Glenmark Pharmaceuticals, an Indian pharmaceutical company with operations in specialty, generics and out-licensing, has seen sales increase from Rs6.04bn (US$138m at 2005 exchange rates) in 2004/05 to Rs29.5bn in 2010/11 (US$645.2m at 2010 exchange rates), or at a compound annual growth rate of nearly 31%. India and South-east Asia together contribute around 25-30% of its overall profits, and about 50% of its branded business income.
Achin Gupta, the firm’s senior vice president of corporate strategy, says although India is a key market, the company is growing even faster in some other emerging markets such as Brazil, Mexico, the CIS, Russia and Eastern Europe. “Our branded generics business is growing at about 40% outside of Asia,” he says.
Competition in Asia has increased over the past five years, Mr Gupta says, largely due to two factors. First is the increased interest from multinationals in the world’s emerging markets. Second is the growth of Indian firms. “We went from having a sales force of about 1,200-1,500 in 2005/06 to a sales force that is about 3,000-strong today,” Mr Gupta says. “Moreover, the ability of Indian companies to play in the global generics market has given them additional funds that are being invested in India.”
Mr Gupta says that brand equity has been a big driver of profitability in Asia. “Leading brands would typically command a slight premium over lesser known products and they would still sell as a result of confidence placed in them by doctors,” he says. “The perspective was that these products were of higher quality.” He believes this trend will continue for at least the next five years. Other factors such as GDP growth, wider insurance coverage and better healthcare infrastructure will all increase drug penetration. They will also open up opportunities for elective treatments and other more expensive treatments.
However, one factor Mr Gupta thinks could dampen profitability is the “threat of reference pricing coming in India where the top three brands in the industry will be used as a reference price for the rest of the companies.” Additionally, he worries about price controls that are already prevalent in a few countries where government buys most of the drugs. “They issue tenders and these are very price-competitive,” he says, pushing down profitability.
