We have big expectations from Japan and China: Sun Pharma's Dilip Shanghvi

Shangvi feels the domestic market is big enough to accommodate both branded and unbranded medicines

With recovery underway in the US market, where it has already readied a specialty drugs pipeline, DILIP SHANGHVI, founder and managing director, Sun Pharmaceutical Industries, tells Sohini Das he is now focusing on China and Japan. While he feels the domestic market is big enough to accommodate both branded and unbranded medicines, Shanghvi nonetheless states that government intervention in drug pricing is a global challenge. The billionaire industrialist also says he has no plans on retiring anytime soon. Edited excerpts: 

Do you think governance issues are behind you after you have announced steps to address some of the key concerns of investors? 
 

Our learning is that apart from being right — legally and technically — we also have to take into consideration how the transaction would be perceived by the world outside. Even though our actions were legal and in the best interests of the company, we thought it is important to address investor concerns. There were some perception issues which have already been addressed.  

What is the update on the whistle-blower complaint which the market regulator is investigating? 
 

We received two sets of queries from the Securities and Exchange Board of India and have shared the requisite information. We hope it will close the investigation at the earliest.

How are you ensuring enhanced compliance at your plants, especially the ones you inherited from Ranbaxy? 
 

Of the four facilities of erstwhile Ranbaxy, which were affected by the US Food & Drug Administration’s regulatory action, we prioritised Mohali and have been able to obtain clearance for it.

Do you think you paid more than you should have for buying Ranbaxy?
 

We believe the Ranbaxy acquisition turned out well. All parts of Ranbaxy business are growing and as it starts contributing fully to our future growth, there will be greater appreciation. Unfortunately, the timing of the acquisition coincided with the changing dynamics in the US generics market and some of our challenges. Hence, the value creation is not clear and visible.

Both top line and bottom line growth have disappointed for the past few years. What are the factors that will improve the financials and by when? 
 

The past few years have been challenging for the entire pharmaceutical industry, with increasing competition and consolidation of buyers in the US leading to pricing pressure. We have taken some steps to address these challenges. One of them is to broad-base our portfolio by adding specialty products.

Our specialty business is a new engine of growth that we believe will give us sustainable returns in the long run. On the generics front, we are focusing more on complex and value-added products. Given the tough pricing conditions in the US market, we will continue to focus on cost optimisation, including rationalisation of generic R&D investments.

What is your message to shareholders who have made losses on their Sun Pharma investments? 
 

Sun is fortunate to have investors who have been with the company for a long time. We are grateful for their continued support. Sun has created consistent value for its shareholders and we are committed to meeting their expectations. I am committed to creating long-term value for all shareholders.  

India and the US continue to be the leading markets for Sun Pharma. Both are facing pricing pressure. What are your plans for de-risking your revenues? 
 

Our outlook for the US and India has not changed and we hope to grow our business in both these markets. We have been investing over the past few years to create a significant specialty business in the US. Some of the specialty products will be also be launched in global markets. We expect all our businesses to grow well. Besides, we are also focusing on entering new growth markets like China. We have big expectations from markets like Japan and China.

You have readied a specialty pipeline for the US. What is your outlook on this portfolio in 2019-20 and 2020-21? 
 

We expect reasonable revenue contribution from our specialty business over the next three-five years. Seven of our specialty products are already in the US market. Sun is the first Indian pharma company to launch a direct-to-customer campaign for its specialty product, Ilumya. We have invested approximately $1 billion in building the specialty portfolio and will continue to be in the investment phase for now.

What is your outlook for the global pharma industry? What focus areas and challenges lie ahead for drugmakers? 
 

I believe there will be a gradual and continual shift towards specialty medicines. In the US and top five European Union markets, the contribution of specialty medicines to overall pharmaceutical spending has almost doubled in the last decade. On the innovation front, new drug development, immunotherapy, next-generation biotherapeutics, including cell-based gene therapies and digital health tools, will gain traction.

Some of the global challenges we face include currency fluctuations, government intervention on pricing, and sudden changes in market dynamics like the one we have seen in the US.

Are Jan Aushadhi and unbranded generics a threat for branded generics players? 
 

The government’s attempt at making medicines more affordable and accessible is laudable. Our view is that the Indian market is large enough to accommodate both unbranded and branded generics.

How are you working on your succession plan? 
 

Sun Pharma is a professionally-run company managed by a world-class team. I don’t plan to retire anytime soon.