Abbott India Ltd
Company Overview
Since 1910, Abbott has been dedicated to helping people in India live healthier lives through a diverse range of science-based nutritional products, diagnostic tools, branded generic pharmaceuticals, and diabetes and vascular devices.1
Headquartered in Mumbai, Abbott India Limited (NSE:ABBOTINDIA), a publicly listed company and a subsidiary of Abbott Laboratories, takes pride in offering high-quality trusted medicines in multiple therapeutic categories such as women's health, gastroenterology, cardiology, metabolic disorders and primary care.
One of India's fastest-growing pharmaceutical companies, Abbott India Limited is part of Abbott's global pharmaceutical business in India.
Abbott India has expertise across product development, manufacturing, sales and customer service and are dedicated to providing high-quality, reliable products with the expert clinical support its customers need.
Abbott India Limited believes in providing quality healthcare through a mix of global and local products for people in India. The company's in-house development and medical teams undertake product and clinical development tailored to the unique needs of the Indian market. The company's employees work to produce high-quality, high-volume formulations using cost efficient processes. And, its trained personnel are dedicated to ensuring compliance with international quality standards.
Abbott in India develops and distributes over 600 products for healthcare professionals that promote health and well-being for Indians in all stages of life.2
Industry Overview
The healthcare environment has been dynamic and, at times, volatile. As per IQVIA, a leading global provider of information and research services in the medical sector, Indian Pharmaceutical Market (IPM) is estimated at ` 149,900 Crore in 2020, its growth up by 2% from 2019. Acute therapies dominate IPM with 64% of the total sales; however, the chronic segment shows faster growth of 10.9% in comparison to 7.9% for acute therapies (3 year CAGR). The domestic pharmaceutical market is highly fragmented with the top 10 companies making up 43% of the share, and the top 150 companies accounting for 96% of share. Local players enjoy a dominant position, occupying 4 of the top 5 positions.3
India is often referred to as the “pharmacy to the world”, ranking 3rd worldwide in total pharmaceutical production volume and 10th by value. As per National Indian Promotion Agency, it is the largest producer of generic medicines and vaccines, occupying 20% volume share in generics and 62% in vaccines.
The face of the market itself is changing because the informed consumer has brought a shift in demand. Given that customer experience can have a transformational impact on business, the informed consumer today is kept at the heart of business operations. In the emerging markets, pharma businesses are increasingly leveraging insights and adapting to changing consumer needs – emotional and behavioral, and not merely clinical - to stay relevant and build a sustainable business.
Opportunities and Challenges
There are multiple factors which impact industry growth and profitability. Severe price pressure is expected due to expansion of pricing regulations and increasing regulatory interventions. Influx of first-time patients from the National Health Protection Scheme (NHPS) into the healthcare ecosystem, relaxation of regulations for patented drugs, and increasing spend on preventive healthcare could emerge as major growth drivers over the next few years. In the medium term, successfully navigating the COVID-19 crisis will be on top of the mind for all companies.
Factors which impact industry and Company growth include:
Technology and Digitalization : Technology led revolutionization of the healthcare industry is likely to be expedited in the year 2020 due to the global pandemic. While healthcare professionals will remain the single largest influencers of treatment and medicine choice, changes in the way doctors interact with both patients as well as sales representatives will open up a new array of opportunities for pharmaceutical companies. Remote healthcare, patient empowerment and multichannel engagement are likely to be some of the important emerging trends. Rapid adoption of new working models will be key to success for pharmaceutical companies in 2020 and beyond.
National Health Protection Scheme : NHPS was launched by the Government of India in 2018 with the objective of providing free health coverage at the secondary and tertiary level to the poor and vulnerable sections of the population. NHPS has expected to cover 50 Crore beneficiaries in 10 Crore families. The National Health Agency projects a four-fold increase in the number of patients treated annually in India, rising to 10 Million over the next few years. The pharmaceutical industry stands to be a prime beneficiary from the massive influx of first-time patients in the healthcare system who are prescribed medicines at the primary care level.
Specialty medicines : These will witness increased demand across both developed and emerging markets, and are projected to account for more spending than previously.
Price controls and regulations : Downward pressure on drug prices is likely to intensify due to the inclusion of more medicines in the 2020 update of the National List of Essential Medicines (NLEM). Additional downward pressure could come from the government’s plans to implement trade margin caps more widely in 2020. Increase in the price of APIs imported from China due to rate hike in 2019 and supply disruption in 2020 is likely to create upward pressure on drug prices. NLEM could be updated more frequently in the future
The 2019 amendment to the Drug Price Control Order (DPCO) broadens provisions for exemptions from price controls to cover all patented medicines as well as products granted orphan drug status. Together with the new rules governing drug registration and clinical research activity notified in March 2019, this is likely to encourage investment from originators and result in early launches of more innovative, patented drugs.
Frequent and unexpected changes in the domestic pricing policy have created an uncertain environment for investments and innovation. The Government and stakeholders would need to productively engage in order to develop a framework that ensures availability and accessibility of affordable drugs for citizens, while ensuring a workable pricing structure for pharmaceutical companies.
OTC drug regulations : With rising patient empowerment and growing willingness to self-medicate, there is a growing demand for the drafting of a welldefined over-the counter (OTC) drug policy. Creation of a regulated OTC market coupled with stricter enforcement of prescribing and dispensing regulations will drive growth in the OTC space. The Company is well placed to benefit from such a policy with its dedicated OTC vertical.
Uniform Code of Pharmaceuticals Marketing Practices (UCPMP) : UCPMP, while currently voluntary, could become mandatory shortly. A mandatory code would require ethical marketing practices to be followed by all companies. Given that the Company has a strong compliance process in place, it would be well positioned under a strict enforcement of UCPMP.
Business Overview
Women’s Health : This portfolio has consistently shown strong growth over the last several years. This year it grew by 21.9% led by Duphaston. Strong brand equity, coverage of gynecologists and high level of trust and credibility owing to sensitive indications with a high premium on safety (especially in pregnancy) are drivers of growth. Introduction of newer indications, addition of new products to expand the portfolio, setting up separate sales and marketing teams to increase focus on In Vitro Fertilisation (IVF) are some of the initiatives undertaken during the year to sustain the growth. Increasing awareness and widening the portfolio to strengthen market presence remain the key focus areas.
During the year, 5 new products viz. Femoston (Hormone replacement therapy or HRT), Femilon (Contraception), Novelon (Contraception), Cetropro (Prevention of premature ovulation) and Parihep (Thromboembolic conditions) were launched.
Gastroenterology : The Company grew by 9.9% in this area during the year, mainly driven by Cremaffin, Udiliv and Duphalac. The company's differentiated offerings beyond pills, a strong portfolio - from Gastro to GPs - and strong equity amongst the consumers are behind the sustained growth. A new, robust product introduction process through extensive market research has helped to further enhance the portfolio. The focus remains on the launch of new products in the Gastrointestinal (GI) space
During the year, 12 new products viz. Evitol (Non alcoholic fatty liver disease or NAFLD), Fidonal (Anal Fissures), Udisyp (Liver Disorders), Tenfoplus (Hepatitis B), Viadek (Pancreatic Exocrine Insufficiency or PEI), Udistrong Orange (Liver Diseases), Creon SD (Pancreatic Exocrine Insufficiency or PEI), Cremadiet + 300 (Constipation), Udistrong sachet – Cranberry (Liver Diseases), Antoxipan sachet, Duphalac Bears 1.6 (Constipation – Pediatrics) and Duphalac Chews 3.3 (Constipation - Pregnancy) were launched.
Metabolics : This portfolio grew by 27.9%, driven mainly by NeoMercazole and Thyronorm, which retains flagship position* in its respective segment. Integration of the thyroid portfolio to optimise spend and increase market share, introduction and improvement of line extensions to facilitate differentiation, and entering bacterial vaginosis with new subtherapy (pre-probiotics) to leverage equity with Gynecs are some of the major drivers of performance. Increasing awareness remains the key priority for sustained growth.
Central Nervous System : This portfolio showed a growth of 12.6% during the year. Vertin and Prothiaden continue as the market leaders* in their segments. Creation of hybrid structure, marketing resource allocation strategy and reduction of attrition on account of team engagement have helped this portfolio to show good performance during the year. Introducing new sub-therapies and life-cycle management support for older molecules remain key priorities. Also, during the year, Epishield (Micronutrients/Epilepsy) was launched.
Multi-Specialty : Under this segment, the Company offers products for Pain Management, Insomnia, Nutritional supplements and Vitamins. This portfolio showed a growth of 4.4% during the year which was mainly driven by Zolfresh, Arachitol Nano and Brufen. Promotion of specialty brand matrix and creation of the leadership academy for capacity building have helped maintain growth. Introduction of new molecules and expanding the portfolio through scientific research and market studies remain the key priority.
Vaccines : The key brands in the vaccines portfolio are Influvac, Enteroshield and Rotasure. The portfolio showed strong double-digit growth of 20.4% and contributed 3.9% of Sales for the year. The growth was mainly driven by Influvac, a number 1* product in its participated market. A separate task force was set up to target the untapped adult vaccination market. Focus is to expand the portfolio beyond the current set of vaccines and target segments. The Company has a licensing arrangement with Bharat Biotech India Limited to market vaccines in the immunology segment.
During the year, Influvac Tetra (Flu vaccine) was launched and was a big hit in the first three months of its launch.
Consumer Health : The Company offers a few consumerdirected products, including all variants of Digene - tablets, liquids and powders. During the year, this portfolio showed strong growth of 19.5%. Cremaffin was consumerised to revitalise the brand. Good strategy and sustained investment have helped achieve growth. The company's focus remains on expanding this portfolio.
During the year, two new products - Brufen Rapid (Analgesics) and Digene Ultra Fizz (Antacid) were launched
Financial Overview
Total Revenue : Total Revenue for the year ended March 31, 2020 is Rs 4207,53 Lakhs in comparison to Rs 3791,89 Lakhs last year, recording a robust growth of 11.0% over the previous financial year.
Profit Before Tax : Profit Before Tax for the year ended March 31, 2020 at Rs 802,69 Lakhs grew by 14.9% over the previous year.
Other Income : The Other Income stood at Rs 114,39 Lakhs, mainly comprising interest income from bank fixed deposits. The Company continues to invest in fixed deposits with banks that have high credit ratings, with a view to safeguarding the principal and maintaining liquidity. Income from bank deposits grew by 27.5%. The investment strategy is reviewed periodically by the Finance Committee. The Company has an investment portfolio of Rs 2168,68 Lakhs as on March 31, 2020
Material Cost : The Material Cost increased on account of inflation, but was compensated by improved sales price realisation, resulting in a marginal decrease in Material Cost as a percentage to Sales from 57.4% in financial year 2018-19 to 57.1% in the current year
Employee Cost : The Company increased its employee strength to 3,551. The Employee Cost as a percentage to Sales shows a marginal decrease at 11.7% in the current year vis-àvis 12.0% in the financial year 2018-19. The increase in Employee Cost by 9.3% over last year is mainly due to merit increase.
Other Expenses : Other Expenses including Depreciation and Finance Cost increased by 7.8% over the last year. However as a percentage to Sales, it has decreased to 15.1% vis-à-vis 15.6% in the previous year
