Emerging markets to be third pillar of our business: Cadila's Sharvil Patel

Q&As with Cadila Healthcare's new MD and his father Pankaj, from whom he took over

Pankaj R Patel passed on the baton of Cadila Healthcare to his 38-year old son Sharvil Patel, who joined the business around two decades ago. Zydus has been planning this transition since the last decade and had also appointed a consultant to help with the same. Pankaj, who took the company from its modest beginnings of Rs 250 crore in 1995 to Rs 9,600 crore in financial year (FY) 2016-17, would mostly be mentoring. He will continue to be the chairman while Sharvil is now the managing director. Sharvil, a PhD holder from the University of Sunderland for his work on breast cancer at John Hopkins, Bayview Medical Centre in the United States (US), feels that the way forward is through research and ensuring compliance. In a candid chat with Sohini Das, both share their plans for the company and the transition as such. 

When did you decide to finally pass on the mantle? 

Pankaj: That the baton would be passed on one day was known from Day 1 of his joining. We have discussed it many times amongst ourselves. When Sharvil joined, he was given the target of achieving $1 billion revenue for the company, and that gave him the opportunity to work with teams across. He got familiar with the company and got to learn the business. There were 70 projects under the $1billion project; in research, market, commercialisation, finance, HR, et al. That was the first thing he did. After that, he was assigned variouys responsibilities one by one. This was done very smoothly. Now, he does not have any pressure. He is touching forty — the right time to take full responsibility. For the next twenty years, the young man's energy will be given to the organisation. I would be there to mentor. In any organisation, this is required — a continuous line of leadership. 

What is the next project you will work on? How apt is the timing, now that you are doing well in the US? 

Sharvil: The next project is this company itself. We hope to do well in the US. I am not euphoric but pragmatic. There will be headwinds in the US market. As we have a good pipeline coming through, the next couple of years look good for us. Going forward, the challenge in the US is to make sure that we build upon some other line of businessi.e. focussing on businesses beyond generics. That's where I would like to put extra effort. We acquired Sentynl Therapeutics in the beginning of this year and we need to make sure that we build on that organically. And, make sure that good products come through, especially in the speciality segment. 

Your father built his empire through the inorganic route; would you like to pursue the same strategy or consolidate? 

Sharvil: Currently, we need to consolidate on what we have built so far. But we also have to be opportunistic. If we get a good opportunity, we cannot let that pass by. We have identified areas where we want to work. As I said, the US is one market where we would look to differentiate the portfolio and front-end presence. We have some gaps in the emerging markets portfolio, but not very significant. We would like to strengthen that if we get something at the right price. And, we are confident in India because of large presence and well established marketing practices and businesses. So, if we get some good brand opportunities or in-licensing opportunities, we would definitely work on that. However, at present we do not have a very large mergers and acquisition (M&A) plan. We don't think we need to do it right now. 

You had taken over at Zydus Wellness few years back. How has that experience prepared you for today's role?

Sharvil: Those are very different businesses, which can't be compared. At Zydus Wellness, we reached a size and scale where we needed to change the way of doing things. We did that and struggled for two years to bring back growth into the business. So, while we did well on margins and profits, our growth was subdued. We made some mistakes on the way as well. Going forward, everything is aligned well. Sales and marketing is doing well. We have a good leadership position there and the leader is very motivated to drive the business forward. Putting the right people at the right place has been a good learning for me at Zydus Wellness. We are very keen to do M&As now. If something works out, we would like to do it in next one year. It has good RoI (return on investment), good cash flow. 

Coming from a research background, how different or similar are your approaches for running the company? 

Sharvil: I have seen my grandfather, a man of science. When he (Pankaj) took over, though businesses did very well, nobody understood the R&D (research & development) efforts that chairman has put in. It has always been underplayed. We have done significant efforts in R&D under his leadership, especially since 2000 — when we built our R&D centers; in biologics, NCE and in vaccines. The foundation has been laid by him, and his contribution to research is the most significant in terms of the portfolio, which will now be built upon over the next five years. On commercialisation, I will have to ensure that we do well. It was very hard to build a R&D set up in India, with issues like talent and capabilities. Now, as that well placed, we need to make sure to drive this engine well. I never had the impression that chairman had commerce on his mind; instead, he had science on his mind. 

In R&D, which is your area of focus; biologics, vaccines, NCE?

Sharvil: R&D on all areas will be of focus. All the way from active pharmaceutical ingredients (API) to R&D in formulations, to biologics, NCEs, transdermals, vaccines. Challenge is to make sure we have good clinical data to take the programmes forward. We have great opportunity as these are unmet medical needs. Focus is not just on R&D, but also compliance. To sustain our business, we have to be compliant. 

How will life change, if at all?

Sharvil: Nothing significant. I guess chairman would now have more time to look at strategy, opportunities, and have a detached view. He can guide us in the right direction. 

Will you focus on investing in start-ups, on your other businesses like hospital?

Pankaj: Yes, I have my hands full. I have work as FICCI chairman. Then there is the hospital business. Sharvil will only look after Cadila Healthcare. Rest, I will have to look into. I am not yet investing in start-ups, but seriously thinking about it as I am free now. The idea is that I would spend some time with entrepreneurs, mentor them with advice and financial investments. No concrete plan as of now. 

Have you set yourself any targets, in terms of revenues or otherwise?

Sharvil:  No targets. Chairman says to focus on inputs, not on outputs. Everybody does it the other way. If we do what we plan to do, revenue will follow. We should look at what kind of milestones we are hitting on R&D, approvals etc. That would make investors understand that revenue will follow if we continue to have the right products at the right place. I am trying to ensure that the input parameters are established. We want to build emerging markets as the third pillar of our business. Currently, it is 5 per cent of our turnover. We will look at in-licensing where we have gaps, and look at M&As in few geographies. Vaccines and biologics are going to play a key role. We also have to focus on India, which is estimated to grow at 12 per cent. Not many markets are growing at that rate. Here, we need to look at the right products, intellectual-property led products, in-licensing opportunities etc. 

Pankaj: The handover process has started. I was looking into human resources, finance, vaccines and NCE. Now, I need to handover these verticals to him. Will take around a month or so. I had a team, from which most of them have retired. When he (Sharvil) came in, I knew that most of these people will retire in ten years or so. That's how I prepared the human resources plan — that by the time this team and I go, Sharvil would have built his team. New team is in place, old team has retired. We have a new head of manufacturing, new head of HR, new head of India business, new head of US business, new head at Wellness, new chief financial officer. Only the head of animal health business is an old timer.