Davos WEF 2018: Sun Pharma Chairman Says U.S. FDA Scrutiny Will Lead To Better Products
Sun Pharma expects FY19 to be a better year than the last two years.
The Indian pharmaceutical industry is upgrading its operations in response to tighter regulations and increased scrutiny from drug regulators. And that will lead to better, more competitive products, according to Sun Pharmaceutical Industries Ltd. Chairman Israel Makov.
“Yes, it is a pressure, but it is a positive pressure. At the end of it, industry will produce better and more competitive products,” he told BloombergQuint’s Menaka Doshi on the sidelines of the World Economic Forum at Davos, Switzerland.
Despite the heightened regulatory scrutiny – the company is awaiting re-inspection at two of its plants in Halol and Kharkhadi – and the pricing pressure in the U.S., Makov expects the financial year 2018-19 to be better than the last two. Sun Pharma is investing in specialty products and by 2020, that will form a significant part of the business, he added.
Here are edited excerpts from the conversation.
How do you diagnose the various ills that the generic industry faces?
The generic industry is an important and significant component of the healthcare industry. Therefore, it is vital part of the healthcare industry and it is going to stay forever. What happened to Teva, has happened to Teva, not to the entire industry.
There are pressures in the market right now like any other business cycle, there are ups and downs sometimes. There is pressures especially in the U.S. market, like pressure on prices which comes from various sources. Part of it is regulation, part of them is that the generic market is growing at a slower pace. So, there is consolidation of the buyers and players. I am sure eventually it will end. I don’t know when. But I am sure the industry will come out of it stronger.
Do you read that as more space for Indian companies to try and take some of the market share that Teva has held globally? Will it be an all-out negative impact for the industry?
I don’t think it is an all-out negative impact on the industry. It is a negative impact on Teva only. Teva is trying to become a more efficient company. But industry is growing, and the Indian industries are also growing. I don’t see new comers in the generic industry. It is a challenge to be a new entrant in the industry. I don’t see any new entrants. Because of the pressure, I see a possible consolidation process. And Indian companies will take a larger share, not only in the U.S. but also in other markets.
Do you also mean consolidation amongst emerging market players, Indian players or consolidation in pharmaceuticals in the west?
It’s also emerging markets and the west. I am not limiting it to just the west or emerging markets.
Did you see India playing a role in that consolidation?
India is already playing a role in that consolidation. If you see outside India, they buy companies. Right now when you have the downturn of the business cycle, it’s opened new opportunities for companies to do the M&A. And each company has its own strategy. You can’t generalise it.
What are the factors which will help return us to better pricing in markets like U.S.?
There is pressure on prices in the generics business. But the generics business is an important part of the healthcare industry and there is a limit for price pressure. Because when you exercise more price pressure then you have supply problems. And when you have supply problems, the healthcare industry suffers. So, I see this as a temporary cycle and not a long-term cycle.
Do you expect continued USFDA type of pressures on Indian companies and continued impact on their profitability as more plants get import alerts?
Indian industry is upgrading their operations. As a response to requests from the FDA and tightened regulation and inspection by the FDA, I think it is a positive process. It is a pressure, but at the end of it, as an industry we will produce better, more competitive products.
We have seen several plants come in for similar scrutiny time and again. So if companies are upgrading, you would see a reduction in FDA scrutiny, an improvement in standards. Do you see the upgrading happening?
I cannot talk about the industry. I can talk about Sun Pharma. And in Sun Pharma, we are upgrading our operations. We have done all the remediation in Halol and we are waiting for the FDA inspection.
Is you Karkhadi plant is still under import alert?
I cannot talk when the FDA will clear things. This is not the only plant. Sun is a global company. We have plants in India, U.S., Europe. You don’t hear about plants which have no problem.
The integration with Ranbaxy. How do you see that coming through? Are you through with all the pain points?
We are at the end of the process. I think we have achieved all that we have wanted in terms of synergies. What we declared we have achieved all of it in synergies. When we look back, it was a successful integration. Every integration especially a large-size acquisitions is always a challenge for every company. We have met the challenge very well.
Do you think FY18-19 will be a better year for Sun Pharma?
For Sun, I don’t give guidance. I am an optimistic guy. Sun is doing a lot in investing in specialty products, and we have quite significant activities surrounding developing and acquiring specialty product. In 2020, I believe, significant part of our business will be around specialty products. Sun is looking at the future and trying to meet all the challenges of the future. If I can say, somebody who comes from Israel and seen a number of companies in his life, Sun is a great company.
Do you think that this pursuit to specialty products will continue both in an organic and inorganic fashion?
Yes, mostly organically. We have expanded our R&D and we have acquired a fewer products.
Do you believe that we are dumping all the goods of globalisation now to look back and support local industry?
I think there is some negative vibe against globalisation right now. But you can’t go back on the transparency that digital industry gave us that everybody knows everything. Everything is global. I don’t think pharmaceutical business is going to return to be local. I think it will be global and increase the globalisation.
Watch the full interview here.