These are testing times for the global drug industry. In advanced markets prices areunder pressure from greater competition a rapidly consolidating group of buyers/ channelswith more bargaining heft and governments keen to cap spiralling healthcare costs.Regulators from these markets have also stepped up their scrutiny of manufacturing unitssupplying into their markets and drug inspectors are taking a tough stand on evenrelatively minor deviations.
As countries move towards regulatory harmonisation drug control administrations inemerging markets are raising the bar for approvals. A case in point is the Indiangovernment's attempt to take a sizeable number of fixed dose combinations off the marketciting irrationality; though not entirely successful it is a sign of things to come.
Drug pricing is a recurring theme across markets and product segments. Thengovernments across the world are on a drive to push local manufacturing and job creation.Success therefore also depends on being able to skilfully navigate myriad business andpolitical landscapes and invest judiciously.
Glenmark continued to deftly manoeuvre through these challenges and delivered stronggrowth in FY 16-17. Our consolidated revenues in the 12 months ended 31 March 2017 rosefrom 20.08% to Rs 91856.81 mn (USD 1371.62 mn). Our net profit for FY17 was Rs 9159.21mn (USD 136.77 mn).
During the year under review our India Formulation business recorded a stellarperformance growing at 9.22%. This is despite one of our largest products being broughtunder price control and the regulatory uncertainty around certain fixed dose combinations.
In the US our largest market our business grew by 52.90% benefitting significantlyfrom the increasing number of approvals. The standout launch during the year was that ofthe first and only generic of Merck's cholesterol drug ZETIA with 180-dayexclusivity in partnership with Endo International. Besides the launch of generic ZETIAthe base business also recorded strong growth. The US generics market continues to bechallenging with greater price erosion consolidation of the supply chain and increasingnumber of competitors.
The Europe business on a constant currency basis performed well. However in the UKour largest market in Europe business was impacted by the devaluation of the poundsterling. This adversely affected the Company's overall performance in this region.
In emerging markets while the Russia business rebounded strongly we stopped sellingin Venezuela from the third quarter of FY17. We also took a write-down on the cash that ispresently lying in our Venezuela subsidiary.
The Active Pharmaceutical
Ingredients division performed very well on account of new launches with exclusivityperiods and strong domestic sales.
In the year ahead we are confident of growing both revenues and profits with improvedperformance in the base business and new product launches in multiple markets.
Our confidence stems from a meticulously crafted strategic blueprint for the nextdecade. At its core this strategy diversifies risk and envisages the systematic unlockingof high-growth and profitable new revenue streams across the entirety of thepharmaceutical value chain. It has been devised with a view to delivering on goals in ariskier more uncertain world.
With this blueprint as our guide we are prepared to transition from being agenerics-driven organisation to one that has an optimal mix of generics specialty andresearch-driven innovative products. We will do this by remaining tightly focussed onthree key therapy areas: oncology respiratory and dermatology. In these threefast-growing therapies characterised by substantial gaps in treatment options thecombined force of our product development/ manufacturing skills and our marketingexpertise - built over decades and across geographies - will yield definitive results notjust for investors but also for patients in need.
The building blocks are already in place. Generics continues to be the engine ofgrowth. Our products are now available in nearly all major geographies. While India is ourprimary production base we have a manufacturing presence across four continents.
In emerging markets we have built a strong branded generics portfolio with a loyalprescriber base. In the US and western European markets where commoditisation of genericsis a real danger we have created a pipeline of complex niche and difficult-to-makegenerics such as cyotoxic injectables and respiratory inhalers through a combination ofinternal development and licensing to stave off competition and protect prices. Wecontinue to exploit first-to-file opportunities in the US for blockbusters such as genericZETIA launched in December 2016. We expect to file 20-25 ANDAs each yearover the next five years and launch between 10 and 20 products annually.
While remaining positive on the generics opportunity we also anticipated the so-callednew normal' in the global generics business and planned our investments indifferentiated and innovative products.
Our pipeline of specialty products to be rolled out over the next three to four yearsis expected to act as a defence against generics price erosion and increase incompetition and boost profitable growth. GSP 301 a novel fixed dose combination of twodrugs in a nasal spray format for seasonal allergic rhinitis is our first brandedspecialty product to clear Phase III the final phase of clinical trials. We will seekUSFDA approval for it in Calendar Year (CY) 18. Besides GSP 301 we are also excited aboutGBR 310 a biosimilar of the allergic asthma and Chronic Idiopathic Urticaria drug XOLAIR.This product is of special interest to us as it is indicated for disease conditions in twoof the three therapy areas that are of critical importance to the organisation i.e.respiratory and dermatology. GBR 310 has the potential to be the first biosimilar ofXOLAIR on market and a Phase I study has already been initiated. We expect tofile for marketing approval in CY 20.
Over a decade ago we began a novel R&D effort in the face of skepticism.
It is a matter of pride for us that those efforts continued in spite of reversals andrelatively limited financial resources are yielding results. Scientists at our biologicslaboratory in Neuchatel Switzerland have developed a proprietary cutting-edgetechnological platform called BEAT (Bispecific Engagement by Antibodies basedon the T-cell receptor). This platform which has been successfully developed bysurmounting substantial hurdles of scale-up and purification allows us to make a newrange of targeted therapy in cancer treatment.
These are bi-specific antibodies (bsAbs) that can work on not one but two targets inthe body implicated in cancer and are thus potentially more effective than availabletherapies.
Key among these is GBR 1302 a potential first-in-class treatment for HER2+ breast andgastric cancers that is currently in Phase I trials. In preclinical studies it showedfaster and more complete killing of tumor cells compared to existing first-and-second-linetreatments. GBR 1342 for mutliple myeloma and GBR 1372 for colorectal cancer are some ofthe other exciting bsAbs based on the BEAT platform that are being preparedfor clinical development.
Among monoclonal antibodies we have GBR 830 a potential best-in-class OX40 antagonistthat is currently in Phase II trials in the US and Canada for moderate-to-severe atopicdermatitis. It is also the first OX40 antagonist globally to successfully complete Phase Istudies. We are exploring the development of GBR 830 in other autoimmune diseases aswell.
The innovative R&D business has the ability to greatly boost our revenues andprofits while also paving the way for Glenmark to take its place in the global club ofpharma innovators.
Barring unforeseen circumstances we are well-positioned to deliver on our strategysuch that by 2025 specialty and innovative products will comprise 30% of our revenues.Over the last few years we have invested significantly in the business to mark thestep-wise transition from generics to an innovation-driven organisation. As we see itover the next three years generics will continue to fuel our growth. After that we expectthe unlocking of revenues from the specialty/innovation business. Thus the next few yearswill see consistent revenues and profitability without the need for inorganic growththrough acquisitions.
Growth will not come at the cost of profits. We anticipate steadily improving ourprofitability margin from 22% - 25% by 2025. Our R&D expenses will stay at roughly 11%- 12% of revenues.
None of this has happened overnight or even by accident. We have painstakingly builtthe skill sets required in various aspects of innovation over the last several years. Wehave consciously kept away from being a consolidator a route favoured by many in thepharma industry for its speed in acquiring scale to follow a slower and in our opinionmore sustainable approach of building internal expertise. As Glenmark continues todeliver strong growth organically we do not see any need to depart from that approach.
There is an area however where we do plan to do things differently from the past. Inthe licensing of our new molecules for further development we now possess the financialand scientific wherewithal to be equal stakeholders in the development process with ourpotential partners. We anticipate doing co-development deals as opposed to signing awayour development rights in exchange for upfront payments and milestones.
Having said that we will also license out drug candidates at a later stage ofdevelopment - after successful proof- of-concept studies in human subjects so as tomaximise asset value.
On the manufacturing front it is a matter of pride for us that we have no outstandingissues with the USFDA. Compliance continues to be a top priority for the organisation.
We are deeply aware that the challenging market conditions an evolving regulatorylandscape the high costs of R&D and the risks inherent to the business make this roadthat we have charted for ourselves a tough one. But we also believe that it is one worthtaking.
As we embark on this exciting journey into a new orbit I would like to express mysincere gratitude to you for continuing to place your trust in us and to seek yourcontinued support and guidance in future.
Chairman & MD