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Sun Pharmaceuticals Industries Ltd.

BSE: 524715 Sector: Health care
NSE: SUNPHARMA ISIN Code: INE044A01036
BSE 00:00 | 24 Apr 2020 Sun Pharmaceuticals Industries Ltd
NSE 05:30 | 01 Jan 1970 Sun Pharmaceuticals Industries Ltd

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OPEN 479.95
PREVIOUS CLOSE 477.30
VOLUME 569035
52-Week high 497.25
52-Week low 315.20
P/E 37.27
Mkt Cap.(Rs cr) 116,426
Buy Price 485.25
Buy Qty 27.00
Sell Price 485.00
Sell Qty 25.00
OPEN 479.95
CLOSE 477.30
VOLUME 569035
52-Week high 497.25
52-Week low 315.20
P/E 37.27
Mkt Cap.(Rs cr) 116,426
Buy Price 485.25
Buy Qty 27.00
Sell Price 485.00
Sell Qty 25.00

Sun Pharmaceuticals Industries Ltd. (SUNPHARMA) - Chairman Speech


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Company chairman speech

Dilip Shanghvi Managing Director

Dear Shareholders

The global pharmaceutical industry is at crossroads. The type of drugs being developedby the industry and the role played by technology are being juxtaposed against the valuethat healthcare delivers to patients. On one hand the industry is developing newgeneration specialty drugs in gene therapy monoclonal anti-bodies and immunotherapycategories which have improved medical outcomes for patients; but on the other hand theindustry is facing increasing resistance from governments and payors over escalating drugprices which impacts healthcare budgets. The need of the hour is for innovation andaffordability to co-exist for the long-term benefit of all stakeholders.

The scenario for the generics industry is markedly different from its much largerbranded counterpart. Generics pricing in the US the largest and most important of allgenerics markets has been under severe pressure over the last three years. The businessprofitability in the US generics market has suffered significantly over this period.Although there are early signs of price stabilisation for some products the overall USgenerics pricing continues to be competitive.

The industry has started responding to these changes through a combination of multipleinitiatives. These include a focus on developing innovative and differentiated productswithdrawal of non-remunerative products and persistent emphasis on cost control.

With business becoming more challenging it has become imperative for companies to bemore innovative and identify new engines of growth. Sun Pharma's significant investmentsin building a global specialty business is an important step in this direction. Thisinitiative will enable us to build an additional engine of growth as well as move up thepharmaceutical value chain over the long term.

Our unwavering focus on cost control continues with these efforts spread acrossgeneric R&D projects rationalisation of manufacturing footprint and other areas.These steps will release resources which can be deployed in the specialty business.

FY19 highlights

We are back on the growth path with our FY19 revenues growing by 10% to '287 Billion.We have recorded steady growth in all the markets where we operate.

Operational performance

Revenues in the US increased 22% to '107 Billion and accounted for 37% of ourconsolidated revenues for FY19. The key growth drivers include increase in generics salesincremental contribution from specialty product launches and a favourable foreign exchangerate. Our subsidiary

Taro recorded a marginal growth in overall revenues to US$ 670 Million for the year.This was mainly the result of more intense competition among manufacturers new entrantsto the market buying consortium pressures and a higher abbreviated new drug application(ANDA) approval rate from the United States Food and Drug Administration (USFDA).

We recorded 8% decline in our India formulations business however our adjustedgrowth excluding one-offs was 5%.

We grew by 11% in emerging markets for the year.

This growth was broad based across various markets.

Our sales in the rest of world (RoW) markets grew by 16% for the year driven byincreased sales in some Western European markets and partly driven by the Pola Pharma Inc.(Pola Pharma) acquisition in Japan.

R&D

R&D is the lifeline of our business as it enables us to develop and launchdifferentiated generics as well as innovative specialty products. It is a key determinantof our future growth and profitability. Our efforts to build a global specialty pipelinemandates that we keep investing in R&D.

Our R&D investments for the year were ~'20 Billion targeted mainly at developingcomplex generics and specialty products. Given the intensely competitive nature of the USgenerics market we continue to be disciplined in identifying future R&D projects forthe generics market. Investments for developing the long-term specialty pipeline areexpected to continue. We are also investing in developing specific products for emergingmarkets and other non-US developed markets.

Progress on specialty initiatives

We have further progressed in our global specialty initiatives which commenced a fewyears ago. We view the specialty business as an additional engine of sustainable growthand cash flows over the long term. It is also an initiative to move up the pharmaceuticalvalue chain and bring in more innovation to our business. We have allocated significantresources over the past few years in building this business for acquiring specialtyproducts funding their clinical trials and establishing the requisite front-endcapabilities. We have now entered the commercialisation phase for most of our specialtyproducts.

The focus areas for our specialty portfolio include segments like dermatologyophthalmology and oncology.

Specialty products-Approvals and launches in FY19

We crossed many important milestones for our specialty business in FY19 with USFDAapprovals for four specialty products and commercialisation of three specialty products.Some of the key highlights for the year were:

• We launched ILUMYA™ (tildrakizumab-asmn) 100 mg/mL in the US for treatingmoderate-to-severe psoriasis in October 2018. We have received a good initial response forthe product and we expect ramp-up in ILUMYA™ sales in the US over the next few years.We have also commenced a direct-to-consumer advertising initiative for ILUMYA™ in theUS.

• Our European partner Almirall received approval for tildrakizumab from theEuropean Commission (EC) under the ILUMETRI™ brand name. Almirall has commencedcommercialisation of ILUMETRI™ in Europe in a phased manner across different markets.

• Sun Pharma also received approval from the Australian Therapeutic GoodsAdministration (TGA) for ILUMYA™ during the year. The product has already beencommercialised in Australia.

• During the year we received USFDA approvals for CEQUA™ (cyclosporineophthalmic solution 0.09%). CEQUATM increases tear production in patients withdry eyes. It is the first and only approved dry eye treatment to combine cyclosporine Awith nanomicellar technology. CEQUA™ will be commercialised in the US in FY20.

• In May 2018 Sun Pharma received USFDA approval for YONSA (abirateroneacetate) a novel formulation in combination with methylprednisolone to treat patientswith metastatic castration-resistant prostate cancer (mCRPC). This approval has furtherstrengthened Sun Pharma's oncology portfolio in the US. The product was commercialised inthe US in the first quarter of FY19.

• During the year Sun Pharma also received USFDA approval for its New DrugApplication (NDA) of XELPROS™ (latanoprost ophthalmic emulsion 0.005%) used for thereduction of elevated intraocular pressure in patients with open-angle glaucoma or ocularhypertension. XELPROS™ is the first and only form of latanoprost that is notformulated with benzalkonium chloride (BAK) a commonly used preservative in topicalocular preparations. XELPROS™ was launched in the US in January 2019.

• In July 2018 Sun Pharma announced the USFDA approval for INFUGEM™(gemcitabine in 0.9% sodium chloride injection) for intravenous use in aready-to-administer (RTA) bag. INFUGEM™ uses a proprietary technology which allowscytotoxic oncology products to be pre-mixed in a sterile environment and supplied to theprescribers in RTA infusion bags. These RTA bags will provide greater safety bypreventing problems of over-dosing or under-dosing and eliminating contamination risk.INFUGEM™ was commercialised in the US in April 2019.

• In August 2018 Sun Pharma launched KAPSPARGO SPRINKLE™ (metoprololsuccinate) extended-release sprinkle formulation in the US. The product will help treathypertension angina pectoris (chest pain) and heart failure. These extended-releasecoated pellets can be sprinkled over soft food or administered via a nasogastric tube tofacilitate long-term once-daily administration for patients who experience difficultywhile swallowing.

• We have also initiated investments in the development of new indications forILUMYA™. Although the clinical trials for these new indications will require upfrontinvestments a successful outcome of the trials will significantly expand the addressablemarket for ILUMYA™ globally.

Enhancing presence in Japan

In January 2019 we announced the closure of the acquisition of Pola Pharma a Japanesepharmaceutical company.

Pola Pharma's portfolio primarily comprises dermatology products and it also has twomanufacturing facilities in Japan with capabilities to manufacture topical products andinjectables. This acquisition strengthens Sun Pharma's presence in Japan and acceleratesits access to the Japanese dermatology market.

Regulatory compliance in pharmaceutical manufacturing

Regulatory standards for pharmaceutical facilities have been undergoing constantupgradation over the past many years with regulatory agencies demanding the highestquality products. To adhere to these stringent standards pharmaceutical companies need tohave an unwavering focus on 24x7 compliance which in turn raises compliance costs.Ensuring that each manufacturing facility remains compliant has become a key priority forpharmaceutical companies worldwide.

During the year many of our facilities underwent successful audits by multipleregulatory agencies including the USFDA.

Our Halol facility which was impacted by cGMP deviations in FY15 was cleared by theUSFDA in June 2018. With this clearance new approvals from this facility for the USmarket have started coming through gradually.

Restructuring and rationalisation

We also continue to focus on optimising our costs given the tough phase that theglobal generics industry is passing through. We strive to optimally utilise our resourceswith greater involvement of people to make the Company more efficient.

We continue to emphasise on optimising our manufacturing footprint to strike apragmatic balance between current costs and future capacity requirements. We areconstantly evaluating our generics R&D investments to ensure a reasonable return oninvestment.

Overall outlook

Our consistent focus is on growing each of our businesses faster than the market inwhich they operate. Our global specialty initiatives will supplement this objective as anadditional growth engine.

Although the US generics industry continues to face pricing pressure the industry hasstarted responding to these challenges by rationalising product portfolios anddiscontinuing non-remunerative products. These steps have been taken to ensure thatgenerics products are able to generate reasonable returns to manufacturers.

In US generics account for more than 80% of overall pharmaceutical volumes. In WesternEurope generics account for a significant portion of volumes as well. In Japan thegovernment has been encouraging higher generics penetration to bring down healthcarecosts. All emerging markets rely on branded generics and/or pure generics to service theirhealthcare needs given the lower purchasing power of their population. Hence genericswill continue to be an integral part of the solution to control global healthcare costsand has an important role to play in overall healthcare management.

Sun Pharma continues to invest in the generics business with a focus on developingdifferentiated complex generics and building a product pipeline across markets. Our strongpositioning in the global generics space will ensure that we remain an important player inthe generics industry.

We are gradually ramping up our global specialty business. One of key ailments that weare targeting is psoriasis. As per a EvaluatePharma report the size of the US psoriasismarket was estimated at ~US$ 10 Billion in 2018 and is expected to grow at 9% CAGR till2024. The report also estimates the global market for psoriasis at ~US$ 15 Billion in2018 which is likely to grow at 9% CAGR to US$ 24.6 Billion by 2024.

We have started commercialising ILUMYA™ useful for treating moderate-to-severeplaque psoriasis in various markets globally. It was launched in the US in October 2018and in Australia in December 2018. Our partner in Europe has commenced a phased launch ofthe product starting with Germany under the ILUMETRI™ brand name.

The product has received a good response from doctors in these markets. We continue toevaluate other potential markets for commercialising ILUMYA™.

We recently announced long-term clinical insights for ILUMYA™ at the 2019 AmericanAcademy of Dermatology conference. The data presented showed sustained skin clearance insome patients living with moderate-to-severe plaque psoriasis after three years of ongoingtreatment with ILUMYA™. The product was also well tolerated with low rates of adverseevents. We believe that these positive data points will enable the product to do well inthe large US$ 15 Billion global psoriasis market.

Our initiatives in the specialty ophthalmology segment are also gaining momentum. Ourdry eye specialty product CEQUATM is expected to be commercialised in the USin FY20. We have recently launched XELPROS™ (latanoprost ophthalmic emulsion) 0.005%in the US for the reduction of elevated intraocular pressure in patients with open-angleglaucoma or ocular hypertension.

Sun Pharma will continue to invest in branding and promotion of its various specialtyproducts. R&D investments for funding clinical trials of some of the specialtyproducts are also likely to continue in future.

For FY20 we expect our consolidated revenues to grow by low-to-mid teens whileR&D investments are estimated at ~8-9% of sales.

Our talented team of employees will be the key driver of all the above initiatives. Weare grateful to our Board of Directors for their guidance and support.

We are thankful for your support as a shareholder and we hope that you will continue torepose your confidence in us in future as well.

Warm regards

Dilip Shanghvi

Managing Director.


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