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1 inum Banking Cement Commercial Vehicle Cotton & Cotton Ya Business Process Management (BPM) Construction Educat Chlor-Alkali Renewable Energy Crude Oil Gems & J o Component pparel Industry oal Natural Gas Power Generation Pa anganese Ore Pharmaceutical Refining & Marketing Reta eight Transport Shipping Sugar Tractor Telecom Tower Wheeler Tyre CRAMS Industry Gems & Jewellery Two ble Energy Sources Pipe Telecom-Wireless Seed Industry n Made Fibre Paper Housing Finance Passenger Vehicl Hospital Industry Roads & Highways Zinc & L Shipbuilding Aluminum Cotton & Cotton Yarn nking Express Service Tracto Steel Two Wheeler Pesticide Gems & Jewellery Express Service Cr Passenger Vehicle CRAMS Industry otel ads Freight Transport ed Industry September 2014 Pesticides The Indian CRAMS Industry Steel Natural Gas

2 The Indian Contract Research and Manufacturing Services (CRAMS) industry was estimated to be worth ~US$ bn in CY2013. Its Contract Manufacturing Services (CMS) segment was estimated to account for ~60% of the industry revenue; and Contract Research Services (CRS) ~40%. CARE Research expects the domestic CRAMS industry to grow at robust rate from CY Contract Manufacturing Services to dominate CRAMS Dominance by generic drugs lowers market value of IPI The Indian Pharmaceutical Industry (IPI) has witnessed a CAGR of 16%, growing from Rs. 1,04,209 crores in FY10 to Rs. 1,84,585 crores in FY14. Globally, the IPI is 3 rd largest in terms of volume and 12 th biggest in terms of value. Due to the dominance of lesser-priced generic drugs, IPI ranks lower in terms of market share. The main drivers of the Indian CRAMS industry are likely to be lower manufacturing costs in India, rising cost of research in developed markets and increase in number of drugs going off-patent. Indian players are preferred over other low-cost manufacturing geographies due to the largely generic mix of the Indian pharma industry. Additionally, India benefits from availability of English-speaking, low-cost, highly-skilled professionals. Drivers of Indian CRAMS industry to power the growth Indian CRAMS to increase global presence in years ahead CARE Research believes that outsourcing of activities has led to reduction in time taken to launch new drugs apart from cost savings, better utilisation of capacities and economies of scale for pharma companies. CARE Research expects Indian CRAMS industry to increase to 7-8% of global CRAMS market by CY16 from current 5.4%. Both the segments of CRAMS, CMS and Contract Research Services (CRS) are likely to show healthy growth in the years ahead. CRAMS companies several categories of risks due to inherent reasons of the business. The physical distance of the two contracting parties results in geographical risks. Further, this leads to financial complications, which may arise out of the transactions being carried out in more than one currency. Due to the contractual nature of transactions and the activity being highly regulated under several laws across countries, there are legal risks that CRAMS companies need to confront. Indian CRAMS companies face legal, regulatory, financial and other risks

3 SECTION I CARE Research Outlook Global pharma industry Global CRAMS industry Indian CRAMS industry o Contract Manufacturing Segment o Contract Research Segment Drivers of Indian CRAMS industry o Patent cliff o Declining R&D budgets and productivity o Cost of manufacturing range-bound o Capacity addition by players o Product/customer diversification o Biopharmaceuticals o M&A in Indian CRAMS Other factors o USFDA inspections o Impact of US CRAMS industry o Expansion of pharma industry to other geographies o Future growth in trials/biopharma o Labour inflation o Exchange fluctuation Outlook on margins Risks Emerging trends Overview of Indian Pharmaceutical Industry Market size of Indian pharma industry o Domestic consumption o Exports o Imports Major product segments Leading pharma companies in India CRAMS overview Overview SECTION II Industry Section

4 Outsourcing trend Factors responsible for outsourcing Key ingredients for success in CRAMS Domestic CRAMS: Drivers Indian CRAMS industry Performance of Indian pharma industry o DMF o ANDA o Exports Other factors driving growth Global CRAMS Overview Industry regulatory framework Competition Factors influencing choice of CRAMS partner Risks and emerging trends Risks o Legal o Regulatory o Financial o Others Emerging trends SECTION III Company Section Domestic companies Biocon Ltd Jubilant Life Sciences Ltd Shasun Pharmaceuticals Ltd Piramal Enterprises Ltd Dishman Pharmaceuticals and Chemicals Ltd Divi s Laboratories Ltd Global companies Lonza

5 Parexel International Covance Inc. Icon Plc. LIST OF GRAPHS and TABLES SECTION I CARE Research Outlook Indian CRAMS industry and growth (CY13E to CY18P) Indian CMS segment and growth (CY13E to CY18P) Indian CRS segment and growth (CY13E to CY18P) Manufacturing costs and growth (FY08-14) Manufacturing costs as a proportion of net sales (FY07-14) Gross block of CRAMS universe (FY07-14) Growth in net sales and gross block (FY08-14) Instances of notices to/drug recalls by Indian pharmaceutical companies Value chain of processes outsourced to CRAMS companies Employee costs as a proportion of net sales (FY07-14) Growth in net sales and employee costs (FY08-14) Proportion of exports and domestic sales of CRAMS universe SECTION II Industry Section Overview of Indian Pharmaceutical Industry Market size of Indian pharma industry Domestic consumption segment Major market segments Top 10 Indian pharma companies CRAMS overview Pharma outsourcing trend Factors responsible for outsourcing Healthcare spending as a proportion of GDP Key ingredients for success in CRAMS Domestic CRAMS: Drivers DMF filings: world v/s India ANDA final approvals: world v/s India Top 10 country-wise Indian pharmaceutical exports

6 Country-wise Indian pharmaceutical exports Global CRAMS Factors considered before finalising CRAMS partner SECTION III Company Section Biocon Ltd Segment-wise proportion of total profits Profitability of Contract Research Segment Profitability of Pharma Segment Jubilant Life Sciences Ltd Business classification Segment-wise proportion of total profits FY14 performance Shasun Pharmaceuticals Ltd

7 FY14 performance Piramal Enterprises Ltd Segment-wise proportion of total profits Dishman Pharmaceuticals and Chemicals Ltd Segment-wise proportion of total profits FY14 performance Divi s Laboratories Ltd

8 Segment-wise proportion of total exports FY14 performance Global companies Lonza o Company financials o Total revenue and net income o Segmental revenue Parexel International o Company financials o Total revenue and net income o Segmental revenue Covance Inc. o Company financials o Total revenue and net income o Segmental revenue Icon Plc. o Company financials o Total revenue and net income

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