Old is gold: Heritage pharma brands take the lead

At a time when pharmaceutical companies are investing billions of dollars to develop new and path-breaking medicines, it is the old and heritage brands that continue to dominate the market. Sales in 2011 show that the average age of the top 10 pharma brands is 19.3 years, and some of them are as old as 25 years.

For instance, Novartis' painkiller Voveran, which was launched in 1986, ranks third, whereas Ranbaxy's much popular health supplement Revital and Himalaya's Liv-52, both 22-years old, rank sixth and 10th respectively.

According to a study conducted by IDFC Securities on pharmaceutical brands, out of the top-100 brands, 93 are pre-2005 vintage. Among the top 300 brands, it's as many as 260.

While most of these brands are painkillers, vitamins and cough syrups, even drugs to treat diabetes and those treating gynaecology problems figure among the vintage brands.

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Matter of trust

"Brand building is a matter of trust, high degree of recall and consistency," says Sujay Shetty, Partner, PricewaterhouseCoopers.

"A brand is built with a lot of investment and it has to be reinforced every year. So ultimately, it is several crore over several decades".

Novartis India Vice Chairman and Managing Director Ranjit Shahani agrees. "Brand is a promise and reputation is the delivery of that promise over and over again. Successful brands are built on innovation while block buster brands are built on game-changing innovation," Shahani said.

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Dominating sales

Analyst say mature brands not only dominate rankings but sales are also growing at a strong double-digit clip year-on-year.

Despite ageing, top-100 brands, with an average age of 15.8 years, have shown nearly 16 per cent growth over 2007-2011. Similarly, the top-50 brands, with an average age of 17.3 years, have recorded more than 16 per cent growth.

"Importantly, despite their vintage, the top 10 brands continue to grow steadily with a revenue CAGR of 14.2 per cent over 2007-2011 – signifying high brand stickiness," the study said.

"Rising on a strong brand recall and increasing sales from rural and untapped markets, these brands are huge money spinners. Some of them clocked annual sales of over Rs 200 crore (Rs 2 billion) last year," said the brand manager of a leading pharmaceutical company.

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According to a study conducted by IDFC Securities, Abbott's anti-diabetic drug Human Mixtard, which was launched in 1992 and currently occupies the top-slot of best-selling brands, garnered revenue of around Rs 219 crore (Rs 2.19 billion) last year.

Similarly, Pfizer's cough medication Corex, launched a year later in 1993, clocked annual sales of Rs 215 crore (Rs 2.15 billion) in 2011.

Even older brands like Voveran and Revital clocked significant sales. While Voveran earned Rs 194 crore (Rs 1.94 billion) for Novartis, Revital contributed Rs 182 crore (Rs 1.82 billion) towards Ranbaxy's sales last year.

Other heritage brands enriching the cash registers of various pharmaceutical companies include popular medicines like Combiflam (anti-inflammatory and painkiller), Benadryl (cough syrup), Calpol (paracetamol), Mox (antibiotic), Liv-52 (for liver ailments) and Shelcal (calcium and Vitamin D3).

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Branding requirements

Most of these best-selling brands in India are off-patent, unlike in the developed countries where the average age of top brands is typically 12-15 years, depending on the length of patent protection.

"One of the reasons could be because in India, painkillers, cough and cold medication and antibiotics are initially prescribed by general practitioners and over the years they adopt characteristics of over-the-counter products. How many of us really go to a doctor for a Combiflam, a Benadryl or a Calpol? We go straight to the chemist," Shetty said.

But analysts suggest that brand building skills are critical and there is clearly a challenge in creating newer brands. Experts say, though a successful brand building is a continuous process and takes decades, a new product needs minimum of six months to develop a market.

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"India is mainly a branded generics market and life cycle management can carry brands through their leadership cycle for more than 25 years.

Classic examples are Voveran, a nonsteroidal anti-inflammatory drug (NSAID) for osteoarthritic conditions and Calcium Sandoz for strong bones and Otrivin a nasal decongestant," says Shahani.

Novartis had launched Voveran as a tablet, which was followed by a gel formulation and later a thermagel. The idea was to capture an additional market segment at each stage.

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MNCs v/s domestic firms

Multinational companies (MNCs) have excelled in the act with better brand building capabilities, notwithstanding their relatively limited market share. Foreign players such as Abbott, GlaxoSmithKline, Novartis and Pfizer account for five of the top-10 brands.

"Given their historic strategic constraint in terms of fewer product launches compared to local players, MNCs have focused on building these limited launches into big brands. This bodes well for future as MNCs seek to broaden their portfolio through branded generics and patented products," the study said.

Abbott, which leads the top-300 list, now has 28 brands in that bracket aided by its acquisition of Piramal Healthcare.

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However, some of the Indian companies are also gearing up to create a meaningful place for themselves.

According to analysts, Mankind has emerged as the biggest brand creator in the pharma space in the last few years.

Says R C Juneja, Chairman and Chief Executive Officer of Mankind Pharma, "brand is like a lifeline for pharma companies. More brands not only mean more profit, it also means that your company is becoming more popular and this is very important for drug makers."

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Since 2000, the company has built 12 brands in the top-300 list – highest in the domestic market and surpassing even the largest players. Of Mankind's 12 brands, 11 are in the acute segment including five anti-infectives brands.

According to Juneja, brand building is a challenge and companies have to formulate product specific strategies to position their brands well in the market. "The field force also plays an important role here," he points out.

Other domestic players like Cipla, Cadila and Elder Pharma also have successful brands in the pharma market.