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Sun Pharmaceuticals Industries Ltd.

BSE: 524715 Sector: Health care
NSE: SUNPHARMA ISIN Code: INE044A01036
BSE LIVE 19:49 | 19 Oct 535.60 -4.75
(-0.88%)
OPEN

541.00

HIGH

543.65

LOW

532.00

NSE 19:49 | 19 Oct 535.75 -4.45
(-0.82%)
OPEN

540.20

HIGH

543.00

LOW

532.00

OPEN 541.00
PREVIOUS CLOSE 540.35
VOLUME 62070
52-Week high 759.00
52-Week low 433.15
P/E
Mkt Cap.(Rs cr) 128,507
Buy Price 0.00
Buy Qty 0.00
Sell Price 535.60
Sell Qty 152.00
OPEN 541.00
CLOSE 540.35
VOLUME 62070
52-Week high 759.00
52-Week low 433.15
P/E
Mkt Cap.(Rs cr) 128,507
Buy Price 0.00
Buy Qty 0.00
Sell Price 535.60
Sell Qty 152.00

Sun Pharmaceuticals Industries Ltd. (SUNPHARMA) - Chairman Speech

Company chairman speech

Dear Shareholders

The Global Pharmaceutical Market is expected to touch US$ 1.4 trillion by 2020compared to US$ 1.0 trillion in 2015 as per IMS. Demographics increased incidence ofchronic ailments ageing population increasing income levels and improved access tohealthcare will be the key drivers of pharmaceutical demand in the coming years. Howeverglobally rising health care costs continue to be a major concern for everyone frompatients to policymakers. Population growth ageing citizens and slower global economicgrowth are likely to pressurise global healthcare budgets. In such an environment genericdrugs are an essential part of any solution to sustaining the healthcare system and arethe key drivers of increasing patient access to modern medicines.

However the global healthcare industry is changing rapidly. Product differentiation isbecoming a key driver of success in an ever competitive and demanding industry. Businesseswill need to be more innovative as well highly cost competitive to ensure long-termsustainable value for shareholders. At the same time with increased expectations ofvarious regulators cGMP compliance is also becoming a key determinant of future success.This requires focused efforts and investments on the part of the industry to remain 24x7compliant with cGMP norms. Large companies like ours have the capabilities and resourcesto ensure that we are able to adhere to these norms.

Highlights of FY16

After many years of sustainable growth our business for FY16 witnessed muted growthand was in line with our annual guidance. We faced anticipated supply constraints anddelays in product approvals at the Halol facility driven by the cGMP complianceremediation efforts. This impacted our US revenues for the year. We expect to eventuallyresolve this in future. However this did not deter us from continuing to invest heavilyin building the specialty business in the US. These investments as of now do not havecommensurate revenue streams and hence they depress our profitability. Currentprofitability is after accounting for these investments. Our R&D efforts continue tobe directed towards building a strong and differentiated product pipeline. These R&Defforts include a pragmatic mix of initiatives directed towards generating short-termmedium-term and long-term cash flows.

Our subsidiary Taro has done well despite increased competition for some of itsproducts. Adverse currency movements in certain emerging markets coupled with a consciousdecision to reduce focus on certain non-remunerative businesses impacted our internationalrevenues outside the US. Hence our overall consolidated revenues were almost flat for theyear.

Enhancing presence in the specialty segment

We continue to allocate significant resources towards building the specialty businessin the US. The main objective behind this is our intent of building a business which cangenerate sustainable value for all our stakeholders. These are long-gestation projects andthere are many milestones yet to be crossed to achieve this objective. Our initiatives inthis segment cover the entire value-chain from in-licensing early-to-late stage clinicalcandidates as well as getting access to on-market patented products. Dermatology andOphthalmic are the key segments targeted through these initiatives besides a few othersegments. Today we are amongst the leading branded companies in the US dermatologysegment driven by innovative products like Absorica Kerastick and the Topicort range ofproducts.

During the year we invested heavily in the development of Tildrakizumab which we hadin-licensed from Merck in 2014. In May 2016 we announced positive results from thePhase-3 trials of Tildrakizumab to treat chronic plaque psoriasis. We expect to announcethe detailed results of these Phase-3 trials at an upcoming medical conference. Post thecompletion of these Phase-3 trials; we have commenced steps towards filing the BiologicsLicense Application (BLA) for this product with the US FDA.

During the year we proceeded further with steps towards establishing the requiredspecialty teams for the US market as well as commenced steps towards building thefront-end distribution network necessary for the specialty segment.

Ranbaxy Integration

The integration of Ranbaxy into Sun Pharma is on track. Post the Ranbaxy acquisition inFY15 our organisation size had nearly doubled mandating a significant integration effortto implement common values systems and processes across the merged entity. The synergybenefits from this integration have started reflecting in our financials in FY16; and weexpect to build further on these synergy benefits in FY17. We continue to target US$ 300million in synergy benefits from this acquisition by FY18 and are on track to achieve thissignificant milestone. The key objective of this merger is to accelerate growth and createopportunities for all stakeholders. The combined organisation will benefit fromsubstantial synergies that lie in our technologies combined pipeline and R&Dexpertise wider product portfolio and rationalisation of manufacturing footprint drivenby our larger talent pool.

Global cGMP Compliance

Adherence to the stringent cGMP requirements of global regulators is a non-compromisingobjective for us. Compliance to these standards has become a key determinant of futuresuccess for the pharmaceutical industry. Our Halol facility which was impacted by cGMPdeviations in FY15 underwent a very significant remediation effort in FY16. These effortsare likely to culminate in to a request for re-inspection which we are likely to put inwith the US FDA by June 2016. This remediation process has temporarily impacted oursupplies and product approvals from this facility which we expect to improve once theentire remediation process is completed and the facility gets recertified.

We are gradually progressing on the remediation process at the erstwhile Ranbaxyfacilities which were found to be non-compliant in the past. While significant efforts tomake these facilities compliant are on this will be a time-consuming process. We expectto complete the remediation steps in at least one of these facilities in FY17.

We continue to invest significant time and resources in ensuring that we remaincommitted to 24x7 cGMP compliance. Over the past year our cGMP capabilities have beenstrengthened significantly. Talent with long-standing global expertise has enhanced ourabilities in this pertinent area. We are also targeting appropriate technology-basedsolutions to facilitate cGMP compliance coupled with an increased focus on requisitemanpower training.

Transformation

It is obvious that to generate long-term sustainable value for shareholders businesseswill need to continuously evolve and transform themselves to build a strong foundation forfuture growth. The key is to improve the underlying fundamentals so that we can aim fordelivering much more from our current levels. At Sun Pharma we have embarked on atransformational journey to make Sun Pharma a Better Stronger and Faster Company.This should help us drive a stable and consistent growth in cash flows which is a keyobjective of our corporate philosophy.

Better

It is imperative and expected of us that as an organisation we consistently deliverBetter quality products. We must become Better by improving the quality of what we do ineach of our businesses and functions. Sustained efforts are being made for improvingmanufacturing and sales processes. Getting it right the first time is the key objectiveand it can make a difference between success and failure. For this care needs to be takento ensure that right from product development to each of our processes quality standardsand compliance principles are adhered to.

Stronger

Our customers expect us to deliver quality products at highly competitive prices. Toachieve this focus on becoming Stronger through productivity enhancement becomes a keydriver. Productivity improvement mandates "doing more with less" and reducingcosts and wastages. Cost leadership has been a critical determinant of our past successand will continue to do so in future as well. Sales productivity throughput and yieldwill be the key contributors to this overall productivity improvement.

Faster

A better and stronger organisation can do well only if it is Fast in responding tocustomer requirements. Time-to-market and minimum cycle times are extremely critical inour business. We have to ensure that increasing size does not limit our agility andflexibility. Our ability to make our products available on time consistently to ourcustomers determines our service standards to customers. A responsive organisationrequires seamless cross-functional collaboration across all the markets which we servicein order to serve the customer. This helps us in devising the most optimum response tobusiness opportunities.

Overall Outlook

The transformation to a Better Stronger and Faster company will involve crossingcritical milestones over the next few years. As we transition we have guided for ouroverall consolidated revenues to grow by 8-10% for FY17.

Persistently working for patients across the world we are targeting to increase theshare of complex generics and specialty products to our overall business in the comingyears. This objective will be driven by a combination of our own efforts coupled withrelevant inorganic initiatives as well as external partnerships. Our specialty strategycoupled with the benefits from the Ranbaxy merger and the targeted productivityimprovements should favourably impact our profitability in the long-term. Our capable andcommitted employees will be the key drivers of this profitability.

As a shareholder you have continuously supported our endeavours over the past manyyears. As always we are grateful to you for this confidence.

Warm regards

Dilip Shanghvi

Managing Director

Sun Pharmaceutical Industries Ltd.