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11

INNOVATION AND PATENTS

For updated information, please visit www.ibef.orgAUGUST 2015

22For updated information, please visit www.ibef.org

Executive Summary………….…….………….3

Advantage India…………………….…………4

Market Overview and Trends……….………..6

Porter’s Five Forces Analysis …………...…27

Strategies Adopted…………………….…….30

Growth Drivers………………………………..33

Opportunities………………………………….41

Success Stories………………………………46

Useful Information……………………..…….52


AUGUST 2015


EXECUTIVE SUMMARY

Source: Planning Commission, Reserve Bank of India, TechSci Research

Note: R&D - Research and Development


Eighth-largest R&D

investor

• In 2014, India’s R&D expenditure is estimated to rise and reach USD44 million by 2014

from USD42 billion in 2013

• 2013, India had the world’s eighth largest annual R&D investment, accounting for 2.7 per

cent of global R&D expenditure

Pharma sector driving

R&D growth

• India’s pharmaceutical industry, which accounts for about 1.4 per cent of the global

pharmaceutical industry in value terms and 10 per cent in volume terms, is expected to

remain a major R&D growth driver

Rapidly growing

overseas investment

• Cumulative overseas direct investments by India has expanded at a CAGR of 43.5 per

cent to USD183 billion during FY14 from USD21 billion in FY08, global car makers are

also looking to move their R&D investments in India

AUGUST 2015

ADVANTAGE INDIA


AUGUST 2015

55

Growing demand

For updated information, please visit www.ibef.org

ADVANTAGE INDIA

Source: R&D spending estimate by Battelle and R&D Magazine, TechSci Research

Notes: F - Forecast, IPR - Intellectual Property Rights, CoE - Center of Excellence, PPP - Public Private Partnership, TRIPS - Trade Related Aspects of Intellectual

Property Rights, NMITLI - New Millennium Indian Technology Leadership Initiative, NIC - National Innovation Council

Robust demand

• Rising income and evolving lifestyles have led to higher demand for aspirational products

• Indian companies’ investments in R&D is not surprising given the importance of innovation to sustain competitive edge

• Indian players are set to benefit from expiration of patents

Attractive opportunities

• Vast opportunities in IT, pharmaceuticals, automobiles, biotechnology and agriculture

• India is the largest exporter of IT products and has the third largest pharma sector with a fast growing contract research segment

Policy support

• PPP for promoting exchange of scientific knowledge and R&D

• Strengthening educational infrastructure

• Amendments to the Patents Act (1970) to make it TRIPS-compliant

• Setting up of NIC in 2010

• Adoption of Science, Technology and Innovation Policy 2013

High ratings

• Establishment of CoEs in various areas; NMITLI initiative on PPP basis

• Increased investments by private players; setting up of R&D centers

• During FY07–13, IPR applications increased at a CAGR of 11.8 per cent from 137,900 to 269,500

2013

R&D

spending:

USD42

billion

2014F

R&D

spending:

USD44

billion

Advantage

India


AUGUST 2015

MARKET OVERVIEW AND TRENDS


AUGUST 2015


EVOLUTION OF INNOVATION AND R&D IN INDIA

Source: Zinnov, Korn/Ferry International, Asia-Pacific Research Center, Stanford University, TechSci Research

Notes: TRIPS - Trade Related Aspects of Intellectual Property Rights, WTO - World Trade Organisation


• Indian Patents and

Designs Act (1911)

• Dependence on bulk

imports

• Establishment of CSIR,

DRDO, ICAR, ISRO and

IITs

• Patents Act (1970)

• Recognition of process patents

only

• Restricted foreign ownership in

Indian companies

• Focus on ‘reverse engineering’

among pharmaceutical

companies

• TRIPS under WTO

(1995)

• Amendments to the

Patents Act (1970) to

make it TRIPS compliant

• Reintroduction of

product patents

• Reduction in tariff and

non-tariff measures

• Easing FDI norms

• Shifting focus in pharma

towards clinical research

and new drug

development

Before 1970

Introductory Stage

1970 to early 1990s

Indigenization

Stage

Early 1990s to 2005

Liberalization and

Transition Era

2005 onwards

Growth Era

• Augmentation of network of centrally-

funded institutions and universities

• Increase in R&D and exports in

sectors such as IT, pharma,

electronics and automobiles

• Innovations in automobiles such as

Nano, the world’s least expensive car

• Numerous innovations from rural India

• Setting up of National Innovation

Council

• Adoption of Science, Technology and

Innovation Policy 2013

• Between January 2005 and December

2014, India granted 3,575 patents to

foreign companies

AUGUST 2015


FORMS OF INTELLECTUAL PROPERTY

Source: Department of Industrial Policy

and Promotion, TechSci Research


Intellectual

Property (IP)

Patents

Trademarks

Geographical

Indications

Industrial Designs

Layout Designs

Plant Variety

Protection

Copyright

AUGUST 2015


INDIA AMONG THE WORLD’S LEADING R&D INVESTORS


Source: Battelle, TechSci Research

Notes: GERD - Gross Domestic Expenditure on R&D,

R&D - Research and Development

Expected expenditure of world’s leading R&D

investors in 2014 (USD billion)It is expected to retain its eighth position in 2014, with R&D

investments increasing to USD44 billion from USD42 billion

in 2013

R&D investments has helped Indian companies to

overcome tight competition with affordable products

internationally

33

40

44

44

52

63

92

165

284

465

Brazil

Russia

India

United Kingdom

France

South Korea

Germany

Japan

China

United States

AUGUST 2015



Source: Battelle, Department of Science and Technology,

TechSci Research

Notes: CAGR - Compound Annual Growth Rate,

PPP - Purchasing Power Parity, E - Expected

R&D spending in India (USD Billion)India’s share of global R&D spending rose to 2.7 per cent in

2013 from 2.6 per cent in 2012 and was expected to be at

2.7 per cent in 2014

India’s R&D investment growth is likely to outpace overall

GDP growth. During 2012–14, R&D spending (in terms of

PPP) was expected to be expand at a CAGR of 4.9 per cent

to USD44 billion, while GDP (in terms of PPP) would

increase at a CAGR of 4.4 per cent

The Planning Commission of India expects to double the

government’s R&D spending from the current 0.9 per cent

of GDP to 2 per cent by 2017

In developed and emerging economies, the ratio of private

and public sector investments in R&D is generally around

2:1. However, in India, as per recent estimates, private

sector investments in R&D stand at just about half of that of

the public sector, indicating huge potential for private

players

STRONG GROWTH IN R&D INVESTMENTS IN INDIA OVER THE YEARS

AUGUST 2015

40

42

44

0.84%

0.85% 0.85%

0.81%

0.82%

0.83%

0.84%

0.85%

0.86%

0.87%

38

39

40

41

42

43

44

45

2012 2013 2014E

R&D Expenditure(PPP) % of GDP-RHS


INDIA HAS BEEN EXPANDING ITS INVESTMENT HORIZON ABROAD


Source: Reserve Bank of India, Battelle, TechSci Research

Cumulative overseas direct investment

(USD billion)

Cumulative overseas direct investments increased to

USD183 billion in FY14 from USD21 billion in FY08

This has led to significant amount of technology transfer

through industrial acquisitions

For instance, Lupin’s total patent filing reached 2,197 in

FY15 up from 600 in FY08. In FY15, The company filled 45

formulation patent, 58 API(Active Pharmaceutical

Ingredient) and 314 New Chemical Entity(NCE) patent. In

addition, the company have 1400 scientists.

In 2015, the company invested around 10 per cent of their

total revenue and this makes company the highest R & D

spender in pharma industry.

20.95 20.9538.12

56.10

100.03125.00

183.00

21

38

56

100

125

146

183

FY08 FY09 FY10 FY11 FY12 FY13 FY14

AUGUST 2015


TRADEMARK APPLICATION ACCOUNT FOR MAJOR SHARE OF IPR APPLICATIONS


Source: Department of Industrial Policy and Promotion

TechSci Research

Break-up of Intellectual Property Rights (IPR)

applications (FY14)

During FY14, the total Intellectual Property Rights(IPR)

stood at 251,564

Trademark applications accounted for the largest share

(79.50 per cent) of total applications at 200005 in FY14

Patent and design applications accounted for 17.07 per cent

(42,951 applications) and 3.4 per cent (8,533) share,

respectively

AUGUST 2015

79.00%

17.04%

3.39% 0.03%

Trade Mark

Patent

Design

Geographical


IPR APPLICATIONS TRENDING NORTH

Source: Department of Industrial Policy and Promotion

TechSci Research

Intellectual Property (IP) applications (‘000)During FY07–14, Intellectual Property Rights (IPR)

applications increased at a CAGR of 5.5 per cent from

172,37 to 251,564.

Trademark applications expanded at a CAGR of 5.45 per

cent over FY07–14 to 200,005.

Patent and design applications rose at a CAGR of 5.80 per

cent and 6.42 per cent respectively, during the same period

Growing IP application activity indicates increased in-house

R&D and innovation in India


AUGUST 2015

28

.94

35

.22

36

.81

34

.29

39

.40

43

.20

43.6

7

42

.95

5.5

2

6.4

0

6.5

6

6.0

9

7.5

9

8.3

7

8.3

4

8.5

3

13

7.9

1

16

5.1

7

17

3.5

9

14

1.9

4

17

9.3

2

18

3.5

9

19

4.2

2

20

0.0

1

172.37

206.79 216.95

182.36

226.33 235.31246.25 251.56

0

50

100

150

200

250

300

0

50

100

150

200

250

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Patent(LHS) Design(LHS)

Trade mark(LHS) Total(RHS)

1414

191

297

517

699

780871

1,031

Pre 2000 2002 2004 2006 2008 2011 1H2013


INDIA IS FAST EMERGING AS A GLOBAL R&D HUB … (1/2)

Source: Zinnov Consulting, The Indian R&D Landscape, 2012 and Attrition,

Hiring and Salary Increase Study, 2013, Crossing the value chasm



MNC R&D centers in IndiaThe number of MNC R&D centers in India has grown at a

CAGR of 14.4 per cent to 1,031 over 2000-13, with an

overall employment base of 244,000

Around 30 per cent of the top 1,000 global R&D spending

organisations have centers in India

MNC captive centers in India along with Indian providers of

engineering R&D outsourcing account for nearly 23 per cent

of the overall global engineering R&D outsourcing market

Most of the centers are located in metro cities – Bengaluru,

Delhi, Mumbai, Chennai and Hyderabad. However, MNCs

have begun spreading out to tier-2 cities after 2005

India’s robust talent pool of over 200,000 engineers has

grown at an average rate of 9 per cent over the last five

years; this has been supporting increased R&D activity

45 per cent of the world's top 500 R&D spenders invest in

India

India has benefitted from alliances with foreign companies

with our scientists and researchers getting exposed to the

latest, state-of-the-art foreign technologies


CAGR: 14.4%

AUGUST 2015



INDIA IS FAST EMERGING AS A GLOBAL R&D HUB … (2/2)

Source: Zinnov Consulting, Attrition, Hiring and Salary

Increase Study, 2013



YoY- Year on Year

MNC R&D centers distribution in India (2013)Bengaluru (erstwhile Bengaluru) has 39 per cent of MNC

R&D centers, followed by Mumbai and Pune at 19 per cent

Until 2005, Tier-1 cities were the favorite destination for

MNCs due to the availability of rich talent, favorable

policies, and better quality of life

However, post-2005, MNCs have started expanding to Tier-

2 cities, as they offered benefits such as higher catchment

area, lower attrition, and cost arbitrage

Total R&D talent pool in 2013 stood at 244,000 having a 11

per cent YoY growth

R&D related investments and processes attain easier

approval from regulatory authorities globally. This has also

increased focus on new generics

Bengaluru39%

Mumbai/ Pune19%

Hyderabad12%

NCR13%

Chennai11%

Others6%

AUGUST 2015


INDIA IS ALSO GARNERING THE BENEFITS OF R&D OUTSOURCING

Source: Financial Express, Value Notes, TechSci Research,

Notes: R&D - Research and Development,

IT - Information Technology; CAGR - Compound Annual Growth Rate

R&D outsourcing in India (USD Billion)Companies across sectors (such as IT, consumer

electronics, personal devices, medical electronics, telecom

and automobiles) are now offshoring complete product

responsibility

India has become one of the most preferred location for

engineering offshoring

By 2020, USD42 billion worth of work related to R&D of

product engineering is expected to be outsourced to India,

growing by a CAGR of 22.7 per cent from 2003


1.3

18.3

42.0

2003 2014 2020

CAGR: 22.7%

AUGUST 2015


GLOBAL 500 COMPANIES PRESENCE IN INDIA

Source: Zinnov- Crossing the value chasm

Notes: R&D - Research and Development

Number of R&D centers for global 500 companies, 2014

The top 500 R&D spenders contribute over USD577 billion

with the top 100 R&D spenders alone contributing 66 per

cent to the global R&D spend

R&D spending by top pharmaceutical companies in India is

up 20.6 per cent in FY14


46

83

52 4528 20

4

17

48 5572 80

Top 50 Top 100 100- 200 200-300 300-400 400-500

Present Not present

AUGUST 2015


Encouraging the private

sector

• The benefit of section 10 (23 G) of the IT Act has been extended to financial institutions

that provide long-term capital to hospitals with 100 beds or more

• Government is encouraging the PPP model to improve availability of healthcare services

and provide healthcare financing

Encouraging

investments in rural

areas

• The benefit of section 80-IB has been extended to new hospitals with 100 beds or more

that are set up in rural areas; such hospitals are entitled to 100 per cent deduction on

profits for five years

• Government has allocated USD612.31 million for agriculture research in Union Budget of

2015-16

• Two more agricultural institutes will be established in states of Jharkhand and Assam

Source: Union Budget 2014-15, Union Budget 2015-16, Health

Ministry, TechSci Research

STRONG POLICY SUPPORT CRUCIAL IN DEVELOPING THE SECTOR


Tax incentives• Customs duty on life-saving equipment has been reduced to 5 per cent from 25 per cent

and exempted from countervailing duty

• Import duty on medical equipment has been reduced to 7.5 per cent

Incentives in the

medical travel industry

• Incentives and tax holidays are being offered to hospitals and dispensaries providing

health travel facilities

AUGUST 2015

1919For updated information, please visit www.ibef.orgSource: Itellectual Property India, 2013-14 report


AUGUST 2015

Top 5 Indian Applicants for patents in the field of Information

Technology

S.No. Name of the Company Application Filled

1 Tata Consultancy Services Limited 267

2Samsung R & D Institute India-

Bangalore Private Limited84

3 Infosys 83

4Samsung India Software

Operational Private Limited66

5 Wipro Limited 59

Top 5 Indian Applicants For Patents from Science and

Research & Development Organizations

S.No. Name of the CompanyApplication

Filled

1Council of Science & Industrial

Research267

2Defence Research & Development

Organization116

3Indian Council of Agricultural

Research71

4Department of Biotechnology,

Government of India34

5 Jubilant Life Sciences Limited 29

Top 5 Indian Applicants for patents from Institutes and

Universities


1Indian Institute of Technology

(Collective)342

2 Amity University 92

3Saveetha School of Engineering,

Saveetha University74

4 Bharat University 37

5 Indian Institute of Science 32

Top 5 Foreign Applicants


1 Qualcomm incorporated 1062

2 Koninklijke Philips N.V. 839

3Telefonaktiebolaget LM

Ericsson (PUBL)386

4 Robert Bosch GMBH 375

5Samsung Electronics Co.

Ltd371

INCREASING IN THE PATENT APPLICATION FILING (FY14)…..(1/2)


INCREASING IN THE PATENT APPLICATION FILING (FY14)…..(2/2)


AUGUST 2015

Top 5 Indian Patentees


1Council of Scientific &

Industrial Research98

2Samsung India Software

Operations Pvt Ltd84

3Hindustan Unilever

Limited32

4Bharat Heavy Electricals

Limited22

5 Tata Motors Limited 21

Top 5 Foreign Resident Patentees


1 Qualcomm Incorporated 138

2GM Global Technology

Operations Inc79

3Telefonaktiebolaget LM

Ericsson (PUBL)50

4Siemens

Aktiengesellschaft46

5Samsung Electronics Co.

Ltd46

Source: Intellectual Property India, 2013-14 report


KEY PLAYERS IN R&D - SCIENTIFIC AND R&D ORGANISATIONS* … (1/2)

Source: Organisational websites, IP India, TechSci Research

Notes: R&D - Research and Development; IP – Intellectual Property, *This list is indicative


Organisation Business description

Council of Scientific and Industrial Research (CSIR)

• CSIR is India’s largest R&D organisation, with 38 national laboratories, 39 outreach centers, 3 Innovation

Complexes, 5 units, 4600 active scientists supported by about 8000 scientific and technical personnel. On an

average CSIR files about 200 Indian patents and 250 foreign patents per year. About 13.86% of CSIR patents are

licensed, a number which is above the global average. It is engaged in scientific industrial R&D for economic,

environmental and societal benefits for the country

• Its research areas span across aerospace, biotechnology, chemicals, energy, foods, information dissemination,

leather and metals, minerals and manufacturing etc.

• CSIR is ranked at 84th among 4851 institutions worldwide and is the only Indian organisation among the top 100

global institutions, CSIR has filled 267 patent application in FY14.

Defence Research and Development Organisation (DRDO)

• DRDO is engaged in design and development of weapon systems and equipment in accordance with the

requirements of the military services

• DRDO had a network of 50 labs and establishments to carry out research. It has over 5,000 scientists and about

25,000 other scientific, technical and supporting personnel. DRDO has filled 116 patent application in FY14.

• Its research areas include aeronautics, armaments, combat vehicles, electronics, instrumentation engineering

systems, missiles, materials, naval systems, advanced computing, simulation and life sciences, ballistics test

facility got inaugurated in Ramgarh.

Indian Council of Agricultural Research (ICAR)

• ICAR is one of the largest national agricultural organisations in the world. It consisted of 99 institutes and 53

agricultural universities across India. ICAR has filled 71 patent application in FY14

• It is the apex body for coordinating, guiding and managing research and education in agriculture, including

horticulture, fisheries and animal sciences in India.

AUGUST 2015

2222


KEY PLAYERS IN R&D - SCIENTIFIC AND R&D ORGANISATIONS* … (2/2)


India Space Research Organisation (ISRO)

• ISRO is engaged in development of space technology and its application to various national tasks, launched

Mangalyan successfully in its very first attempt#

. ISRO has filled 12 patent application in 2014

• The organisation has 19 centers across India to pursue R&D activities and ISRO currently has a constellation of 9

communication satellites, 1 meteorological satellite, 10 earth observation satellites and 1 scientific satellite

• Its research areas include communication satellites for television broadcast, telecommunications and

meteorological applications, and remote sensing satellites for management of natural resources

• On June 28, 2015, ISRO launched Polar Satellite Launch Vehicle, PSLV-C27,which is the fourth satellite in the

Indian Regional Navigation Satellite System (IRNSS)

Indian Council of Medical Research (ICMR)

• ICMR is the apex body in India for the formulation, coordination and promotion of biomedical research and one of

the oldest medical research bodies in the world. ICMR has filled 14 patent applications in 2014.

• The council has a fleet of 21 institutes(mission oriented national institute), six regional medical research centers

and five units engaged in medical research

• The council’s research priorities encompass the areas of communicable diseases, fertility control, maternal and

child health, nutritional disorders, and non-communicable diseases such as cancer, cardio-vascular diseases,

blindness and diabetes

Centre for Development of Advanced Computing (C-DAC)

• C-DAC is a premier R&D organisation of the Department of Information Technology (DIT)

• It is engaged in research in the areas of supercomputers, applied electronics, technology, applications and health

informatics

• CDAC has filed 17 patent applications in FY14

Source: Organisational websites, TechSci Research

Notes: R&D - Research and Development,# on 24 September 2014, *This list is indicative

AUGUST 2015 For updated information, please visit www.ibef.org


KEY PLAYERS IN R&D - INSTITUTES AND UNIVERSITIES* … (1/2)



Indian Institutes of Technology (IITs)

• It is a group of autonomous engineering and technology oriented institutes of higher education

• Indian Institutes of Technology (IITs) is planning to monetise intellectual properties (IPs) by exploring tie-ups with

firms that invest in "inventions". In 2014, IITs have filled 342 patent application.

• The Indian Institute of Technology-Bombay (IIT-Bombay) has shown a massive growth in patent filing and showing

a rise of nearly 400 per cent from 2008-09 where just 19 patents were filed.

National Dairy Research Institute (NDRI)

• NDRI is engaged in research, teaching and extension activities in areas of dairy production, processing,

management and human resource development

• Its research activities focus on improving dairy productivity, innovating milk processing technologies and

disseminating information to the various stakeholders in dairy business to make dairying a self-sustaining business

• In 2014, R&D activities comprised 89 in-house and 74 externally funded research projects, including 19 NAIP

projects in consortium mode with financial outlay of USD21.95 million

Indian Institute of Science (IISc)

• IISc is one of the earliest instances of PPP for a research institute in India

• It is engaged in research in various departments of science such as biological, chemical, electrical, mathematical,

physical and mechanical sciences. A new center for Brain Research is expected to contribute to future growth

• In FY13, the institute filed the third highest number of patent applications amongst all the institutes and universities

in India with 31 applications, while in FY14, IISc have filled 32 patent applications

Source: Organisational websites, IP India, TechSci Research

Notes: R&D - Research and Development, IP - Intellectual Property,

AUGUST 2015

http://www.ndri.res.in/ndri

http://www.ndri.res.in/ndri



KEY PLAYERS IN R&D - INSTITUTES AND UNIVERSITIES* … (2/2)


The Energy and Resources Institute (TERI)

• TERI is engaged in developing solutions to global problems in fields of energy, environment and sustainable

development, has also established research centers in Bengaluru, Goa, Guwahati, Himalayas, Mumbai

• The important research areas include biotechnology, earth science and climate change, technology development,

social transformation, and modelling and economic analysis

Institute of Life Sciences (ILS)

• ILS undertakes basic and translational research in frontier areas of life sciences

• The institute’s research interests are in the areas of infectious disease biology, gene function and regulation, and

translation research and technology development

Indian Institute for Advanced Studies (IIAS)

• IIAS is a residential centre for advanced research in humanities, social sciences and natural sciences

• Its major research areas include social, political and economic philosophy; comparative studies in philosophy and

religion; education, culture and arts; natural and life sciences; and national integration and nation building


Notes: R&D - Research and Development, *This list is indicative

AUGUST 2015


KEY PLAYERS IN R&D - PRIVATE SECTOR COMPANIES*



Hindustan Unilever Limited

• HUL is credited with innovations in product areas such as structured bar soap, fairness cream, zero alcohol soap,

poly-coated scouring bar for dishwashing, fortified salt, instant tea, critical components for a water purifying device,

and value-added (nature care) tea

• Worldwide, HUL has over 20,000 registered patents and patent applications

• HUL expenditure on scientific research and development is around USD5.3 million in FY15, where the total

revenue expenditure is USD4.85 million and USD0.42 million expenditure made as a capital expenditure

Tata Steel Limited

• Tata Steel undertakes research in areas such as raw materials and coke, iron and ferro alloys, steel making,

coated products, materials characterisation and joining, materials modelling and product design, and refractory

technology

• The total value of the patent is around USD18.1 million till FY14 as compared to USD16.5 million in FY13.

Cipla Limited

• Cipla’s R&D division focuses on new product development and new drug delivery systems across a range of

therapies

• The company’s total R&D spending increased by 6.2 per cent in FY15 as compared to USD86 million in FY14

• In 2015, Cipla filed more than 200 formulation development projects underway. Company filled 12 formulation in

north America, 78 in Europe region while more than 1800 internationally

• It is among the top companies domestically in R&D spending


Notes: R&D - Research and Development, Growth* - In terms of INR, *This list is indicative

AUGUST 2015


Source: Times of India, Economic Times, The Hindu, Defence Now

Notes: ICBM - Inter-Continental Ballistic Missile, DRDO - Defence Research & Development Organisation, HSL - Hindustan Shipyard Limited

INNOVATION HAS BEEN A CORNERSTONE OF THE COUNTRY’S DEFENCE SECTOR


INS Vikrant

• India Indigenous

Aircraft Carrier (IAC)

• Total displacement

of over 40,000

tonnes

• Being built by

Cochin Shipyard

Limited

• To be inducted by

2014-16

Agni-V missile

• Successfully test

fired in April 2012

• India joined an elite

group of nations

having ICBM

technology

• Indigenously

developed by DRDO


2014-15

Arihant Class

Submarines

• With its launch in

2009, India joined

an elite group of

nations having

nuclear-powered

submarines

• Developed by HSL

Tejas

• Second supersonic

aircraft to be

developed

indigenously by

Hindustan

Aeronautics Limited

(HAL)


2015 at a cost of

USD103.1 million

AUGUST 2015

PORTERS FIVE FORCES ANALYSIS –

HEALTHCARE & BIOTECHNOLOGY


AUGUST 2015


PORTERS FIVE FORCES ANALYSIS – HEALTHCARE

Source: TechSci Research

Note: R&D – Research and Development


Competitive Rivalry

• In a bid to discover the next block buster drug, competition between

the pharma companies are intense

• In addition, expiry of patents will also lead to further competition from

generic drug manufacturers

Threat of New Entrants Substitute Products

Bargaining Power of Suppliers Bargaining Power of Customers

• Huge R&D expenditure

requirement reduces threat of

new entrant

• Government regulation is strict

for this industry

• Bargaining power of suppliers

in this industry is high because

quality of products and timely

delivery matter and there is less

number of quality suppliers in

this industry

• Bargaining power of customers

is low due to undifferentiated

products

• Cheaper generic formulations

pose a threat to healthcare

companies

Competitive

Rivalry

(High)

Threat of New

Entrants

(Low)

Threat of

Substitute

Products

(Low)

Bargaining

Power of

Customers

(Low)

Bargaining

Power of

Suppliers

(High)

AUGUST 2015


PORTERS FIVE FORCES ANALYSIS – BIOTECHNOLOGY




Competitive Rivalry

• High entry barriers due to the capital-intensive nature of the industry

has reduced competitive rivalry

• Entry of new players in the market has led to increased competition.

However, given the low success rate, rivalry is low

Threat of New Entrants Substitute Products

Bargaining Power of Suppliers Bargaining Power of Customers

• Capital intensive nature of

industry reduces the threat of

new entrants

• Strict government regulation

• Suppliers’ power is low

because the raw materials are

largely undifferentiated

• Individual buyers do not have

influence on pricing

• However, government price

control enhances buyer’s

power

• Patent protection stops the

threat of alternative drugs and

chemicals for a period of time

Competitive

Rivalry

(Moderate)

Threat of New

Entrants

(Low)

Substitute

Products

(Low)

Bargaining

Power of

Customers

(Low-Moderate)

Bargaining

Power of

Suppliers

(Low)

AUGUST 2015

STRATEGIES ADOPTED –

HEALTHCARE & BIOTECHNOLOGY


AUGUST 2015


STRATEGIES ADOPTED – HEALTHCARE

Source: Company website, TechSci Research


• Private players in the industry are making their supply chain efficient and leveraging

economies of scope to reduce cost. One such example is Narayan Hrudayalaya (NH)

where health care is provided at affordable cost. NH reduces cost by

• High procurement of medical supplies

• High-volume by high capacity utilisation and staff productivity

• Good human capital management (i.e. training)

• Leveraging the benefit of Information Technology to reduce cost and improve healthcare

delivery

• Developing new and innovative healthcare services will help players in differentiating

themselves from others

• Healthcare providers are also trying to provide better services to differentiate themselves

• Certain players in industry focus only on providing one kind of health care service to its

customers and gain expertise through research in the area. This also helps them to be the

leader in that service. One such example is Tata Memorial hospital which is focused on

treatment of cancer and provides leading cancer treatment in India

Cost leadership

Differentiation

Focus

AUGUST 2015



STRATEGIES ADOPTED – BIOTECHNOLOGY

Source: Company website, TechSci Research

Notes: R&D – Research and Development,

Note*-Until January 31st 2015

• Higher emphasis on technological innovations that will improve efficiency and help in

achieving cost leadership. For example, Panacea Biotec has been providing innovative

vaccines at affordable prices across globe

• Investing heavily on R&D to create new and innovative products. For example, Biocon’s

strong commitment to research has enabled it to bring ‘first-in-class’ biologic drugs that will

change the treatment of psoriasis and other autoimmune diseases

• Companies are creating barriers by applying for patents to curb replication of the drug by

other manufacturer. For example, Panacea has been granted 400* patents in India and

worldwide

Cost leadership

Differentiation

Creating barriers


AUGUST 2015

GROWTH DRIVERS


AUGUST 2015


STRONG DEMAND AND POLICY SUPPORT DRIVING INVESTMENTS

Source: Battelle, Electronics for You, Organisational websites, TechSci Research

Notes: PPP - Public Private Partnership, R&D - Research and Development,

NMITLI - New Millennium Indian Technology Leadership Initiative,

CoE - Centre of Excellence, NIC - National Innovation Council


Policy support

PPP in R&D

Strengthening educational

infrastructure

Amendments to the Patents Act &

Setting up of NIC

Inviting Resulting in

Growing demand

Evolving consumer lifestyles

Liberalisation and increasing competition

Proximity to future

growth markets

Increasing investments

Establishment of CoEs, NMITLI initiative

Providing support to global projects from

India

Increasing corporate R&D investments

AUGUST 2015


PHARMACEUTICAL SECTOR DRIVING R&D GROWTH



R&D spending by top six Pharma giants in FY15

(USD million)India’s pharmaceutical market is highly fragmented, with

300 large and 18,000 mid-sized and small companies

The country’s pharma industry accounts for about 1.4 per

cent of the global pharma industry in value terms and 10 per

cent in volume terms

Indian healthcare sector, one of the fastest growing

industry, is expected to advance at a CAGR of 17 per cent

during 2011–20 to reach USD280 billion

This would help drive R&D growth in India; the average

R&D expenditure by Indian pharma companies is close to 6

per cent of total revenues

AUGUST 2015

325

289

186

117

87 85

58

Ranbaxy DR Reddy Lupin Cipla CandilaHealthcare

Wockhart Aurobindo


POLICY SUPPORT AIDING GROWTH IN THE SECTOR … (1/2)


PPP in R&D

• Exchange of scientific knowledge between research centers, national laboratories,

institutes of higher learning and the industry

• The Indian Government plans to involve the private sector in R&D mainly for sectors like

vaccines, drugs and pharmaceuticals, super computing, solar energy and electronic

hardware. The govt. has announced to create a USD16 million fund for setting up R&D

units with the help of industries

• The government has shell out a USD1.1 billion public-private partnership fund to support

research and development in India

Funded institutions and

foreign universities

• Increasing the number of Indian Institutes of Technology (IITs) to 21, establishing and 19

IIMs , 5 AIIMs

• Foreign universities permitted to enter the higher education system in India by establishing

their own campuses or joint ventures with existing universities

• Atal Innovation Mission with USD248.84 million will boost the academicians,

Entrepreneurs and researchers to work towards innovation

Science & Technology

• Government offers around USD99.53 million for Science & Engineering Research Board,

USD90.41 million for alliance and R & D mission, USD54.74 million for multi-disciplinary

research in frontier areas of Science & Technology (Research and Development Support),

USD25.55 million for Technology Development programme and USD22.73 million for

technical research center.

Source: Battelle, Electronics for You, Union Budget 2015-16,

Organisational websites, TechSci Research

Note: PPP - Public Private Partnership

AUGUST 2015



POLICY SUPPORT AIDING GROWTH IN THE SECTOR … (2/2)

Patents Act• Amendments to the Patents Act, 1970 to make it TRIPS compliant

• Increased incentives to domestic firms to conduct R&D

• Increased likelihood of technology transfer from developed nations

National Innovation

Council (NIC)

• In 2010, NIC was set up to implement strategies for inclusive innovation in India and

prepare a roadmap for innovation over 2010-20, idea is to build a domestic model to cater

to Indian needs

• Tasks of NIC include creating a framework to encourage innovation by central and state

governments, universities, R&D institutions and SMEs

• NIC build digital database of innovations across sectors and at Grassroot. In addition NIC

also set up sectorial Innovation council in Maharashtra

Source: Battelle, TechSci Research

Note: SMEs - Small and Medium Enterprises

AUGUST 2015

Atal Innovation Mission

• Atal Innovation Mission (AIM) to be established in NITI to provide Innovation Promotion

Platform involving academicians, and drawing upon national and international experiences

to foster a culture of innovation , research and development and for that government

offered USD24.88 million


SCIENCE TECHNOLOGY AND INNOVATION (STI) POLICY 2013



Introduction of STI

Policy 2013

• In January 2013, the Government of India introduced the Science, Technology and

Innovation (STI) policy 2013 at the centenary sessions of the Indian Science Congress

held at Kolkata

Vision of STI Policy• The STI policy is aimed at helping India become one of the top five global scientific

powers by 2020, by taking advantage of large demographic pool of engineers and science

graduates

Rising involvement of

the private sector

• STI aims to boost innovation through Research and Development (R&D) led by the Public-

Private Partnership (PPP) mode thereby increase the investments on Research and

Development (R&D) to 2 per cent of GDP by 2017 from current 1 per cent

Increase in human

resources

• The policy seeks to increase the number of full-time R&D personnel by 66 per cent over

2013–17 and expand the number of publications from the current 3.5 per cent of global

share to around 7 per cent by 2020

AUGUST 2015


RECENT INVESTMENTS IN R&D BY KEY PLAYERS


Source: India Electronic News, Moneycontrol, CNBC, Economic Times, Appliancemagazine.com,

Business Standard, The Hindu, Company websites, TechSci Research


2013

• Jan 13: DuPont has double

their R&D activities in India

• April 13: Yamaha announced

the establishment of a R&D

centre in India

• Jun 13: Huawei has set up a

new Research and

Development (R&D) centre in

Bengaluru with an investment

of USD150 million

• Jul 13: OneOcean

Corporation has set up

ClipCard Technology (R&D)

centre in India

• Oct 13: Carraro India has set

up a new R&D centre in India

• Jan 22: Intel India to invest over

USD120 million to expand its

Bengaluru R&D center

• Mar 07: BASF opens global R&D

center in Mumbai

• Sep10: Valvoline Communications

Ltd (VCL) a JV between Ashland

Inc and Cummins India Ltd will

open its R&D centers in Ambernath

near Mumbai in Maharashtra

2014

AUGUST 2015

2015

• Mar 15: After a successful merger

with Ranbaxy, Sun pharma

announced to increase its R & D

investment to USD325 million

which would expected to increase

to USD500 million in FY16.

• May 15: Ford Motor company have

announced to invest around

USD829.46 million in R & D center

Chennai

• July 15: Lupin, Pharma Industry

has announced to spent

USD185.63 million in pharma

Industry. In addition, the company

has their R & D center in Pune with

1400 scientist



RECENT INVESTMENTS IN R&D BY GOVERNMENT

Source: India Electronic News, Moneycontrol, CNBC, Economic Times, Appliancemagazine.com,

Business Standard, The Hindu, Company websites, TechSci Research


NMITLI-New Millennium Indian Technology Leadership Initiative

Centers of Excellence

(CoEs)

• The government has set

up CoEs based on the

PPP model for technology

development and transfer,

scientific research, human

resource development and

economic outreach

• CoEs have been set up in

the areas of telecom,

wireless technology, bio-

informatics, lasers and

optoelectronic devices and

nano-electronics

NMITLI

• The programme identifies

areas for development

based on national

consultation and invites

best partners from

institutions, academia and

private sector to play a role

in the process

• NMITLI has initiated 60

largely networked projects

in diverse areas involving

85 industry partners and

280 R&D groups from

different institutions with

investment outlay of

USD114 million

Centrally funded institutes

• The government proposes

to establish 8 new IITs, 3

IISERs, 10 NITs and 20

IIITs

• These institutes together

account for over 80 per

cent of the total PhDs in

engineering in India

• The institutes are also

amongst the top Indian

applicants for patents from

the ‘institutes and

universities’ category

Central and foreign

universities

• New universities in 16

uncovered states

• The remaining 14 new Central

Universities will be set up as

world class centers of

excellence at different

locations

• Foreign universities permitted

can enter higher education

system in India by having their

own campuses or joint

ventures with existing

universities

• 12 teacher education courses

and three new programs have

been upgraded

AUGUST 2015

OPPORTUNITIES


AUGUST 2015


Source: ARAI, Business Standard, India Law Office, Deloitte, TechSci Research

Notes: IT - Information Technology, ARAI - Automotive Research Association of India,

NVH - Noise, Vibration and Harshness


Pharma and healthcare

• Indian healthcare sector, one of the fastest growing industry, is expected to advance at a

CAGR of 17 per cent during 2011–20 to reach USD280 billion

• Contract research is a fast growing segment in the Indian healthcare industry

• Indian pharmaceuticals market is anticipated to expand at a CAGR of 17.2 per cent over

2011-2016 to touch USD27.3 billion

• Indian companies got 81 ANDA approvals from US FDA from period of January-August

2014

Information Technology

(IT)

• India is increasingly seen as a product development destination

• Companies are now offshoring complete product responsibility including complex services

like product management

Automobiles

• Research is being carried out by individual companies as well as industry associations

such as ARAI in various areas such as structural dynamics, safety, NVH and electronics

• India is the sixth largest auto market globally and is poised to become the third largest by

2020

OPPORTUNITIES IN THE TELECOMMUNICATION INDUSTRY … (1/2)

AUGUST 2015


Source: ARAI, Business Standard, Planning Commission,

India Law Office, TechSci Research

Notes: IT - Information Technology, ARAI - Automotive Research Association of India,

NVH - Noise, Vibration and Harshness, DBT – Department of Biotechnology# Announced in budget 2015-16 with a sum of USD16.3 million


Biotechnology

• By FY17, India’s biotech industry is estimated to increase to USD11.6 billion from USD7.0

billion in FY15

• Protein and antibody production, and fabrication of diagnostic protein chips are promising

areas for investment

• Stem cell research, cell engineering and cell-based therapeutics are other areas, wherein

India will cash in its expertise

Agriculture

• India has the potential to become a major producer of transgenic rice and several

Genetically Modified (GM) or engineered vegetables

• Hybrid seeds, including GM seeds, represent new business opportunities in India based

on yield improvement

• In 12th Five-Year Plan, DBT has proposed to support 10 agricultural universities through

R&D grants to promote R&D on agriculture

• Two agricultural institutes will be established in states of Jharkhand and Assam#

OPPORTUNITIES IN THE TELECOMMUNICATION INDUSTRY … (2/2)

AUGUST 2015


Source: Zinnov - Crossing the value chasm

Notes G500 – Global 500 companies


OPPORTUNITIES OF JOB CREATION BY GLOBAL 500 COMPANIES

There is a potential to create 200,000 R&D jobs by Global

500 companies in the next five years

During 2013-18, R&D headcount is expected to increase at

a CAGR of 15.8 per cent

176

366

313

229

489

595

2013 2018

R&D headcount Remaining addressable population

R&D headcount by G500 (‘000)

AUGUST 2015



India With More Than 350 Companies And More Than 250 R & D Centers From G500

AUGUST 2015

Chandigarh

Emerging Locations

NCR

Tier 1 locations

Ahmedabad

Vadodara

Kolkata

Vishakhapatnam

Coimbatore

Mangalore

Goa

NashikHyderabad

Bangalore

Chennai

PuneMumbai125

62

45

43

38

26

24

0 20 40 60 80 100 120 140

Bangalore

NCR

Pune

Hydrabad

Chennai

Mumbai

Others

Source: Zinnov - Crossing the value chasm, News Articles, TechSci

Research

Notes G500 – Global 500 companies

G500 presence across locations in India (Till December, 2013)

SUCCESS STORIES


AUGUST 2015


Source: Lupin website, Lupin Reports

Notes: API - Active Pharmaceutical Ingredient, CNS - Central Nervous

System, NSAIDS - Non-Steroidal Anti-Inflammatory Drugs,

TB - Tuberculosis, NCE - New Chemical Entity

Patents filed by LupinLupin is a renowned pharma player having a wide range of

quality, affordable generic and branded formulations and

APIs

Lupin has emerged as the fifth largest and among the top

five fastest-growing companies in the US

It is one of the world’s largest manufacturers of TB drugs

and has significant market share in the cardiovascular,

diabetology, asthma, paediatrics, CNS, Anti-infectives and

NSAIDs therapy segments

By FY15, Lupin’s total patent filing reached 2,197 up from

600 in FY08

The company is amongst the fastest growing in top 10

generic pharmaceutical players in Japan and South Africa


AUGUST 2015

LUPIN: ON A HIGH GROWTH PATH …

(1/2)

38

26

75

42 6

0

10

8

45

26

84

42

12

41

39 5

8

5 14 17 4

3 47

23

2

31

4


Formulation Patents API/Process Patents NCE Patents



LUPIN: ON A HIGH GROWTH PATH …

(2/2)

Source: Lupin website

Notes: CAGR - Compound Annual Growth Rate

Lupin net sales (USD million)Its revenues increased from USD822.5 million in FY09 to

USD2.1 billion in FY15, at a CAGR of 16.8 per cent

India formulations business grew by 5 per cent recording

revenues of USD502.6 million for FY2014-15 as compared

to USD414 million for FY2013-14

AUGUST 2015

822.5

1006.7

1250.9

1484.6

1742.11839.2

2090.2


CAGR: 16.8%


INFOSYS: NURTURING INNOVATION IN IT … (1/2)

Source: Office of the Controller General of Patents,

Designs and Trademarks 2013-14 Annual Report,

Company Annual Reports, TechSci Research

Indian IT patent applications (FY14)Infosys is 3rd highest number of patents applications in India

Research activity for different areas is allocated amongst

dedicated labs such as Software Engineering lab,

Convergence lab, Security and Privacy lab, Distributed

Computing lab and E-Com lab

During FY11-15, the company’s revenues increased at a

CAGR of 9.6 per cent to USD8.7 billion from USD6.0 billion

During the same period, net profit expanded at a CAGR of

7.6 per cent to USD2.0 billion from USD1.5 billion

Infosys spent USD97.9 million in R&D expenses during

FY15


AUGUST 2015

59

59

66

83

84

169

0 50 100 150 200

Indian Institute of Technology(Collective)

Wipro Limited

Samsung India SoftwareOperations Private Limited

Infosys

Samsung R & D Institute India

Tata Consultancy

Income and net profit (USD billion)

6.0

6.9

7.4

8.2

8.7

1.51.7 1.7 1.8

2.0

0.0

0.5

1.0

1.5

2.0

2.5

0.0

2.0

4.0

6.0

8.0

10.0

FY11 FY12 FY13 FY14 FY15

Sales Net Profit



TCS: NURTURING INNOVATION IN IT … (2/2)

Source: Company Annual Reports, TechSci Research:

Note: CAGR - Compound Annual Growth Rate,

* calculated in INR terms

Income and net profit (USD billion)During FY09-15, the company’s revenues increased at a

CAGR of 17.3 per cent to USD15.7 billion from USD6 billion

During the same period, net profit expanded at a CAGR of

19.4 per cent to USD3.3 billion from USD1.1 billion

TCS spent USD37.3 million in R&D expenses during FY15,

up 13.2 per cent from the USD33 million spent in FY14

AUGUST 2015

6.0

6.3

8.2

10

.4

11

.6

13

.6

15.7

1.1

1.5

2.02.2

2.6

3.2 3.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0


Sales Net Profit


HUL: A LEADING INNOVATOR IN FMCG


Source: Economic Times, Company Annual Reports,

Company website, TechSci Research

Notes: CAGR: Compound Annual Growth Rate,

Strong research and development (USD million)Incorporated in 1933, HUL is India’s leading company by

sales in the Fast-Moving Consumer Goods (FMCG) sector

in India. British-Dutch company Unilever owns a majority

stake of 52 per cent in HUL

HUL wins the top FMCG award at the Dun & Bradstreet

Corporate Awards 2015

Hindustan Unilever Limited (HUL) has been ranked No 1 in

India on the Forbes list of Most Innovative Companies

across the globe for 2014. In the global list, HUL ranks 14th

and is the only Indian company in the Top 50.

The company has over 20,000 registered patents and

patent applications worldwide

HUL is also driving innovation in various categories such as

oral care, personal products and soaps & detergents etc.

AUGUST 2015

1922

34.4

20.7

15.1

FY10 FY11 FY12 FY13 FY14

CAGR: -5.6%

USEFUL INFORMATION


AUGUST 2015

5353

INDUSTRY ASSOCIATIONS

Automotive Research Association of India (ARAI)Survey No 102, Vetal Hill, Off Paud Road, Kothrud,

Pune - 411 038

Tel: 91-020 30231111

Fax: 91-020 25434190

E-mail: [email protected]

Website: www.araiindia.com

Indian Society for Clinical Research (ISCR)c/o Pfizer center, 5, Patel Estate, S.V.Road, Jogeshwari(West),

Mumbai-400 102

Tel: 91-022 26774140, 66932028

E-mail: [email protected]

Website: www.iscr.org

The South India Textile Research Association (SITRA)13/37, Avanashi Road, Coimbatore - 641 014

Tel: 91-422 2574367, 6544188

Fax: 91-422 2571896

Email: [email protected]

Website: www.sitra.org.in



AUGUST 2015

5454

GLOSSARY … (1/2)

API: Active Pharmaceutical Ingredient

ARAI: Automotive Research Association of India

CAGR: Compound Annual Growth Rate

CoE: Center of Excellence

DRDO: Defence Research and Development Organisation

FDI: Foreign Direct Investment

FY: Indian Financial year (April to AUGUST)

So FY10 implies April 2009 to AUGUST 2010

GDP: Gross Domestic Product

GERD: Gross Domestic Expenditure on Research and Development

HAL: Hindustan Aeronautics Limited

HSL: Hindustan Shipyard Limited



AUGUST 2015

5555

GLOSSARY … (2/2)

IAC: Indigenous Aircraft Carrier

ICBM: Intercontinental Ballistic Missile

IT: Information Technology

NMITLI: New Millennium Indian Technology Leadership Initiative

NVH: Noise Vibration and Harshness

PPP: Public Private Partnership

PPP: Purchasing Power Parity

R&D: Research and Development

TRIPS: Trade Related Aspects of Intellectual Property Rights

USD: US Dollar

WTO: World Trade Organisation

Wherever applicable, numbers have been rounded off to the nearest whole number



AUGUST 2015

5656

Exchange rates (Fiscal Year)


EXCHANGE RATES

Exchange rates (Calendar Year)

Average for the year


AUGUST 2015

Year INR equivalent of one USD

2004–05 44.81

2005–06 44.14

2006–07 45.14

2007–08 40.27

2008–09 46.14

2009–10 47.42

2010–11 45.62

2011–12 46.88

2012–13 54.31

2013–14 60.28

2014-15(Expected) 60.28

Year INR equivalent of one USD

2005 43.98

2006 45.18

2007 41.34

2008 43.62

2009 48.42

2010 45.72

2011 46.85

2012 53.46

2013 58.44

2014 61.03

2015(Expected) 61.03

5757

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AUGUST 2015

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