SUN PHARMACEUTICALS

Group 2
Aditya Shubham – 2110003
Ankit Maurya – 2110006
Geet Bajargaan – 2110021
Sakshi Sharma – 2110053
Samar Singh - 2110054
INTRODUCTION

 Sun Pharma is the world's fourth-largest specialty Generic Pharmaceutical Company and No. 1 in
India, with over 8% domestic market share.
 Around forty manufacturing plants in five different continents,various R&D cells, and a workforce
spanning over 50 different nationalities constitute Sun Pharma.
 The company makes active pharmaceutical ingredients. The product portfolio comprises of more
than two thousand superior-quality molecules covering multiple dosage forms, along with tablets,
inhalers, injectables, creams, capsules, and ointments.
 The key to Sun Pharma's success is its innovation capabilities backed by strong R&D consisting of
about two thousand scientists and R&D investments of about seven to eight percent of the total
revenues.
M I S S I O N , V I S I O N , A N D VA L U E S

 Business Mission: The Company aims to provide high-quality and innovative medicines to
people worldwide by fully leveraging their strengths.

 Business Vision: The Company aims at Reaching People and Touching Lives Globally as A
Leading Provider of Valued Medicines.

 Business Values: The Company focuses on fulfilling its promise to the stakeholders through
the following values:
I N D I A N P H A R M A C E U T I C A L I N D U S T RY

 The evolution of the Indian Pharmaceutical Industry is genuinely remarkable.

 The industry has experienced massive growth and has transformed itself from being a bulk
importer to self-sufficient and gaining global recognition as the largest supplier of generic
drugs.
 The initiative changed its form drastically through national, international, innovation, and
regulatory policies, which impacted the evolution of the Indian Pharmaceutical firms.
 New Public policies led to a rise in market turbulence and offered new prospects for
expansion and developing innovative technology, greater knowledge, and much greater
market capabilities.
 The domestic market is predicted to rise three times in the next decade, according to the Indian
Economic Survey 2021. In 2021, the domestic pharmaceutical market is expected to be worth
the US $42 billion, increasing to US$ 65 Bn by 2024 and US$ 120-130 billion by 2030.3
 In FY21, India's medicine and pharmaceutical exports totaled US$ 24.44 billion. As of May
2021, India had shipped 586.4 lakh COVID-19 vaccines to 71 countries, including grants (81.3
lakh), commercial exports (339.7 lakh), and COVAX platform exports (165.5 lakh).
 Generic medications account for 20% of global export volume, making the country the world's
largest supplier of generic drugs. In April and May 2021, India's medication and pharmaceutical
exports totaled the US $3.76 billion.
P O R T E R ’ S 5 F O R C E S ( I N D U S T R I A L A N A LY S I S )

 COMPETITIVE RIVALRY: In the coming years, pharma businesses will have many growth options, as numerous
medications in the United States lose their patents and foreign markets become more important. Many innovator
businesses attempt to establish themselves by acquiring or forming joint ventures with generic companies to take
advantage of the genetic potential. As a result, Indian enterprises may face competition from big pharma companies
with tremendous financial clout and other generic businesses. With the lack of visible opportunities in the US post,
the patent cliff competition is expected to heat up. Thus, competitive rivalry is HIGH.

 THREAT OF NEW ENTRANTS: The threat of new entrants in the Indian Pharmaceutical Industry is somewhat
low. There is constant rising competition in the Generic Markets, and vital Research and Development are required to
sustain a position in the market. Strict Government regulations on Pricing, Patenting, and Generic Prescriptions also
act as barriers to entry. The fixed cost requirement is low, but the need for working capital is high. Nonetheless, high
growth prospects make the industry attractive for the admission of new players.
 THREAT OF SUBSTITUTES: In unbranded marketplaces, the threat of substitution is higher, where pharmacists can
substitute one generic with another. In the branded market and for biosimilars, the doctor or physician can substitute one
drug for another. Thus, the threat of substitution is HIGH.

 BARGAINING POWER OF SUPPLIERS: For API companies, the bargaining power is high because of difficulty in
manufacturing products. These companies command premium prices. However, most API suppliers have low bargaining
power since they produce commoditized or straightforward products. Thus, the bargaining power of suppliers is
MEDIUM.

 BARGAINING POWER OF BUYERS: Consumers hardly have a choice as they buy what the doctor says. Buyers are
scattered, and they do not wield much power in the pricing of the products. Thus, the bargaining power of buyers in
LOW.
P E S T E L F R A M E W O R K A N A LY S I S :

Political Factors:

Some Political factors which impact the Indian Pharmaceutical Sector are:
 There exist strict regulations concerning safety standards, certifications, etc. There is prohibition on the
use of many drugs which might be harmful for health. Companies failing to meet those standards often
fail to survive in the market.
 The government also keeps control on drug prices, so they are affordable to the public. Drug Price
Control Orders (DPCO) issued under the Indian Essential Commodities Act of 1955 ensure so.
 Indian Government also encourages pharmaceutical corporations to maintain necessary, lifesaving
pharmaceuticals within reach of the public. The government supports such businesses in surviving in a
competitive market.
Economic Factors:
Economy of a country is a major force in driving the firms of that country. Some economic factors influencing
the Indian Pharmaceutical Sector are:

 As the economic conditions of a nation get better, people's household income rises, and the standard of living
increases too. People can afford important medicines. Drugs which seemed costly before, could be purchased
now. The average expenditure on healthcare by has increased.
 Due to cost efficiency, firms in the Indian Pharmaceutical industry are still struggling to generate profits. Due
to this reason, they are not able to reinvest money into further research.4
 The supply of raw materials to create generic drugs is still dependent upon China.
 The government policies are still very complex to obtain licensing for pharma companies and discourages the
new market entrepreneurs from entering the industry.
Social Factors:

The important socio-cultural factors that impact the Indian Pharmaceutical Industry are:
 The lifestyle of people has changed drastically. There is minimal physical activity, and more and more people
are becoming obese every day. Consequently, they are facing health concerns like diabetes, thyroid, and
hypertension. To cope up with this, more and more medicines are being consumed and thus. The revenue for the
Pharma industry is also increasing
 There is a continuous increase in the number of aged people in the country (over the age of 65). They need
more medicines and thus the rise in demand leading to expansion of the industry.
 However, at the same time, more and more people are adopting a healthier lifestyle with a focus on physical
activities and nutrition. They are also skeptical about the unnecessary use of synthetic drugs, thus there could be
a possible fall in the demand of many drugs in the future.
Technological Factors:

The Indian Pharmaceutical Sector is heavily dependent on technological innovation for its growth.
Some major technological factors affecting the industry are:
 Research and biotechnology advancements have led to companies achieving greater economies
of scale much more easily due to reduced production costs.
 It is necessary to preserve the medicines in a suitable environment at suitable conditions of
temperature and humidity. Today, medicines can be stored and transported without any issues,
thanks to technological advancements.
 The reach of the companies has expanded a lot with the help of a more developed supply chain,
leading to greater profits for them.
Environmental Factors:

Some environmental challenges that impact the Indian Pharmaceutical sector are:
 The manufacturing of drugs leads to huge carbon footprints. Most nations are trying to minimize this
impact on the environment by employing measures. Meeting these environmental standards can be quite
expensive for the firms, thus leading to a failure for many of them.
 Drugs manufacturing also generates a plethora of biotechnology pollutants. It risks the health of the
people. To ensure their safety, the company must dispose of this garbage.
 The pharma firms can also contribute towards various environmental campaign to show their
contribution towards a greater cause. Many companies do it to maintain their reputation and as a part of
their corporate social responsibility (CSR).
Legal Factors:

The legal environment of India has the following impacts on the Indian Pharmaceutical Sector:

 The Indian government has made constant efforts to minimize and prevent frauds involving expiration dates and
medication batch manufacture. If a corporation does not follow the rules, it may be subjected to legal action.
 Pharmaceutical Firms are heavily dependent on their Databases and analytical resources. If there is some
malfunctioning or cyber-threats, their customers might lose faith in them which has a direct impact on their
reputation, revenue and growth.
 When forming the groundwork for their operations, pharmaceutical firms have to abide by the strict rules to
ensure that their drugs are safe for use. In this way, many firms avoid the extravagant costs of going through
any legal processes.
F I N A N C I A L C O M PA R I S O N W I T H C O M P E T I T O R S :

India is the world's third-largest producer of pharmaceuticals by volume and the fourteenth-
largest producer by value.
According to the market cap of the Indian pharmaceutical industry, Sun Pharma is the market
leader, followed by Divi’s Laboratories Ltd. and Dr. Reddy’s Laboratories Ltd.

D U P O N T A N A LY S I S :
To get a better glimpse at the performance of the top-3 companies, we put the financial
values of the companies in the formula provided below –

The ROE of the top 3 Pharmaceutical companies comes out to be –

• Sun Pharmaceutical Industries Ltd – 8.92%

• Divi’s Laboratories Ltd. – 36.82%
• Dr. Reddy’s Laboratories Ltd. – 12.87%
 Sun Pharmaceutical Indutries Ltd – 8.92%

Divi’s Laboratories Ltd. – 36.82%

Dr. Reddy’s Laboratories Ltd. – 26.28%

We can infer from the above values that even after being the market leader of the pharmaceutical sector
(by volume), Sun Pharma’s ROE is lower than that of its competitors.
Sun Pharma also has a lower ROE compared to the industry average, which comes out to be around 14.4% (top 14 companies
by volume, 2020) which is not a positive sign for the shareholders.
 
It indicates that Sun Pharma has not made effective use of the capital invested by shareholders. It suggests that the Company is
unable to generate significant returns to investors. Analysts believe that a company's RoE of less than 12-14 percent in the
pharmaceutical industry is insufficient.
I N T E R N A L A N A LY S I S ; V R I O
( R E S O U R C E - B A S E D A N A LY S I S )
 The success of Sun Pharmaceuticals is driven by its ability to develop and launch branded generic products at a rapid pace with
minimum cost.

 Well-trained and scientifically oriented sales representative's team with a strong performance track record.

 The Company has world-class quality in design, equipment, and operations in all the manufacturing facilities across the world. They
have 48 (API & finished dose) state-of-the-art manufacturing sites spanning six continents.

           
Resources Valuable Rare Difficult to Organizational Competitive
Imitate Exploitation Implication
New Products Yes No No Yes CP

R&D Yes Yes Yes Yes SCA

Manufacturing Yes Partly Yes Yes Yes TCA

Human Resource Yes Yes Yes Yes SCA

Brand Yes Yes Yes Yes SCA

SCA: Sustainable Competitive Advantage TCA: Temporary Competitive Advantage CP: Competitive Parity
Sun Pharmaceuticals – Value Chain Analysis

Margin
S W O T A N A LY S I S
 SUN PHARMA INDUSTRIES LIMITED ACQUISITION OF RANBAXY LABORATORIES:

 Sun Pharma and Ranbaxy Labs sparked

excitement in the Indian pharma business on
April 6, 2014, when they announced that Sun
Pharmaceutical would buy 100% of Ranbaxy Labs
for $4 billion, becoming the world's fifth-largest
generic pharma company. Ranbaxy will combine
with Sun Pharma under these agreements, and
Ranbaxy stockholders will get 0.8 Sun Pharma
shares for each share of Ranbaxy. Sun Pharma
finalised the purchase of Ranbaxy Laboratories
Limited on March 25, 2015.
 S TA N D I N G B E F O R E
MERGER & AFTER
MERGER GAINS

 Company's pre-merger Net Sales Rs. 1,60,044 million in

Financial Year 2013-14 increased to Rs. 2,72,865 million
in Financial Year 2014-15
 Gross Profit went from 1,32,250 to 2,05,473, and Net
Profit climbed from 31,415 to 45,394 dollars (Rs. in
Million)
 Consolidated revenue from operations climbed 70% to
Rs. 277,178 million in FY15, while EBITDA increased 10%
to Rs. 78,166 million.

CONCLUSION
 Sun Pharma has pursued a strategy of purchasing underperforming businesses. Sun Pharma paid $3.2
billion for Ranbaxy and $800 million for its debt.

 The benefits of this acquisition began to show themselves in the 2015-16 fiscal year.
 The acquisition would create the world’s 5th largest specialty generic pharma company

 US$ 250 million of revenue &operational synergies by 3rd year primarily derived from top-line growth, and
procurement & supply chain efficiencies