Download Free Medical REVIVING THE PHARMA ANCILLARY INDUSTRY PowerPoint Presentation

REVIVING THE PHARMA ANCILLARY INDUSTRY PowerPoint Presentation

DOWNLOAD MEDICAL POWERPOINT PRESENTATION

About This Presentation

Description : Coronavirus COVID-19 pandemic emerged as an unprecedented and unexpected event, which resulted in several new challenges troubling the pharmaceutical supply chain. The crisis brought forth the unforeseen chain of events of ancillaries on the overall functioning of the pharmaceutical ecosystem. These challenges are further augmented by the limited visibility industry stakeholders have into ancillaries. This report by Indian Pharmaceutical Alliance (IPA) and Accenture talks about the urgent action required to support the ancillaries. The methodology for identifying these interventions is interactive - through Indian Pharmaceutical Alliance (IPA)‘s and CRISIL‘s facilitation, Accenture conducted several interviews across large Indian pharma manufacturers, pharma ancillaries and industry SMEs to come up with this holistic perspective. Outcome: This IPA and Accenture report focuses on un

Tags : Coronavirus, COVID-19, PHARMA ANCILLARY INDUSTRY, PHARMA, Pharmaceutical, IPA, Accenture, report

Published on : Jun 27, 2020 | Views : 1304 | Downloads : 1

Shareable Url :

Embed Code :

Comment

Transcript

Slide 1-

June, 2020 Roadmap for Resilience with Excellence REVIVING THE PHARMA ANCILLARY INDUSTRY
Slide 2-

EXECUTIVE SUMMARY (1/2) 2 While challenges like surface logistics and RM shortages are getting resolved with lockdown relaxations, areas like manpower availability (due to permitted movement of migrant labor), clogged sea-ports and financial distress (especially for MSMEs) require urgent action Epidemiology suggests that a recurrence of Covid-19 is imminent. However, key questions vis-à-vis disaster management like definition of essential goods, clear communication to ground authorities and communication to alleviate public fear remain unanswered Further, the COVID crisis and its implications have amplified structural risks for the industry - single source dependence for imports and increased costs to comply with new ways of working The success of ~$41 Bn Pharma industry is driven by a network of Ancillary Partnerships The pharma industry is a jewel in India‘s crown with long term growth opportunities The ~$9 Bn ancillary industry is a key contributor to the success of pharma industry. . Key Level 1 ancillaries include API/KSMs, Packaging (Plastic, Aluminum, Glass) and Excipients and Chemicals. MSMEs have salience of ~55-60% within ancillaries, contributed by ~10,000 – 11,000 units Ancillaries have faced significant disruption due to a variety of factors during lockdown Restricted movement and fear for safety has resulted in constraints in manpower availability Movement constraints have been caused by lack of public transport and unclear communication to ground authorities leading to employees being denied passage. A fraction of the workforce is also unwilling to resume work citing fear of infection and pressure from families Impacted surface and seas transports have led to logistics disruptions Low availability of trucks and truckers due to absenteeism, refusal for carrying part load, issues with transport permits for interstate movement and clogged sea ports have resulted in disrupted surface and sea transport Raw Material shortage caused by operating constraints, absence of operating permits and lack of sufficient orders has relatively been less disruptive than manpower and logistics, however the situation may worsen in the future once the inventories servicing current requirements run out Stretched working capital cycles and increased input costs are creating financial distress for smaller players Reduced inventory turnover and payable days along with stretched receivables is creating a strain on the working capital An overall cost impact of 9% - 11% anticipated for all ancillary players, with smaller players facing severe financial distress At an overall level, Baddi and Vapi clusters have been more adversely impacted due the challenges posed by lockdown Disruptions in third party services as well as delivery pressure from customers have been sporadic challenges across ancillaries The road ahead is fraught with risks
Slide 3-

EXECUTIVE SUMMARY (2/2) 3 Concerted efforts across Govt, large pharma ,ancillaries and IPA necessary for revival We propose six recommendations to ensure the ancillary industry recovers rapidly and is emerges resilient and stronger than ever thus securing long term success for the industry ACCELERATE RECOVERY for business continuity (next 3 months) Government to deliver financial relief to the MSME ancillaries While the Govt, had announced relief measures for MSMEs in form of INR 3 Lakh Crores collateral-free automatic loans for MSMEs, they will have to ensure effective disbursal of the proposed intervention. Additional relief on electricity costs and wage support packages and moratoriums on statutory payments like ESI, PF and gratuity will improve the financial situation of MSMEs Ancillaries to create and implement protocols for worker safety to convince the workforce and ensure safe return to work Guidelines from the govt. on pre-emptive safety protocols and measures along with awareness of insurance schemes and COVID treatment centers would go a long way in bolstering this effort INVOKE RENAISSANCE to emerge stronger (next 1-2 years) Reducing reliance on imports from a single geography to manage supply disruptions This will require the govt. to identify strategic APIs to for indigenous manufacturing and facilitate execution of this plan through inducing clusters by early approvals, set-up of common utilities, lowered borrowing costs and research based linkages to continuously innovate Mentorship / knowledge sharing , facilitated by IPA and pharma companies, will enable ancillary competitiveness through access to frugal innovation, sourcing assistance, better payment terms and persuading pharma companies to accept price hikes BUILD RESILIENCE for preparedness in case of recurrence (next 6 months) A robust disaster management mechanism A COVID control tower, driven by IPA and supported by industry and Government stakeholders) will be at the nerve center supported by the business continuity toolkit - these will play a pivotal role in influencing and managing communications across stakeholders A cross-industry collaboration platform , led by large Indian Pharma manufacturers will drive greater visibility in the ancillary value chain to proactively identify supply risks 1 2 3 4 5 6
Slide 4-

CONTENTS 4 02 SETTING THE CONTEXT 04 RECOMMENDATIONS 03 CHALLENGES FACED BY ANCILLARY PLAYERS 01 OBJECTIVES AND METHODOLOGY
Slide 5-

REPORT OBJECTIVES 5 Current situation: COVID-19 presents itself as an unprecedented event resulting in several new challenges plaguing the pharmaceutical supply chain. The crisis highlights the cascading effects of ancillaries on the overall functioning of the pharmaceutical ecosystem. These challenges are further compounded by the limited visibility industry stakeholders have into ancillaries. IPA-Accenture initiative: IPA and Accenture recognized that urgent action is required to support the ancillaries and therefore collaborated to identify interventions that will enable business recovery. The methodology for identifying these interventions is interactive - through IPA‘s and CRISIL‘s facilitation, Accenture has conducted several interviews across large Indian pharma manufacturers, pharma ancillaries and industry SMEs to develop a holistic perspective. Outcome: This report focuses on understanding the root causes of the challenges and possible recommendations across the time horizon: Execution focused interventions - To navigate the current situation and help ancillaries get back on their feet in the short term while minimizing the impact on bottom line Policy level recommendations – Ideation of long-term interventions to help the business stabilize over time, sustain their performance and succeed in the ‗new normal‘ We believe that concerted efforts across pharma and ancillaries, government and the IPA will be necessary to implement the recommendations. This document will help in expediting the action by bringing all industry stakeholders on the same page while also furthering the policy agenda of the ancillary industry.
Slide 6-

WE FOLLOWED A MULTI-PRONGED METHODOLOGY, INCLUDING PRIMARY INTERACTIONS ACROSS ANCILLARY PLAYERS, FOR OUR ANALYSIS AND RECOMMENDATIONS PRIMARY RESEARCH Interviews across clusters and industry segments for ground level insights 3 11 5 2 Ahmedabad & Vadodara 3 6 1 4 9 2 4 1 2 19 4 7 6 1 1 2 7 1 2 Baddi Mumbai-Pune Vapi-Valsad Vizag Hyderabad Sikkim Chennai Delhi-NCR Legend: API & KSM Excipients & other chemicals Packaging Engg Services, Utilities, Testing We interacted with 103 ancillary players across the industry sub- segments SECONDARY RESEARCH Augment primary research inputs on evolving industry scenario and challenges faced BEST PRACTICES Leverage learnings from other countries and state governments around crisis management and industry support 6
Slide 7-

SETTING THE CONTEXT
Slide 8-

THE ~$41 BN PHARMA INDUSTRY IS A JEWEL IN INDIA’S CROWN Pharmacy of the world ~22% share of the global generics market, largest in the world ~550 US FDA approved plants (maximum outside the US) 50% of global demand fulfilled for vaccines Long term growth opportunity Possibility to increase value share India accounts for 10% of global production by volume, but 1.5% by value Potential to switch from generics to higher margin licensed drugs Strategic shifts in pharma supply chain There is a strong global push to de-risk pharma supply chains and reduce dependence on China Rising wages and anti-pollution drive have eroded China‘s once-overwhelming cost advantage Govt. promotes manufacturing $182 Mn incentive by Govt. to promote manufacturing of 53 critical KSMs & APIs $455 Mn financial assistance to Telangana Govt‘s proposed pharma city One of the lowest prices in the world Indians pay 70% less than the global median to buy medicines One of the lowest manufacturing costs (almost 50% of Europe) Provision of access to affordable treatment (e.g. anti-retrovirals in Africa) to people / Governments who have an affordability challenge Pivotal role in the global COVID crisis Quick production ramp-up of potential COVID drugs e.g. Favipiravir (Fujifilm Toyama Chemical), Remdesivir (Gilead) Supplying COVID support drugs to the world e.g. HCQ Tablets to 108 nations, $5.4 billion worth of Paracetamol Note: Market share numbers are as of 2019 Source: IBEF,IPA Reports, Medbelle Reports, Make in India and Accenture Research 8
Slide 9-

THE SUCCESS OF PHARMA INDUSTRY HAS BEEN DRIVEN THROUGH A NETWORK OF ANCILLARY PARTNERSHIPS End Product for Patient API1 Excipients Packaging Binders/Fillers Disintegrants Colors and Flavors Sweetener/Preservative Ancillaries Petrochemicals Plant Starch Wood Pulp Whey Petrochemicals Glucose/Fructose Wood Pulp Petrochemicals Crude Oil Plant Based Animal Based Metals Formulation Transport, Utilities, Technical, Refrigeration and Engineering Services 1 – Active Pharmaceutical Ingredient | 2 – Key Starting Material | 3 – Polyethylene | 4 - Polyvinylchloride Source: Accenture Research and Industry Reports AL: Foil/Tube/ Base Foil Plastic: Bottle/Blister/Tube Ink/Cylinders/Die & Punch Inserts/Labels/Boxes Aluminum Sheets PE3/PVC4/Film Pigment Paper/Board Glass: Vial/Ampule/Bottle Silica Non-Exhaustive Raw Material Printing Accompaniment Minerals 9
Slide 10-

Packaging # 4,500 – 4,800 Excipients # 2,500 – 2,800 Total # 10,000 – 11,000 MSME PLAYERS HAVE SIGNIFICANT SALIENCE IN THE ~$9 BN ANCILLARY INDUSTRY $Bn - Market Size Note: MSME is defined as companies with annual revenue <100 Cr Source: Accenture Research, Pharmexcil, IBEF,CRISIL and Industry Reports API # 3,000 – 3,400 | # - No. of MSME Units ~50-55% ~$5.5Bn ~60-65% ~65-70% ~55-60% ~$2 Bn ~$1.5 Bn ~$9 Bn Significant % of KSMs are imported from China (70%) 15-20% of API production is captive to large Indian pharma manufacturers Includes plastic, paper, aluminum and glass packaging Primary, secondary and tertiary packaging considered Comprises of excipient, chemical and solvent companies Large manufactures supply to a variety of industries | MSME Salience | Large ancillary salience ~45-50% ~35-40% ~30-35% ~40-45% 10
Slide 11-

ACROSS CLUSTERS, THE COVID PANDEMIC HAS LED TO WIDESPREAD DISRUPTIONS IN THE ANCILLARY INDUSTRY Ahmedabad & Vadodara Baddi Vapi-Valsad Mumbai Vizag Hyderabad Sikkim Logistics Disruptions Raw Material Shortage Financial Distress Disruption in 3rd Party Services Delivery Pressure from Customers Challenges faced by ancillaries Legend: Moderate DisruptioHnigh Disruption Source: Accenture Research and CRISIL Manpower Availability 11
Slide 12-

CHALLENGES FACED BY ANCILLARIES
Slide 13-

A MULTITUDE OF FACTORS HAVE BEEN RESPONSIBLE FOR THE DISRUPTION CAUSED BY COVID-19 LOCKDOWN 9% 22% 50% 58% 65% 70% % Repondents saying 'Yes' What are the current challenges faced by your company? Challenges around availability, permissions and load adherence for fleets and clogged sea-ports have resulted in major disruptions Constrained operations of starting material suppliers has impacted supplies. Inventories are helping manage the current shortfall Impact on inventory turnover, payable days, receivables & increased input costs are creating financial distress specially for smaller players Logistics Disruptions Raw Material Shortage Financial Distress Disruption in 3rd Party Services Delivery Pressure from Customers Challenges around 3rd party services like engineering and courier services were limited Pharma companies have been cooperative in case of stretched delivery timelines Impact on movement and fear for safety is causing labor shortage across blue collar, white collar and 3rd party workforce Manpower Availability Note: Respondents could choose more than one factor Source: Primary Interviews 13
Slide 14-

EACH OF THESE CHALLENGES ARE DRIVEN BY MULTIPLE FACTORS WITH SOME INDUSTRIES AND CLUSTERS SHOWING A HIGHER IMPACT 1 – Full Truck Load Source: Primary Interviews and Accenture Research Manpower Availability Logistics Disruptions Raw Material Shortage Financial Distress Restricted movement due to lack of public transport and unclear communication to ground authorities, along with fear for safety has resulted in constrained manpower availability While packaging companies are impacted due to low automation, API players are constrained by their dependence on skilled labor Clusters like Baddi & Daman with greater need for interstate movement are facing higher manpower shortage Issues with truck and trucker availability due to high absenteeism, FTL1 adherence for material delivery, and not receiving transport permissions are disrupting surface transport Clogged sea ports due to limited availability of workforce are causing delays in shipment delivery With a low degree of co- location with customers, API players are more adversely affected due to logistics constraints while packaging companies are able to manage well The RM vendors of the ancillary companies have been impacted by operating constraints, absence of operating permits and lack of sufficient orders, leading to RM shortages. However, current requirements are being managed through inventory The situation might worsen in the future once as inventory levels deplete Critical starting materials which are industry agnostic are likely to become bottlenecks if production does not start soon Reduced inventory turnover and payables along with stretched receivables have led to a high working capital burden on ancillaries Smaller players are currently more vulnerable to this burden, given that their working capital cycles were already stretched even before the lockdown To add to working capital woes, lower utilizations coupled with higher cost base are expected to cause severe financial distress for MSMEs 14
Slide 15-

Working capital benefits proposed by the govt. might get offset due to higher input costs & low utilization. An effective mechanism to ensure benefit disbursal to MSMEs is required Supplies are improving as increasing number of suppliers re-start operations. However, there might be a momentary dip due to inventory run-outs and high supply lead times With lockdown relaxations, interstate movement and truck availability is improving. However, unclogging of sea ports is likely to take longer to resolve owing to workforce constraints Local labor availability will improve. However migrant labor shortage is likely in select clusters as respective State Governments facilitate their return WHILE SOME CHALLENGES ARE GETTING RESOLVED WITH LOCKDOWN RELAXATIONS, CERTAIN ASPECTS REQUIRE URGENT ACTION Logistics Disruptions RM Shortage Financial Distress Positive near term outlook Moderate near term outlook Source: Primary Interviews and Accenture Research Negative near term outlook Manpower Availability 15
Slide 16-

EPIDEMIOLOGY SUGGESTS THAT A RECURRENCE OF COVID- 19 IS IMMINENT… Likely recurrence of COVID in Wuhan India reports it‘s Nationwide first case lockdown 30th January 25th March 12th May Lockdown 4.0 with relaxation 15th May ~4,000 new cases daily Easing of travel restrictions - Asymptomatic patients infecting healthy population Lockdown ineffective in building Herd Immunity - For herd immunity to kick in ~55% of the population would need to be infected (estimates) Emergence of Super Spreaders - Densely populated areas with lack of social distancing measures would become hot beds for COVID Containment measures successful in curbing transmission Social distancing norms being adhered to in public places Lockdown opens up After a 35-day streak of no cases, 6 new cases of COVID were reported from a residential compound sparking fears of a second wave, leading to the government mandating testing for all residents of Wuhan Current Scenario Potential Future Source: Accenture Research COVID Cases Decline of COVID Resurgence of COVID 16
Slide 17-

…HOWEVER, KEY QUESTIONS PERTAINING TO UNDERLYING CAUSES OF THE CHALLENGES REMAIN UNANSWERED Source: Accenture Research CHALLENGES FACED BY ANCILLARY PLAYERS UNDERLYING CAUSES & UNANSWERED QUESTIONS How do we ensure that the essential goods are comprehensively defined in a way to ensure operating permission from Day 1 ? Operating Constraints No operating permits Lack of sufficient orders Definition of Essential Goods How will the govt. ensure that communication to ground authorities leaves no room for Loss in Translation ambiguity ? Whom do companies reach out to for resolving issued related to No route of escalation permissions & stoppages? Transport permissions Restricted movement of manpower Operating Constraints Within the people in authority, who is responsible for reaching out to the masses to give them the confidence that it is safe to travel to work? Fear for safety Depleted labor pool Trucker availability Clogged sea ports Lack of communication to alleviate public fear 17
Slide 18-

FURTHER, THE COVID CRISIS AND ITS IMPLICATIONS HAVE AMPLIFIED CERTAIN STRUCTURAL RISKS FOR THE PHARMA INDUSTRY Source: Primary Interviews and Accenture Research DEPENDENCE ON IMPORTS FROM A SINGLE GEOGRAPHY INCREASED COSTS TO COMPLY WITH NEW WAYS OF WORKING Risks The pharma ancillary supplies for both API/ KSMs (~70%) and capital equipment (~50%) have significant dependence on China. Hence, supply chain disruptions could have been worse. When such a scenario recurs, we would once again be significantly underprepared to deal with it since this challenge has not been resolved With new ways of working, companies will have to adapt to operating with social distancing and reduced manpower to ensure safety. This will result in the players incurring additional costs There will be a severe impact on productivity and cost structures of MSMEs amongst ancillaries, which will impact the industry competitiveness Triggers 18
Slide 19-

RECOMMENDATIONS
Slide 20-

WE PROPOSE SIX RECOMMENDATIONS TO ENSURE THAT THE INDUSTRY RECOVERS RAPIDLY AND EMERGES STRONGER THAN EVER 20 accelerate RECOVERY build RESILIENCE invoke RENAISSANCE Deliver financial relief to ancillaries 1 2 3 4 5 6 Enable safe return of workforce Develop robust disaster management capabilities Create an ecosystem to promote trust and transparency among all industry players Reduce reliance on imports from a single source Ensure competitiveness of ancillaries in the new normal * Indication of the time by which these recommendations should be implemented completely Next 3 months* Next 6 months* Next 1-2 years*
Slide 21-

THE CENTRAL GOVERNMENT HAS ANNOUNCED RELIEF PACKAGES FOR MSMEs WHICH IS LIKELY TO EASE THEIR FINANCIAL DISTRESS Source: Primary Interviews and Accenture Research 1 The Indian Government has announced the provision of a fiscal relief package for MSMEs 3 Lakh Crores collateral - free automatic loans for MSMEs The government has extended an emergency collateral-free credit line of up to 20% of their outstanding credit (as of February 29) to MSMEs with loans of up to Rs 25 crore outstanding and turnover of up to Rs 100 crore The loans will have a 4-year tenure with 12 months moratorium on principal repayment. Interest is to be capped 100% credit guarantee cover to banks and NBFCs on principal and interest which should enhance the flow of funds from banks to NBFCs to MSMEs and help alleviate near-term liquidity pressures 20,000 Cr subordinate debt for stressed MSMEs 50,000 Cr equity infusion for MSMEs through fund of funds However, the Govt. needs to ensure that there is a mechanism in place for effective disbursal of the proposed interventions & availability of loans to smaller units in the MSME space 21 Ownership: Government Support on working capital extension and relief on other costs can also ease the distress Provide tax subsidies along with refund policies & reduction in GST Administer relief on electricity bills up to 10% on the fixed expenses for a period of 6 months, thus allowing companies to pay only basis consumption Provide direct wage support / subsidy package or extend loan support for paying wages for the next 3-6 months at a concessional rate of interest Announce moratorium on all statutory payments such as ESI, PF and gratuity payments for the next 6 months to all MSMEs up to a pre-defined turnover limit. (Under PMGKY, the current threshold for giving relief (up to 100 employees and 90% employees with < ₹ 15000 monthly wage) can also be relaxed as entities in API/KSM industries are marginally overshooting these limits).
Slide 22-

PROVIDING ASSURANCE TO MIGRANT WORKERS AND IMPLEMENTING WORKER SAFETY PROTOCOLS IS ESSENTIAL TO ENSURE A SECURE RETURN TO WORK PLAN YOUR WORKFORCE Leverage existing HR data –to create an ―Essential Staffing Advisor‖ i PREPARE WORKPLACE Create layout based zoning and identification of workplace elements to create factory level identifiers ii PROTECT & COMPLY Employee tracking along with ensuring social distancing, safety at entry points and canteen / breakout areas iii Source: Primary Interviews and Accenture Research 2 Need to communicate with, and convince migrant labor to return Conviction in safety measures can be established through: Robust SOPs for disinfection and quick resumption of operations Use of technology to monitor employee and workplace safety and compliance – safe distancing and contact tracing 22 Ownership: Ancillaries Support: Government Employers and government have to work in tandem in order to assuage concerns on: Safety of life: Checks and balances for personal safety Safety of employment: Guarantee & security of employment on work resumption Ancillary manufacturers need to be given clear guidelines on pre-emptive measures with implementation support from authorities To assuage the concerns around medical treatment, access to health insurance schemes may be necessary. Ayushman Bharat, which covers COVID testing and treatment under their umbrella, will be an ideal instrument. If required, some criteria in relation to individuals who are not entitled to avail of the scheme can be relaxed by the Government as a one-time dispensation
Slide 23-

A ROBUST DISASTER MANAGEMENT CAPABILITY WILL LEVERAGE LEARNINGS FROM PAST DISRUPTIONS WITH A CONTROL TOWER AT THE NERVE CENTRE 3 COVID 19 Control Room Business continuity toolkit List of essential industries Rapid response SOPs in case of infection detection Role and responsibility matrix of key stakeholders A comprehensive view of the ancillary network Precise flow of information Central Government State Government Local Administration People Large Manufacturers Ancillary Manufacturers Ministries / Departments Source: Primary Interviews and Accenture Research ONE IN EACH CLUSTER 23 COVID Control Room will ensure that on ground issues are effectively resolved and risks are proactively identified and mitigated Ownership: IPA Support: Government Ancillaries Large Indian Pharma
Slide 24-

A CROSS-INDUSTRY COLLABORATION PLATFORM WILL DRIVE GREATER VISIBILITY IN THE ANCILLARY VALUE CHAIN TO PROACTIVELY IDENTIFY SUPPLY RISKS 4 Source: Accenture Research Collaboration and Risk Management Transparency resulting from regular exchange of information has many advantages for across the value chain Collaboration Real-time control and monitoring helps identify potential threats and resolve them before the impact Risk Management Ancillary 3 Plant #7 Ancillary 4 Plant #2 QUALITY AGREEMENTS SUPPLY AGREEMENTS ESTABLISH ECOSYSTEMS DATA INTEGRITY ASSURED Ancillary 2 Plant #1 Ancillary 1 Plant #4 PHARMA COS Control over Quality Processes Single Scalable Platform Inventory & Mfg. Visibility Cross Enterprise Processes Risk Dashboard Supply Chain Map Knowledge sharing creates a climate of trust between players in the chain Risk Mitigation Plans 24 Ownership: Large Indian Pharma Support: IPA Ancillaries
Slide 25-

REDUCING RELIANCE ON IMPORTS FROM A SINGLE GEOGRAPHY WILL HELP MANAGE SUPPLY DISRUPTIONS Source: IPA Report and Accenture Research 5 25 For strategic APIs, Govt. could provide plug-and-play infrastructural support in dedicated zones Planning Identifying strategic APIs for local sourcing, which are: APIs with future potential- to provide future scale of production APIs where India has strong development and manufacturing skills Identify large dedicated clusters for operating manufacturing plants – such clusters could be situated next to ports, KSMs Execution Extending pre-approval of environmental clearance and easing other regulatory clearances (like simplifying the license renewal process) Setting up common utilities such as solvent recovery and distillation plants, power and steam units, effluent treatment plants, etc., to make smaller units economically viable in these zones Lowering costs of borrowing to set up a plant in these API hubs/SEZs through tie-ups with multilateral financing agencies Embedding strong research based linkages to continuously innovate to improve process technologies (e.g., yield improvement) CHINESE GOVERNMENT’S INITIATIVES TO DRIVE API GROWTH Lower borrowing costs 5%-7% Lower logistics costs 1% of expenses Lower labor & electricity costs 11 US cents/kwh 15% y-o-y growth of industry 5x increase in API manufacturers in 5 years Clusters in the close proximity of starting materials E.g. Petrochemicals Multiple sources for capital equipment: Look beyond China at countries like South Korea, Malaysia and Taiwan to develop alternate suppliers Ownership: Government Support: Ancillaries
Slide 26-

MENTORSHIP/KNOWLEDGE SHARING WILL ENABLE ANCILLARY COMPETITIVENESS Industry bodies and Large Indian Pharma companies can come together to support ancillary manufacturers Source: Primary Interviews and Accenture Research Sourcing assistance - Aggregate demand across ancillary manufacturers of a similar kind and negotiate better with the source Access to frugal innovation – Help MSMEs access innovative ecosystem players with solutions in the space of ‗safe operations‘ Support innovation in a viable manner through demand aggregation 6 Better payment terms – Ensure that payments terms across the chain are improved to enable efficient payments cycles and sufficient flow of working capital Price increase – Persuade pharma companies to accept price hikes wherever required factor inputs justify the same MENTORSHIP COMMERCIAL ACUMEN 26 Ownership: IPA Support: Large Indian Pharma Ancillaries
Slide 27-

OVERALL, CONCERTED EFFORTS ACROSS PHARMA AND ANCILLARIES, GOVERNMENT AND THE IPA WILL BE NECESSARY TO IMPLEMENT THE RECOMMENDATIONS Ownership Support Government IPA Large Indian Pharma Ancillaries Deliver financial relief to ancillaries Enable safe return of workforce Develop robust disaster management capabilities Create an ecosystem to promote trust & transparency among all industry players Reduce reliance on imports from a single source Ensure competitiveness of ancillaries in the new normal 1 2 3 4 5 6 27
Slide 28-

CONTACTS RISHABH BINDLISH Managing Director India Life Sciences & Global Generics Lead rishabh.bindlish@accenture.com AMIT MISRA Senior Principal Life Sciences amit.z.misra@accenture.com
Slide 29-

APPENDIX 1 - LIST OF RELEVANT ANCILLARIES CLASSIFIED AS ESSENTIAL MANUFACTURING RELATED API Manufacturing Units Glass Bottle making plants Suppliers of Chemicals, industrial gases, diluents or fillers, binders or adhesives, disintegrants, lubricants, glidant Raw Material Suppliers (KSM, Solvent, colors, flavors, coating materials and excipients) All packing materials viz, foils both plain & printed; cartons, DFC boxes, fiber drums, HDPE DRUMS, stereo and ink for the same, printed label etc. Plastic & Flexible packaging Units Aluminum Foil and caps manufacturing Units Laboratory chemicals and equipment such column etc. required for QC testing Machine Fabrication and Maintenance Services; Spares Service Provider Technical service providers – for Qualification, Validation, etc. Effluent Treatment Services Provider; Hazardous Waste disposal PVC fills and Plastic bottles PET and PPHDPE Briquette Safety Equipment suppliers Ancillary units like recovered solvent recyclers Industry scrap dealers, processers SUPPLY CHAIN RELATED Printing units for pharma inputs; Label printing units Ancillary units for printing industry like plate makes, etc. Private Pharma Testing Labs (in Hyderabad) who specialize in critical testing Thermocol box manufacturing units & Ice Gel pack units required for cold chain products. Truck Agencies Paper and Cardboard manufacturing units for packaging Transport services for inbound RM/PM and outbound Finished Goods Carriage and Forwarding Agent (CFA) operations Temperature and Refrigeration equipment & services SUPPORTING INDUSTRIES Transport Companies ( for carrying workers to Plants and back ) Service providers of Boilers, Compressors, Stability Chambers Service providers of Calibration of Instruments, HPLC & GC Columns Service providers of clean room equipment Courier Services Source: IPA and Accenture Research 29
Slide 30-

APPENDIX 2 - SWIFT ACTION COUPLED WITH FINANCIAL SUPPORT WERE KEY TO EARLY RECOVERY OF CHINA’S INDUSTRY Challenges Govt pushed industries to operate and meet the requirements; industries were unwilling due to manpower issues Price Increase – Increase in cargo charges and input raw material cost by 5-10% Exports – Air shipments were a major challenge while sea shipments were streamlined Key pharmaceutical activities such as site inspections/certifications halted Recovery of industries (as on March last week): 99% work resumption rate for large enterprises outside Hubei (95% in Hubei) 92% work resumption rate for all government-owned firms 77% Work resumption rate for small and medium enterprises outside Hubei 1 – Small and Medium Sized Businesses Source: Primary Interviews and Accenture Research 30
Slide 31-

APPENDIX 3 - LIST OF REFERENCES FOR SECONDARY RESEARCH IBEF Make In India Department of MSME IQVIA GBRE Medbelle Research IPA CRISIL Invest India The Economist News Reports (The Print, News 18, Bloomberg, The Wire) Pharmexcil , ExpressPharma and PharmaBiz China Insights Working Papers by Chicago Booth Review Working Papers by Tsinghua University China State Council Department Website News Reports (China Briefing, Xinhua News, China News Service) Industry Facts and Figures COVID Epidemiology Trends World Health Organization World Economic Forum News Reports (Wall Street Journal and Forbes) National Institute of Allergy and Infectious Diseases Monetary Incentives by Governments News Reports (Forbes, CNBC, Jakarta Post and ASEAN Briefing) US Small Business Administration Official website of the United Kingdom Government British Business Bank Government of Canada (Department of Finance) Australian Government Department of Business Government of Singapore Dezan Shira and Associates German-Indonesian Chamber of Industry and Commerce 31
Slide 32-

ABOUT ACCENTURE Accenture is a leading global professional services company, providing a broad range of services in strategy and consulting, interactive, technology and operations, with digital capabilities across all of these services. We combine unmatched experience and specialized capabilities across more than 40 industries—powered by the world‘s largest network of Advanced Technology and Intelligent Operations centers. With 505,000 people serving clients in more than 120 countries, Accenture brings continuous innovation to help clients improve their performance and create lasting value across their enterprises. Visit us at www.accenture.com DISCLAIMER: This document is intended for general informational purposes only and does not take into account the reader‘s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this presentation and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals.