Cadila Healthcare turns focus on vaccines and biosimilars

Analysts expect the two segments to contribute 25% of domestic revenue in 2 years; vaccines contribute less than 1% of revenues at present, while biosimilars account for 4.5% of domestic revenues

After setting its house in order for the US business, Cadila Healthcare is now putting focus on new areas with growth opportunities, such as biosimilars and vaccines. The Ahmedabad-headquartered pharma major at present draws less than one per cent of its domestic revenue from vaccines and about 4.5 per cent of its domestic turnover from biosimilars – analysts expect these two segments to contribute around 25 per cent to the company's domestic revenue in two years from now.

The company's Moraiya plant near Ahmedabad got clearance from the US drug regulator last year. Cadila Healthcare has bagged 70 approvals from the US Food and Drug Administration (US FDA) since April 2017 and has a pipeline of 157 abbreviated new drug applications (ANDAs), including niche products. The US accounts for 40 per cent of its turnover, as against the domestic market’s 34 per cent share. Edelweiss Securities expects the US business to expand at 13 per compound annual growth rate (CAGR) through FY20 – from an estimated $870 million in FY18 to $1,100 million in FY20.

Ganesh Nayak, chief operating officer and executive director of Cadila Healthcare, has indicated in his recent interactions with analysts that biosimilars and vaccines would not only drive growth in the domestic market in the short term, but also be a focus area for emerging international markets and the US in the long run.

Biosmilars

The company has so far invested Rs 2.5 billion to Rs 3 billion on the Zydus Biologics facility, which is now shut for improving procedures and standards in line with FDA requirements. It faces its first FDA audit in June this year (for a non-biosimilar product). Cadila Healthcare, however, has shortlisted three molecules for the US market – an oncology product (market size of $3,925 million; so far no biosmilar has been approved; Cadila sells this molecule in India), arthritis molecule Adalimumab, and a breast cancer molecule.

The company has already launched nine biosimilars for the domestic market (Rs 146 billion revenue) and senior company official say that it plans to launch two molecules every year from now. It also has a presence in the emerging markets (around $100 million in revenues). But, now it is gearing up to target geographies like Mexico, Russia, Kazakhstan and Indonesia, where it is looking at partners for a few products.

Cadila Healthcare’s new managing director Sharvil Patel had earlier indicated to Business Standard in an interview that emerging markets would form the third pillar of the company’s growth after US and India. In fact, the emerging markets’ contribution to biosimilars is expected to be bigger than that of India, given the low penetration of biosimilars in these markets.

Vaccines 

Cadila Healthcare has four vaccine products in the domestic market – but, as a senior company official indicated, the company is now eyeing the high margin optional vaccines market in the country. In terms of volumes, the optional vaccines segment contributes only 20 per cent of India’s vaccine volumes and is pegged at Rs 19.5 billion (clocking a 6 per cent growth rate).

“The company will have a higher pricing power in this market, making the vaccines business more profitable,” said an official. Cadila Healthcare plans to double the field force for vaccines in India in 2018 (from the current 75) and reach 300 people in two years.

Samir Desai, senior vice-president and strategic business unit (SBU) head for vaccines at Cadila Healthcare, has recently indicated to analysts that the company is betting on the Unicef and Pan American Health Organisation (PAHO) tenders market. It is now trying to obtain the WHO pre-qualification and readying three to four products in its pipeline. The Gavi (vaccine alliance) and Unicef procurements from India have doubled in the past five years.

Edelweiss analyst Deepak Malik expects the contribution of vaccines to grow from the present Rs 200 million to an overall turnover to Rs 15 billion by FY25. “Many smaller players have managed to obtain the WHO pre-qualification and we do not see a significant challenge for Cadila Healthcare in complying with US FDA standards," he added.