indian pharmaceutical industry has emerged as a global hub for pharmaceutical manufacturing with quality producers and many internationallyapproved manufacturing units. The industry is also emerging as a hub for contract research, clinical trials, biotechnology and clinical data management services.

The Indian pharmaceutical industry ranks third in the world in terms of volume of production and constitutes 10% of global pharmaceutical production whereas in terms of value, it is the fourteenth-largest in the world and accounts for a 1.5% share in the global pharmaceutical market.

Some highlights from our study of pharmaceutical companies based in Mumbai cluster are as follows:

Characteristics of the pharmaceutical companies in the Mumbai cluster

Ownership pattern

Private players dominate the pharmaceutical industry in the Mumbai cluster and constitute 73% of the surveyed pharmaceutical companies, besides proprietary and partnership firms that constitute 10% each of the surveyed companies.

Most pharmaceutical companies in the Mumbai cluster manufacture their own products whereas only 27% companies carry out contract manufacturing activities. Among the private limited companies, approximately 95% companies are engaged in standalone manufacturing.

Branding

Pharmaceutical companies in the Mumbai cluster are not focused on branding, as only 38% companies own a brand. None of the proprietary-owned companies in the Mumbai cluster own a brand, as they are all engaged in contract manufacturing activities.

Among the respondent companies that own brands approximately 45% cater exclusively to the ayurveda segment.

Segment-wise classification

The survey reveals the various segments in which the pharmaceutical companies in the Mumbai cluster operate. Among these segments allopathy and ayurveda were the two prominent segments which were a part of the business operations of the respondent companies.

The companies in the cluster were engaged in manufacturing of varied product dosages forms, ranging from tablets, syrups to dry suspension, ointments injectables among others. Almost 47% companies were manufacturing medicines in tablet or capsules forms. Another, 37% respondents were into manufacturing of ointments/creams and other dry suspensions.

Operational analysis

Revenue classification

According to the survey results, 50% respondent companies in the Mumbai cluster recorded less than Rs 40 mn as revenue, whereas 17% companies were in the higher revenue bracket of Rs 500 mn to Rs 1 bn.

Among the respondents that earned less than Rs 40 mn in revenues, approximately 80% companies derived more than half of their revenue from the domestic market.

Share of exports in revenue

Exports form a substantial component of the revenues of the pharmaceutical companies that operate in the Mumbai cluster. According to the survey, exports constitute more than 50% of the revenues of 23% respondents companies that operate in the cluster.

Among the surveyed companies, 40% companies derive less than 25% revenue from exports followed by 37% companies which derive 25% to 50% revenue from exports. The other aspect to the exports was that 30% of the respondents were not exporting at all. These non exporting companies are into manufacturing of allopathy and ayurvedic products, with some companies manufacturing bulk drugs.

Country-wise exports

The major export destinations for the respondent SME’s in the Mumbai cluster were Europe, Americas, Middle East and Asia. Europe emerged as the most preferred export destination.

Production details

Production capacity utilisation

The pharmaceutical companies surveyed in the Mumbai cluster rank high on capacity utilisation, as 49% companies have a capacity utilisation of more than 75% followed by 48% companies that have a capacity utilisation between 50-75%.

Among the respondents with high capacity utilisation of more than 75%, approximately 80% companies operate with 1 plant each. Whereas approximately 58% companies operate with one plant among the respondents with capacity utilisation of less than 75%.

Research and development

According to the survey, 83% respondent companies in the Mumbai cluster have at least one R&D unit whereas around 11% companies have more than one R&D facility. The R&D spend of 52% companies is in the range of 2-5% whereas 38% companies operating in the cluster have a R&D spend of more than 5%.

IT adoption among SMEs

As per the survey, majority (90%) of the pharmaceutical companies in the Mumbai cluster use some sort of an IT product. While printers, desktop and scanners are the most commonly used hardware in the surveyed companies, high-end products such as notebooks, networking products etc are not very popular.

Among the various IT applications used by the respondents, payroll application is the most popular followed by receivables management applications.

Share of IT in total expenditure

Though most of the companies surveyed in the Mumbai cluster utilise some sort of an IT product, the share of IT in total expenditure is relatively low as 78% of the respondents have an IT budget of less than 1%. The survey also revealed that these respondents are not keen on increasing their spending on IT as approximately 95% of the companies with less than 1% expenditure on IT do not intend to increase their IT expenditure in the future.

Challenges in IT adoption

As per the survey, approximately 45% respondents indicated high cost of implementation as one of the challenges in IT adoption. Small size of business was also perceived as one of the challenges for IT adoption by almost 38% respondents.