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2 The Indian Pharmaceutical Industry (IPI) is globally 3rd largest in terms of volume and 13th largest in terms of value. Inherently India has been regulated market, and significant emphasis has always been given on price control; hence India s rank in global pharmaceutical industry varies significantly in value and volume terms. The domestic IPI has been witnessing strong growth scenario during last one decade, as domestic consumption has increased at a CAGR of around 9 per cent during FY03-FY13 period. Rising urbanisation and increase in income levels fuelling industry s consumption Exports continue to remain mainstay for the industry growth Exports contribute a significant 53 per cent of IPI production. Recently IPI has elicited a whole lot of attention as almost all the key players have been in the news for not adhering to the current good manufacturing practices (CGMP) and causing them to face the ire of USFDA. Despite all odds, the Indian companies have posted a significant growth in revenue, especially in the export market. Ability of domestic manufacturers to expand to different geographies (i.e. emerging economies), expanding product portfolio through constant R&D has been key to the growth of this industry. Growth in the exports of pharmaceutical products from India will be driven by patent expiries of the major branded drugs across the world, particularly in the US market. The growth in the US market will be led by increasing generic penetration and healthy ANDA (Abbreviated New Drug Application) pipeline of Indian pharma players. Shrinking patent pipeline to drive exports Key challenges to the industry The new Drug Price Control Order (DPCO) enforced by Department of Pharmaceuticals brought 348 drugs covering 600 formulations under price control w.e.f. 15th May, The policy was designed to control high disparity in prices of drugs across various brands and shift from cost based pricing practice to market based pricing. CARE Research believes, the new price control pose a onetime (i.e. near term) challenge on the industry revenues; however with only 600 formulations falling under the preview of this policy the overall impact on the industry would be miniscule.

3 SECTION I CARE Research Outlook Improving healthcare delivery systems and growing penetration of medical insurance A boost for pharmaceutical industry Government focusing towards bridging the deficit towards human resource requirement in healthcare sector New price control has posed challenge for the industry Exports would continue to remain mainstay for the industry growth in near to medium term Shrinking patent pipeline in developed markets offers significant growth potential for Indian formulation segment Momentary hiccups like delay in approvals from USFDA may constrain the growth by some extent Healthy growth scenario in emerging economies provide encouraging prospects for domestic pharmaceutical companies Increasing focus towards R&D has been key success factor for domestic manufacturers off-late Margins to witness downside risk in near term; however gradual improvement expected in medium term Exports would continue to remain mainstay for the industry growth in near to medium term SECTION II Industry Section Evolution and Industry Structure Evolution of Indian Pharmaceutical Industry I. Pre- independence phase II. Development phase (before 1970) III. Phase of process patents ( ) IV. Introduction of TRIPS regime ( ) New price control has posed challenge for the industry Current structure of IPI Competitive scenario Industry Characteristics Low cost advantage and skilled manpower Export dominate Indian pharmaceutical production Factors driving India s drugs and pharmaceutical exports USFDA approved manufacturing facilities

4 Manufacturing costs and access to the domestic pharmaceutical market Increasing share of Indian pharmaceutical companies in ANDA flings Patent Expiries Backward integration by domestic formulation companies Forward integration by bulk drug manufacturers Demand Scenario Demand scenario Chronic segment was the key growth driver for the formulation market during last few years Acute segment continued to witness healthy rise Key Growth Drivers Growth in middle class population and rapid urbanization Changing demographics and increase in per capita income leading to higher penetration Increasing prevalence of lifestyle related diseases Increasing health insurance penetration Outsourcing opportunity offered by big pharmaceutical MNCs Trade Scenario Exports Scenario Imports Scenario Regulation Landscape Background Foreign Direct Investment (FDI) in the Indian Pharmaceutical Industry Major Regulatory Bodies and Applicable Acts, Policies National Pharmaceuticals Pricing Policy (NPPP) 2012 Major Features of NPPP 2012 Impact on the Indian Pharmaceutical Industry Code of marketing practices CRAMS Overview on CRAMS (Contract Research and Manufacturing Services) market Biopharmaceuticals and Bio-Similars Opportunity Overview The Vaccines Market The diagnostics and therapeutics market SWOT Analysis SWOT analysis

5 Pharma R&D Indian Pharma R&D Global Pharma R&D Glossary of terms SECTION III Company Section Aurobindo Pharma Cipla Dr Reddy s Ltd Glenmark Pharmaceuticals Ltd LIST OF GRAPHS and TABLES SECTION I CARE Research Outlook Outlook on domestic consumption of pharmaceuticals Availability of HR during Eleventh Plan and Projections for Twelfth Plan Estimated rise in per capita healthcare expenditure Growth trend in total business premium in healthcare insurance Outlook on Exports Value of branded drugs going off patent CY Exports share of key markets Estimated market size of emerging markets (US$ Billion) Trend in R&D expenditure of major players ANDA Approvals Granted by USFDA (CY08-CY13) Outlook on operating margins

6 Evolution and Industry Structure Industry structure Competitive structure of IPI SECTION II Industry Section Industry Characteristics Profile of People Employed in the Pharmaceuticals Segment Labour cost comparison Factory cost comparison Trend in industry exports Exports share in the total industry revenue Comparison of R&D Cost in India & US Manufacturing Cost Index for USFDA plants Country-wise ANDA approvals in CY13 Company wise share of API as % of consolidated revenues (FY2012) Demand Scenario Trend in domestic consumption of pharmaceuticals Key Growth Drivers of Indian pharmaceutical industry Rise in Indian Middle Class Population as a percentage of total population Rise in Indian Middle Class Population as a percentage of total population Projected Expectancy of Life at Birth in India ( ) Indian population s expenditure break up as a % of overall disposable income ( E) Increasing prevalence of lifestyle related diseases in India ( E) Country wise out of pocket expenditure as a % of total healthcare expenditure (2009) Country wise per capita expenditure on healthcare US$ (2009) Trend in gross health insurance premium Pharmaceutical outsourcing trend (1990 to 2020) Developed Markets Patent Expiry Exposure and Impact (CY ) Company wise ANDA approvals (CY2013) Trade Scenario Trend in Exports Country wise share in exports Geographical revenue break up of key manufacturers

7 Country wise exports trend The value of branded drugs going off patent globally (US$ billion) CY2012-CY2016 Trend in imports Country wise share in imports Country wise imports trend Regulatory Landscape Major regulatory bodies Regulatory framework Biopharmaceuticals and Bio-Similars Opportunity Comparison of small molecules pharmaceuticals v/s biopharmaceutical Biologics product patent expiries (US$ Billion) (CY2012-CY2020) Pharma R&D Top 10 Indian Pharma Companies by gross sales & their R&D expenditure (FY2012) Relative comparison of major cost advantage in India (%) Business Risk Top 10 Global Pharma Companies by sales & their R&D expenditure (CY2011) NME approvals by USFDA (CY2005-CY2011) SECTION III Company Section Aurobindo Pharma Segment wise revenue break up (FY13) R&D Expenditure Cumulative Filing as on December 2013 Revenue Mix % Composition of Formulations Sales ANDA pipeline as on December 2013 Consolidate Annual Financials (FY11-13) Cipla Segment wise revenue break up (FY13) R&D Expenditure Cumulative Filing as on December 2013

8 Dr Reddy s Ltd Consolidate Annual Financials (FY11-13) Quarterly Standalone Financials Credit Rating Segment wise revenue break up (FY13) R&D Expenditure Cumulative Filing as on December 2013 Geographic and product diversification Consolidate Annual Financials (FY11-13) Glenmark Pharmaceuticals Ltd Segment wise revenue break up (FY13) R&D Expenditure Key Deals Consolidate Annual Financials (FY11-13) Quarterly Standalone Financials Credit Rating

9 Credit Analysis & Research Ltd. (CARE), promoted in 1993 by some of the leading Indian banks and financial institutions including Industrial Development Bank of India (IDBI), Canara Bank and others is amongst the premier credit rating agencies in India and provides credit rating, research and information services. CARE Ratings is well equipped to rate all types of debt instruments including Commercial Papers, Fixed Deposits, Bonds, Debentures, Hybrid Instruments, Preference Shares, Loans, Structured Obligations, Asset Backed Securities, Residential Mortgage Backed Securities etc. CARE's rating methodologies are in line with the best international practices. CARE Research & Information Services (CARE Research)is an independent division of CARE. CARE Research services a variety of business research needs with credible, high-quality research and analysis on various facets of the Indian Economy and Industries. The Publications include Industry Reports, Debt Market Review, Budget Analysis and other policy impact analysis and special commentaries on topical issues. CARE Research offers research reports on various Indian industries. The reports by CARE Research provide insightful data and analysis on various industry sectors and CARE's outlook on the same. To view list of industries under our coverage you can visit For any queries regarding the content & scope of the report kindly reach us at careresearch@careratings.com To place an order, please contact: Manish Sukhija Business Development - CARE Research Credit Analysis & Research Ltd. 503, Kaledonia, Sahar Road, Off Western Express Highway, Andheri (E), Mumbai Cell: , Tel.: (Direct), (Board) CORPORATE OFFICE MUMBAI Credit Analysis & Research Ltd. 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai Tel: , Fax: , care@careratings.com 503, Kaledonia, Sahar Road, Off Western Express Highway, Andheri (E), Mumbai Tel.: ; Fax: REGIONAL OFFICES AHMEDABAD 32, Titanium, Prahaladnagar Corporate Road, Satellite, Ahmedabad Tel: Fax: BENGALURU Unit No , 11th Floor, Prestige Meridian II, No.30, M. G. Road, Bangalore Tel: , Telefax: CHANDIGARH 2nd Floor, S.C.O , Sector 34-A, Chandigarh Tel: / 09 CHENNAI Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai Tel : / Fax: HYDERABAD 401, Ashoka Scintilla, , Himayat Nagar, Hyderabad Tel: Fax: JAIPUR 304, Pashupati Akshat Heights, Plot No. D-91, Madho Singh Road,Near Collectorate Circle, Bani Park, Jaipur Tel: / 14 KOLKATA 3rd Floor, Prasad Chambers, (Shagun Mall Building), 10A, Shakespeare Sarani, Kolkata Tel: / 02 Fax: NEW DELHI 13th Floor, E-1 Block, Videocon Tower, Jhandewalan Extension, New Delhi Tel: , Fax: PUNE 9th Floor, Pride Kumar Senate, Plot No. 970, Bhamburda, Senapati Bapat Road, Shivaji Nagar, Pune Tel: MALDIVES 4th Floor, CHAMPA Center Point, Chandhanee Magu, Male' Republic of Maldives. Tel: / Mobile: / Fax: CIN: L67190MH1993PLC071691