Reort On Indian CRAMS Industry
The Indian CRAMS Industry……growth trajectory commences
The Indian CRAMS industry was valued at US$3.8 bn in CY2010, accounting for approximately 6% of the US$67 bn global outsourcing market, indicating significant growth opportunities in this segment. CRAMS business consists of the CMO and CRO, of which CMO constitutes a major portion (>60%) of the overall business. The CRAMS segment, dominated by the CMO segment, starts from the phase IIB clinical trial, and continues to the off-patent stage, and includes manufacturing of intermediates, APIs and formulations. CARE Research expects the domestic CRAMS industry to grow at a CAGR of 32% over CY2010-2014E. CRAMS industry would continue to be dominated by the CMO segment forming larger portion of it, however we expect the share of CMO is likely to narrow down from ~61% in 2010; foreseeing revival in CRO segment. The CMO & CRO segment is likely to register healthy growth during 2010 – 2014E. The global CMO market is valued at US $42 bn in 2010; growing at a CAGR of 13.1% over 2007-10. It is expected to reach to US $85 bn by 2012.
Over the years Indian CRAMS players have developed expertise in manufacturing APIs and conducting high- end R&D services. India has become one of the favoured destinations for outsourcing contracts by drug innovators globally due to their product mix being skewed towards high-end research services, biologics and complex technology services, at low cost. India offers an abundant pool of professionals in the area of drug development and research chemistry with large number of pharmacists and post graduates (science) qualifying every year. Big pharma companies and global outsourcing service providers have started focusing on India for drug development and research chemistry. According to the Indian Government, by 2020 India would be one of the top five pharma innovation hubs with one out of every five to ten drugs discovered in India. CRAMS Industry
CARE Research expects stability in the margins of Indian pharma sector till FY13E based on consistent demand for generic products from regulated markets especially the US. Hence, CRAMS players would be forced to keep the prices in control and with their higher input costs, depreciation and plant maintenance costs they would witness pressure on their margins till H1FY13. Also, the pricing of contracts for the generic drugs is lower compared to patented drugs which further leads to margin reduction. The EBIDTA margins of players under our coverage in Q3FY12 declined by around 330 bps YoY and around 150bps QoQ.
As per CARE Research estimates, the margins of CRAMS company analysed by us would remain under pressure and decline in the range of 150-200bps until H1FY13 whereby most of the capex would be done and would stabilize thereafter. CRAMS players with their advanced technical skills and capabilities would focus on higher export orders for augmenting their margins.
A large portion of the CRAMS activity is outsourced to India and China as they are comparatively lower cost destinations. However, India enjoys a better position compared to China in key areas like chemistry and technology skill, quality of products & services offered and meeting the regulatory body requirements. China is known for low labour costs as compared to any other country, however India scores in terms of quality and intelligence. India has more number of FDA approved plants compare to China. Also, the number of DMF filings in India (50% of the overall DMF filing) is much more compared to China. Hence, CARE Research doesn’t expect China to be a major threat to Indian CRAMS industry.
1) Executive Summary
3) Overview on Indian Pharmaceutical Industry
4) Overview on CRAMS Industry
Value Chain Analysis
Drug Life Cycle Process
Factors Responsible for Outsourcing
Declining research productivity and stricter USFDA norms
Increasing R&D costs
Increasing time period to bring new drug to the market
Drugs patent expiry
Increasing competition from generics
Increasing pressure on government to reduce healthcare budget
Focus on core skills and capabilities
Rise of small & mid-size biotech companies focused only on R&D
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