We're looking for buyouts in the US: Pankaj R Patel

Interview with Chairman & MD, Cadila Healthcare

Ahmedabad-based pharma major Cadila Healthcare, which covered a long journey from being a Rs 250-crore company in 1995 to the Rs 9,800-crore behemoth it is today, feels the road ahead lies in biosimilars. The company's chairman and managing director Pankaj R Patel tells Sohini Das how he expects the turnover from biosimilars to grow to 20 per cent of its revenues in the long term. Edited excerpts:

You’re planning to raise up to Rs 18,500 crore through issuance of shares and other securities. Are you eyeing any acquisitions in the near term?

We have no plan at this moment to raise the money, but it is an enabling provision. If you are acquiring anything, you might need to raise some money. Once you zero in on any target, it is too late to raise the funds then. Deals can happen in one month and some deals can take years. You never know how soon or how fast can the deal materialise.

You already have made a couple of acquisitions this year. What kind of segments are you eyeing now?

We did an acquisition of the animal health business of Zoetis, making a strong position in the animal health business in India for Zydus. With this acquisition, we became one of the top companies in the sector in India. It’s more strategic from the size perspective, and we did not have a manufacturing asset in the animal health business. We now also have the manufacturing capability and that would help us increase our exports going forward. That's the whole rationale behind this acquisition, and we believe business can grow 10-15 per cent going forward.

We acquired some brands from Albert David. That's a brand acquisition strengthening our position in the gastro segment, filling the gaps in the therapeutic categories. That is our focus in India - acquiring brands which can fill in the gaps in our basket. Other than that, we are actively looking at opportunities in the US market. We are looking at both companies with presence in the US generics market as well as companies with presence in the US speciality market. There’s nothing in pipeline at the moment, but we are looking at India and the US. For India, we would look at smaller acquisitions, maybe some brand acquisitions. For the US, we would look at larger acquisitions.

The US contributes around 40 per cent of your revenues. Given the regulatory hurdles and uncertainties, will you look at de-risking your overall business by bringing down the US share?

We believe the US is an important market for every pharmaceutical company. We don’t see our share should come down; rather, we would want to increase our share going forward. Clearly, we are not looking at the US market share to come down; it will always remain a major market for us apart from India. From the de-risking point of view, we have a strategy in place which basically involves multiple geography plans. We have a facility now in the US and in India we have multiple facilities from where we can supply to the US. We have more than one facility to manufacture and supply to the US market, and that is how we look at it now.

Biosimilars are the sunshine segment in pharma now. You also have a huge pipeline ready. How do you see the share of biosimilars rising in your turnover?

We have 20 different programmes in biologics. We have seven products in the market and more are in the pipeline. Over the next three years, we want to bring another five to six products to the market. We also have started getting registrations outside India for biosimilars. Our export activities for biosimilars for emerging markets have started. We are also looking at the developed markets, and have initiated dialogues with the regulators about the process we need to follow to get product approvals in those markets. Biosimilars will become a significant part of our turnover in the coming years, as our exports grow. In the short term, it can go up to five or seven per cent of our turnover; in the long term, it can reach up to 20 per cent of our turnover.

The past few months have seen some uncertainties on the Indian regulatory environment, be it for fixed dose combinations or otherwise. What is your comment?

We’ll continue to focus on India and we plan to play our role in the Indian healthcare system. These challenges are there, and the real challenge is that of predictability. The challenge is not of a new NLEM (National List of Essential Medicines) or a new drug pricing order, but it is of predictability. If you know what is coming tomorrow, you can plan; but if you get surprises, then it is difficult for any business to plan. For any business to grow and become profitable, predictability in the environment plays a big role.