Analyzing outsourcing trends in Indian firms

Industry: Pharma
Group 7 Members: Kartik Mathur 2010094 Kedar Muley 2010095 Kishan Kumar 2010096 Swapnil Joshi 2010257 Nidhi Gupta 2010260

Indian Pharmaceutical Evolution

Phase V Phase IV Phase III Development Phase Phase II Phase I Early Years Government Control Indian Patent Act 1970 Process development Production infrastructure creation Growth Phase Innovation and Research

New IP law Rapid expansion of Discovery domestic market Research International Convergence market development Research orientation

Market share domination by Drug prices Export capped foreign initiatives companies Local companies begin to make an Relative impact absence of organized Indian companies

1970

1980

1990

2000

2010

Today's Pharmaceutical Industry Challenges

Research & Development (RnD) Standards & Regulations

Sales

Information Technology

RnD
y

Demands to improve clinical trial productivity and reduce time from First in Man studies to final approval, Getting complex day by day Growing need to share data, insights and conclusions with researchers and study coordinators who are likely to be geographically dispersed Need to share clinical trial data with multiple geographically dispersed investigators, monitors and statisticians
5

y y

IT
y y

Poor alignment of IT with business strategy Greater focus on cost containment by business History of poor program management and PM practices Methodologies and architectures not well articulated Poor track record in meeting project deliverables (on time and on budget) Slow response to meeting R&D challenges, especially around the deployment of IT to address flood of data

The Pharmaceutical Marketplace

High and continually escalating R&D costs

Outsourcing Continuum
Tactical Reduce and control operating costs Make capital funds available Cash infusion Resources not available internally Function difficult to manage or out of control Strategic Improve business focus Increase flexibility and speed Access to worldclass capabilities Accelerated change with proven approach Shared risks Free resources for other purposes Transformational Bring new solutions to customers faster Respond to shortening product lifecycles Leverage external suppliers Leapfrog competitors Enter new markets with reduced risks Acquire innovative ideas

SHORT TERM FOCUS

LONG TERM FOCUS

Should I Outsource?
Embed in Busines s Units

YES
Is the function highly NO strategic or a source of competitive advantage?

YES
Eliminate

NO

Do business unit customers need this service?

Is the same service required by several business units?

NO

Embed in Business Units

YES NO
Place at Corporate Office Is it needed for consistency, fiduciary, governance or control purposes? Can a 3rd party provide the service cheaper or better?

YES

YES

Consider Outsourcing

NO
Embed in Business units

START

Cipla Ltd
Mar-11 Net Sales PBDIT 6,135.16 1,391.12 Mar-10 5,359.52 1,518.54 Mar-09 4,960.60 1,105.33 Mar-08 3,997.90 972.13 Mar-07 3,438.24 922.51 Mar-06 2,891.36 806.09 Mar-05 2,181.26 581.32 Mar-04 1,842.24 448.19 Mar-03 1,437.28 345.34 Mar-02 1,274.51 334.59

COGS Distribution Expenses

4744.04 52.01

3840.98 44.31

3855.27 47.19

3025.77 31.66

2515.73 28.3

2085.27 22.77

1599.94 12.58

1394.05 12.78

1091.94 12.99

939.92 11.14

Cost of Sales (CS)

4796.05

3885.29

3902.46

3057.43

2544.03

2108.04

1612.52

1406.83

1104.93

951.06

Opening Stock of Raw Materials Purchases of Raw Material Closing Stock of Raw Materials Raw Materials Consumed (RM) Outsourcing Ratio (RM/CS)

646.27 2,559.88

797.2 1,945.58

632.92 2,037.19

532.4 1,725.66

480.07 1,348.85

363.1 1,303.29

253.23 1,000.07

252.91 700.41

137.26 639.55

101.43 450.48

891.11

646.27

797.2

632.92

532.4

480.07

363.1

253.23

252.91

137.26

2315.04

2096.51

1872.91

1625.14

1296.52

1186.32

890.20

700.09

523.90

414.65

48.27%

53.96%

47.99%

53.15%

50.96%

56.28%

55.21%

49.76%

47.41%

43.60%

Outsourcing in Cipla
Till mid 90s the outsourcing by Cipla by traditional way. With an enhancing of IT and incorporating IT services at company they were able to do away from traditional ways. (Click Here) Outsourcing not only in RnD or just IT, rights to sell the product is also given. (Click Here) Outsourced Part: Contract Manufacturing Nitin, Shasun. Clinical Research- Synchron Bio-informatics & other IT services HCL, Sai Systems Drug Discovery/Medicinal Chemistry Glaxo UK, Pfizer, Akorn, Epivir  Quality Check: Vendor Auditing and Evaluation Construction Quality Assessment Financial records Trade Practices Visit to Production House Sample test

Ranbaxy Laboratories Ltd.

Mar-11 Net Sales PBDIT COGS Distribution Expenses Cost of Sales (CS) 5,593.45 1,847.78 3745.67 161.85 Mar-10 4,728.09 Mar-09 4,391.91 Mar-08 4,224.22 970.84 3253.38 150.44 Mar-07 4,047.15 593.29 3453.86 149.85 Mar-06 3,575.44 303.78 3271.66 134.28 Mar-05 3,706.30 699.88 3006.42 147.82 Mar-04 3,637.60 1,019.78 2617.82 110.33 Mar-03 2,931.13 782.53 2148.60 79.47 Mar-02 2,046.78 374.4 1672.38 61.81

1,249.59 -1,318.78 3478.50 117.57 5710.69 170.1

3907.52

3596.07

5880.79

3403.82

3603.71

3405.94

3154.24

2728.15

2228.07

1734.19

Opening Stock of Raw Materials Purchases of Raw Material Closing Stock of Raw Materials

385.38 1,656.72

512.07 1,395.97

404.96 1,756.05

425.93 1,492.37

406.42 1,417.33

443.7 1,214.35

335.6 1,305.99

266.92 1,236.21

210.26 1,056.75

196 686.51

478.88

385.38

512.07

404.96

425.93

406.42

443.7

335.6

266.92

210.26

Raw Materials Consumed (RM) Outsourcing

1563.22

1522.66

1648.94

1513.34

1397.82

1251.63

1197.89

1167.53

1000.09

672.25

Outsourcing in Ranbaxy
R&D GSK & Ranbaxy Service outsourcing - Wyeth GVK, Jubilant, Lilly Suven Albany Molecular & Nektar Contract Manufacturing Nitin, Jubilant, Divis Clinical Research Syngene (Biocon), Aurigene (Reddys) Bio-informatics & other IT services TCS, Satyam, Infosys, GVK Bio, Jubilant Drug Discovery/Medicinal Chemistry Aurigene, Divis, Syngene, Suven, GVK Bio Pre-clinicals Vimta, Lambda Central laboratory services SRL Ranbaxy, Vimta

COMPARISION
60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 1 2 3 4 5 6 7 8 9 10 Ranbaxy Cipla

Quality Check at Cipla

1. Quality Assurance 2. Premises 3. Personnel 4. Validation 5. Documentation / Records 6. Vendor Qualification 7. Change Control Program 8. Sample 9. Stability Studies 10.Drug Recall 11.Annual Product Review 12.Audits 13.Quality Control Departments Manufacturing Area Equipment Equipment Calibration Material / 14.Raw Material 15.Purified and Water for Injection Systems 16.Depack / Preparation component room 17.Sterilizer / Oven Loading Room 18.Equipment Airlock 19.Washroom / Grown change room 20.Manufacturing (Sterile Product)  Aspectic Batching Area  Filling room  Terminal Sterilization  Packaging 21.Manufacturing (Oral dosages)  Packaging  Reprocessing  Finished Product Control

Outsourcing to I.T. Services

Slide presentation will enable Sales, Marketing and IT leaders to effectively manage their IT Sales & Marketing support service systems and will provide key reference points to inform their insourcing and outsourcing strategies.

Result of Outsourcing
Solid though not spectacular Buyers tend to invest more in outsourcing management and governance (OM/G) efforts The operating model of many large, global pharmaceutical firms, however, can complicate their back-ofce outsourcing management efforts

How are Pharma Companies Responding?

Pharma has had to wake up to slumping stock prices, generic competition, regulatory pressure and shrinking R&D pipelines that are forcing them to become more competitive and cost effective they are used to working with partners so outsourcing isnt that strange for them. Outsourcing, not always, does not imply is always the right or viable answer, but that its potential merits, as well as challenges, are systematically addressed.

How are Outsourcing Service Providers Responding?

Leading outsourcing service providers that target the pharma, life sciences and biotech industries generally are in sync with the demand and trending in outsourcing. Focusing on how to enable broad, global outsourcing efforts in these industries. Strong emphasis in moving beyond traditional life and shift Also focusing on how to ease the pains and challenges of transition and accelerate the time to which buyers being to reap the benets of outsourcing.

The Advisor Perspective Critical Points to Consider

Before launching on a journey to improve internal business processes either through outsourcing or internal transformation: 1. How has the outsourcing service provider landscape evolved in terms of potentially better serving your needs? 2. Are the skills and ambition now in a place that makes outsourcing a viable alternative? How is this determined? 3. What are others in your industry doing to drive process improvement and change into their organization? How do you measure yourself against your peers? 4. Do you have a strategy on outsourcing and globalization? How do you start the process, and develop a roadmap to an unknown future state?

Closing Comment

India is an acquired taste Give it some time & it will grow on you

Merci!