Global Pharma Products Business

• Differentiated branded hospital generics portfolio comprising inhalation and injectable anaesthesia, pain management drugs and intrathecal spasticity management drugs
• One of the few global suppliers of inhaled anaesthetics with an internal capability to manufacture all four generations of inhalation anaesthetic products
• State-of-the-art manufacturing facilities inspected by the US FDA, the UK MHRA and other pharma regulators
• Distribution to >100 countries leveraging direct sales force as well as distributor channel

India Consumer Products Business

• Over-the-counter (OTC) market portfolio comprising marquee brands and various products across key categories including skincare, gastro-intestinal care, women's intimate range, kid's well-being and baby care, pain management, and oral and respiratory healthcare
• Well-established brands include Saridon, Lacto Calamine, i-pill, Supradyn, Polycrol and Tetmosol
• Large India-wide distribution network with chemist coverage comparable with the top OTC players across over 1,500 towns

MARKET SCENARIO

Globally, healthcare spending is expected to increase to more than $10 Trillion by 2022, accordingly to Deloitte. Pharma spending is expected to hit $1.2 Trillion by 2022, growing at a CAGR of above 6%. This acceleration is likely to be driven by growth in specialty medicines such as oncology and autoimmune biologics, rising share of pharmerging markets, novel therapies that address key unmet needs, and increased access to medicines as a result of new pricing policies around the world.

Global Pharma Services Business

Contract Development and Manufacturing Organisations (CDMOs) offer services ranging from preclinical and clinical development through commercialisation. With the increasing trend of outsourcing in the pharmaceutical industry, the contract manufacturing market will continue to grow. The extended footprint has also allowed CDMOs to become integrated full-service providers or ‘one-stop shops’ offering end-to-end solutions. This trend is expected to continue as both large and small pharmaceuticals and biotech companies prefer to work with strategically integrated partners.

CDMOs are increasingly benefitting from the strong funding environment in Biotech in the developed world. New drug approvals are on the rise, signaling a robust clinical development pipeline. The number of approved oncology therapies continue to rise. CDMOs serving API clients are likely to benefit due to sector consolidation and erratic API supplies from China. Consolidation among players has resulted in making the buyers’ position strong in the pharma industry. PEL, through its recent acquisitions of Sterile injectables and HPAPI facilities in the US, has proactively set itself to create a one-stop shop for its customers. This has resulted in making our value proposition much stronger and attractive for the big pharma companies to not only continue outsourcing, but to also consider PEL as a strategic partner for new/existing initiatives. The Company, with its integrated approach, is offering custom end-to-end services to accelerate the route of drugs to the market and reduce the cost and complexity of development.

Global Pharma Products Business

PEL was initially present in the $1.1 Billion market of inhalation anesthesia. The Company’s addressable market size has expanded to $55 billion in the hospital generics market. PEL’s careful portfolio selection ensures that the Company experiences lesser competitive pressures than most peers. PEL serves the institutional market, with a diverse set of buyers. The Company is predominantly in injectable and inhalation anesthesia dosage forms, which are difficult to manufacture and in the case of inhalation anaesthesia, the manufacturing as well as delivering requirements are unique.

In other products too, PEL benefits from unique factors. For a number of its inhalation anesthesia products, the Company provides its institutional customers in developed markets with vaporisers, which are necessary to administer drugs. Branded intrathecal products are injected by a physician into a pump, which is implanted into the patient on a long-term basis and for which regular refilling is required. The Company sells controlled substances in several markets outside the US, where original innovator brands have maintained legacy value.

India Consumer Products Business

The OTC products comprise several therapeutic applications, including vitamin and dietary supplements, weight management and analgesics. The India Brand Equity Foundation (IBEF) expects the Indian OTC market to grow at around 9% annually to reach `44,000 Crores by 2026. The growth of the OTC market is likely to be driven by the following factors:

• Growth in GDP and purchasing power
• Propensity for self-medication
• Rise in geriatric population
• Likely new regulations leading to liberalisation of OTC drug sales
• Increased use of media, particularly digital, to reach and educate consumers (in certain categories)

Over the past couple of years, the Indian OTC industry has been impacted due to the GST rollout and demonetisation. Channel partners (distributors and to some extent retailers) started down-stocking as the GST deadline approached, leading to shrinking of the wholesale channel. The companies that are able to optimise their supply chain and rationalise CFAs and distributors stand to benefit from the reduced compliance burden.

PEL undertook key initiatives both at strategic and operational levels in preparation for and after GST implementation. The Company supported its channel partners with additional credit, held extensive interaction to educate and understand their concerns and invested in capability building and people development to create sustained advantages. The GST rollout has provided the Company an opportunity to simplify operations and achieve better efficiencies. PEL should benefit due to supply chain optimisation and reduced compliance burden in the GST era.

OPERATIONAL PERFORMANCE

Global Pharma Services Business

During the year, PEL stayed on course to execute and deliver on its 3C strategy – Customers, Capability and Capacity – as evidenced by the highlights below:

• Substantial growth in the order book in FY2019 -
  >50 new customers during the year and
  >75% order book from existing customers
• >70 integrated projects till date; 28 integrated projects in FY2019
• Completed a High Potency API plant annexed to the Riverview facility
• Completed a major API investment in support of a key innovator customer at Morpeth site

Global Pharma Products Business

During the year, the business has witnessed strong growth, driven by PEL’s focus on forging deeper relationships with its extensive customer base:

• The year saw the launch of Sevoflurane Integrated Closure variant in select European markets
• The Company also launched marquee products such as MITIGO™, which is an opioid agonist indicated for the management of intractable chronic pain
• Integration of key acquired products from Janssen and Mallinckrodt remains on track. The acquired products have high entry barriers as they are complex in terms of manufacturing, selling or distribution, resulting in limited competition

India Consumer Products

During the year, the business continued to focus on its strategic endeavours:

• Added key brands in the Vitamins, Minerals and Nutrients categories
• Successfully initiated national distribution and sale of Digeplex. Products sold under Digeplex brand names are digestive enzymes used as remedies for digestive disorders
• E-commerce channel was established in FY2019. The Company is tapping e-commerce, rural, exports and alternate opportunities in order to widen the distribution network
• Increasingly using technology and analytics for making decisions in sales and operations

FINANCIAL PERFORMANCE

Revenue from the Pharma business grew by 11% y-o-y in FY2019 to `4,786 Crores on account of growth in base business, integration of acquired products into the sales force, strong order book and robust demand. Revenue has grown at a CAGR of 15% over the last 8 years, now contributing 36% to the overall PEL revenue mix. Our Global Pharma business, which accounts for 93% of Pharma revenues, has delivered a strong growth in EBITDA margins, from 10% in FY2011 to 23% in FY2019.

QUALITY AND BUSINESS EXCELLENCE

PEL is committed to consistently meet or exceed the requirements and expectations of its patients, customers, regulators and partners. In its pursuit to harness quality as a culture and for quality to continue to be a key differentiator, the Company ensures timely scale up of its standards to align with the industry benchmarks. The Company has a strong belief that quality is driven by a concern for patient safety. A deep commitment to building a quality‑driven organisational culture has helped PEL achieve regulatory compliances with zero defaults.

Robust Governance Strategies

Quality Governance

A strong governance and escalation mechanism is the foundation of PEL’s quality management framework. The Company’s quality management system is independent of its businesses and reports directly to the Board. IDEATE is an initiative that serves as a guide to building a sustainable governance model at PEL.

IDEATE stands for:

• Independent Quality Reporting
• Data Integrity Compliance
• Effective Governance
• Aligned Systems
• Transparent Work Culture
• Empowered Teams

Data Governance and Risk Mitigation Strategies

Data within pharmaceutical business is the most critical element and adequate data governance forms the foundation of an effective Quality Management System. PEL is committed to ensure that the data it generates is reliable to enable correct decision-making by the Company, its customers and the regulators.

Quality Tool Kit

PEL’s quality team also uses several tools used for quality focus and risk avoidance at the site level. Proprietary tools for quality health evaluation and risk minimisation include:

In addition, the Company has multiple layers of vigilance, which include surprise corporate inspections of manufacturing sites by the QA team. These inspections lead to proactive identification of risks and their mitigation in a timely manner.

Over the past several years, PEL has invested significant capital into its India Consumer Product infrastructure, which has contributed to the Company’s strong product portfolio and far-reaching distribution network. Its emphasis on quality and its compliance track record has allowed it to move up the value chain in its business.

The India Consumer Products business utilises flexible manufacturing at external sites by third-party vendors. The in-house business development team follows stringent protocols for selection of such vendors. This team conducts detailed checks at all critical points in the chain from sourcing to finished products.

Summary

PEL is on a quality advancement journey from 'Quality for Compliance' to 'Quality as a Culture', with a focus on systems, processes, technology and people. The Company believes that quality is a collective responsibility and this belief is woven into the very fabric of the organisation. The belief is vindicated by the fact that all key facilities are approved and successfully inspected by the USFDA, a testament to the high compliance standards.