You are here » Home » Companies » Company Overview » Sun Pharmaceuticals Industries Ltd

Sun Pharmaceuticals Industries Ltd.

BSE: 524715 Sector: Health care
BSE 15:30 | 19 May 884.20 -15.20






NSE 15:19 | 19 May 884.20 -14.95






OPEN 883.00
VOLUME 64585
52-Week high 966.90
52-Week low 652.75
P/E 121.62
Mkt Cap.(Rs cr) 212,146
Buy Price 884.20
Buy Qty 29.00
Sell Price 888.00
Sell Qty 1.00
OPEN 883.00
CLOSE 899.40
VOLUME 64585
52-Week high 966.90
52-Week low 652.75
P/E 121.62
Mkt Cap.(Rs cr) 212,146
Buy Price 884.20
Buy Qty 29.00
Sell Price 888.00
Sell Qty 1.00

Sun Pharmaceuticals Industries Ltd. (SUNPHARMA) - Chairman Speech

Company chairman speech

Managing Directors Message

Dear Shareholders

Health first - that is the underlying message that the COVID-19 pandemic hasreasserted. The pandemic is a health as well as an economic crisis and hence the role ofthe pharmaceutical industry has become very critical. The pandemic has shaken the globaleconomy but has given the world an opportunity to correct decades of under investment inhealthcare.

While the pharmaceutical industry has taken significant strides in developingcutting-edge products in immunology biologics gene and cell therapy etc. it hasbarring certain exceptions neglected developing new innovative products in theanti-infective segments.

A growing incidence of chronic ailments like diabetes cardiovascular cancer etc.coupled with better pricing for products in these segments has resulted in very few newproducts being developed for infectious diseases. Over the past few decadesanti-infectives have become less attractive as potential areas for R&D due torelatively inferior pricing for such products compared to chronic products. Globalinnovator companies have reorganised their R&D pipelines to focus more on developinghigh-end chronic products. The global manufacturing infrastructure for anti-infectives hasfollowed this trend resulting in very few new capacities being set up for such products.The COVID-19 global pandemic may force both the industry and governments to revisit theimportance of focusing on infectious disease research.

Over the past many years governments across the world have given more importance tocontrolling healthcare costs to balance their overall budgets. The COVID-19 pandemic andthe economic costs that it has extracted may force governments to revisit thispresumption and try to strike a balance between providing adequate healthcare and theability to fund it.

While the pandemic obviously highlighted the importance of having an optimum healthcareinfrastructure it has also ignited a fresh debate on globalisation versus localisation.Supply chain network strategy is evolving as the pandemic has also highlighted the risksassociated with vendor and/or location concentration. There is a higher sense of urgencynow to achieve a pragmatic balance between outsourcing and self-sufficiency. Achievinghigher resilience for supply chain is likely to prompt companies to evaluatediversification of their vendor base. However in case of the pharmaceutical industry newvendor identification and qualification will be a time-consuming process.

There is also a gradual realisation that the COVID-19 virus is here to stay and thatall of us will have to learn to coexist with the virus till an effective treatment orvaccine becomes available. The industry is trying to develop a potential vaccine at afrantic pace while simultaneously putting in efforts to test existing drugs which canpotentially aid COVID-19 treatment.

There will be far-reaching changes in the way in which organisations are likely tooperate going forward.

Consumer behaviour and consumption patterns are also likely to change due to the globalpandemic. Social distancing and maintaining individual hygiene (like using masks and handsanitisers) have become imperative. Work-from-home (WFH) option has been exercised by mostorganisations for certain functions and there is a likelihood that it will continue forsome more time till the viral infection comes under control. There is a possibility thatWFH may become the new-normal for certain categories of corporate work force even afterCOVID-19 comes under control.

COVID-19 risk response

In these critical and uncertain times Sun Pharma has responded quickly and efficientlyto meet the challenges at hand. We promptly evolved a COVID-19 Risk Management Plan andformed multiple COVID-19 Risk Response Teams under the guidance of the senior managementto tackle the challenges resulting from the global pandemic.

Sun Pharma ensured adequate supplies of medicines to its customers across the worlddespite the supply chain disruptions and the lockdown restrictions in various countries.In a situation where there were multiple disruptions in manufacturing because of variouschallenges in terms of availability of intermediates availability of packaging materialetc. we have ensured uninterrupted supply of our products across markets. Sun Pharma hasalso supplied some of the medicines used for treating COVID-19 symptoms.

There is now a higher focus on automation digitalisation as well as increaseddependence on analytical tools for decision making. We are leveraging IT technology toolsto ensure business continuity as well as to facilitate WFH for many functions in theorganisation. Changes at manufacturing facilities have been made to ensure productivity aswell adherence to all safety and hygiene protocols.

We are also evaluating the potential of some existing products which can be useful inCOVID-19 treatment. These include Nafamostat Mesilate and the phytopharmaceutical AQCH.Both these products are currently undergoing Phase-2 trials in India.

As part of our corporate social responsibility we donated certain medicines useful inmanaging COVID-19 symptoms and hand sanitisers worth about 250 Million to support theIndian governments COVID-19 pandemic response.

Sun Pharma has also arranged personal protective equipment (PPE) kits disinfectantsgloves etc. to help fight the pandemic.

FY20 highlights

We continued our growth trajectory in FY20 with our overall revenues growing by about13% to 323 Billion.

Key growth drivers include India our global specialty business coupled with growth inthe rest of the world and API business.

Operational performance

For FY20 India formulation sales were at 97 Billion accounting for about 30% ofoverall revenues. Adjusted for one-offs of last year the India business has recorded aY-o-Y growth of 15%. Our India business has done well and we have started witnessing anincrease in our market share. Our leading presence in chronic segments coupled with ourstrong brand equity with doctors is helping us increase our market share in an intenselycompetitive market. We have also initiated an expansion of sales force for the Indiabusiness in order to expand our geographical footprint in India and to ensure that all ourbrands get the attention they deserve.

Revenues in the US remained almost flat at 105 Billion and accounted for approximately33% of our consolidated revenues for FY20. While we witnessed a ramp-up in sales of ourspecialty products the generics business continued to face price erosion driven bycompetitive intensity amongst manufacturers buying consortium pressures and a higher paceof generic approvals from the USFDA. Our subsidiary Taro recorded a 4% decline inoverall revenues to US$645 Million for the year.

We grew by 3% in emerging markets for the year. We are witnessing a reduction in tenderrevenues in our South Africa business. Excluding the impact of the tender sales we haverecorded a low double-digit growth year-on-year for our emerging market portfolio. Thedepreciation of some emerging market currencies has also reduced our reported growthdespite good underlying growth in local currency.

Our sales in the rest of world (RoW) markets grew by 31% for the year driven byincreased sales in some key Western European markets and the full year consolidation ofthe Pola Pharma acquisition in Japan.

Research & Development (R&D)

R&D is imperative for any pharmaceutical Company's future. Our focus is to continueinvesting in R&D to develop differentiated generics and innovative specialty products.Our global generic business requires a constant flow of new products and hence R&Dcapabilities to develop such products and meet the individual requirements of each marketare very important. At Sun Pharma we have multiple R&D centres and a strong R&Dteam to cater to these requirements.

R&D is also absolutely vital for strengthening our global specialty pipeline. It isa key determinant of the future growth and profitability of the specialty initiative. Weexpect to continue to invest in specialty R&D in the coming years as we progressfurther in building the specialty business.

Our R&D investments for the year were approximately ^20 Billion. We continue to bedisciplined in identifying future R&D projects for the US generics market and thefocus is on developing differentiated generics. Investments for developing the long-termspecialty pipeline are expected to continue.

Progress on specialty initiatives

As we gain traction in the specialty business it is becoming an additional growthengine for us. Our global specialty revenues for FY20 were about US$430 Million andaccounted for approximately 9% of our consolidated revenues.

We undertook multiple initiatives during the year as part of our efforts to build thespecialty business. These include:

1. New specialty product launches in the US

2. Targeting new markets like Japan and China for our specialty products

3. Evaluating new indications for ILUMYA

4. Reiteration of ILUMYAS potential through longterm clinical data

5. Enhancing the specialty R&D pipeline by adding preclinical candidates

New specialty launches

During the year we launched four specialty products in the US market viz. CEQUAABSORICA LD EZALLOR SPRINKLE and DRIZALMA SPRINKLE.

a) CEQUA: In October 2019 Sun Pharma commercialised CEQUA (cyclosporine ophthalmicsolution) 0.09% in the US. It is indicated for increasing tear production

in patients with keratoconjunctivitis sicca (dry eye) an inflammatory disease thataffects more than 16 Million people in the US. CEQUA is the first and only USFDA-approvedcyclosporine treatment delivered with nanomicellar (NCELL™) technology which helpsto improve the bioavailability and physicochemical stability of cyclosporine resulting inimproved ocular tissue penetration. CEQUAs launch significantly enhances Sun Pharmasspecialty ophthalmology portfolio in the US.

b) ABSORICA LD: In February 2020 Sun Pharma launched ABSORICA LD™ (isotretinoin)capsules in the US for the management of severe recalcitrant nodular acne in patients 12years of age and older. ABSORICA LD is the only isotretinoin formulation to feature SunPharmas micronisation technology which utilises micronised particles to optimiseabsorption at a 20% lower dose and can be taken with or without food.

c) EZALLOR SPRINKLE: In July 2019 Sun Pharma launched EZALLOR SPRINKLE™(rosuvastatin) capsules in the US for the treatment of three types of elevated lipiddisorders in people who have difficulty swallowing a problem that is estimated to affectapproximately 30-35% of long-term care patients.

d) DRIZALMA SPRINKLE: In October 2019 Sun Pharma launched DRIZALMA SPRINKLE™(duloxetine delayed-release capsules) in the US for oral use. It is

a serotonin and norepinephrine reuptake inhibitor (SNRI) designed for the treatment ofvarious neuro-psychiatric and pain disorders in patients who have difficulty swallowing.The availability of DRIZALMA SPRINKLE expands Sun Pharmas portfolio of innovativeformulation products designed for individuals with swallowing difficulties the risk ofwhich increases with age and exposure to age-related diseases and conditions includingdepression anxiety and pain disorders.

Targeting new markets for specialty products

During FY20 we took steps to target two important markets for our specialty productsviz. Japan and Greater China. In June 2019 we announced licensing agreements with asubsidiary of China Medical System Holdings Ltd. (CMS) for the development andcommercialisation of two of our specialty products - Tildrakizumab (for psoriasis andpsoriatic arthritis) and Cyclosporine A 0.09% (CsA) eye drops (for dry eye disease) forGreater China market. These licensing agreements will facilitate Sun Pharmas entry intothe Greater China market which is the second largest pharmaceutical market globally.

In August 2019 Sun Pharma announced the filing of an application in Japan formanufacturing and marketing authorisation of ILUMYA for moderate-to-severe psoriasis withthe Pharmaceuticals and Medical Devices Agency (PMDA) Japan. The PMDA has recentlyapproved this application and launch preparations have been initiated. This launch inJapan will be a step forward for Sun Pharma in expanding the global franchise for ILUMYA.

We have also recently entered into an exclusive licensing and distribution agreementwith Hikma Pharmaceuticals PLC for commercialisation of ILUMYA™ in the Middle Eastand North Africa (MENA) region.

Evaluating new indications for ILUMYA

In June 2019 we announced interim results from a Phase-2 study of ILUMYA in patientswith active psoriatic arthritis (PsA). The interim analysis revealed that over 71% ofpatients treated with ILUMYA experienced a 20% improvement in joint and skin symptoms(ACR20 response) meeting the primary endpoint of the study.

The interim results showed that ILUMYA was well tolerated with a low rate of serioustreatment-emergent adverse events. The Phase-2 study interim results also showed thatacross all patients receiving ILUMYA 75.3% experienced a 20% improvement in symptoms ofPsA (ACR20 response) at week 24 compared to 50.6% of patients on placebo.

The findings were similar in patients receiving 100 mg or 200 mg of ILUMYA on aquarterly dosing schedule. For some patients on 100 mg ILUMYA results were seen as earlyas 8 weeks. Furthermore an average of 47.1% of all patients receiving ILUMYA achieved anACR50 response with some results seen as early as 12 weeks compared to 24.1% of patientson placebo.

Given the encouraging Phase-2 study interim results Sun Pharma is in the process ofinitiating the Phase-3 trials for PsA. ILUMYA is already approved in the US for thetreatment of adults with moderate-to-severe plaque psoriasis who are candidates forsystemic therapy or phototherapy and is being investigated for PsA which affects up to42% of people with plaque psoriasis.

Reiteration of ILUMYAS potential through long-term clinical data

In October 2019 Sun Pharma presented long-term follow-up data from ILUMYA Phase-3reSURFACE 1 and resurface 2 trials. The data showed that the significant response ratesseen in the initial 52 and 64 weeks respectively were maintained over four years forpeople with moderate-to-severe plaque psoriasis with more than half the participantsachieving at least 90% skin clearance [Psoriasis Area Sensitivity Index (PASI) 90] with nonew safety concerns recorded.

Additional study analyses showed that the 75-100% skin clearance achieved with ILUMYAtreatment over three years was sustained equally in people with and without metabolicsyndrome a common condition in people with psoriasis. This positive data reiterates thepotential of ILUMYA and also indicates that the product provides a sustained responseagainst moderate-to-severe plaque psoriasis thus giving long-term benefit to the patient.

Enhancing the specialty R&D pipeline

Developing/adding new innovative specialty products is imperative to ensure a strongR&D pipeline. We have taken multiple steps to strengthen the specialty pipeline.

In August 2019 Sun Pharma entered into a global licensing agreement with the CSIRIndian Institute of Chemical Technology Hyderabad (CSIR-IICT) for patents related tocertain compounds with potential therapeutic activity across multiple indications in SunPharmas specialty focus areas. Under the terms of the license agreement Sun Pharma getsexclusive global license for the said patents and any other future patents covered in theagreement.

This collaboration for developing new drugs is part of Sun Pharmas broader strategy forenhancing its global specialty pipeline. This agreement will facilitate the addition ofpre-clinical candidates to Sun Pharmas global specialty pipeline. A successful clinicaldevelopment of these potential compounds may enable Sun Pharma to commercialisepharmaceutical products for various therapeutic indications over the long term.

We recently presented pre-clinical data for GL0034 a long-acting GLP-1R (Glucagon-LikePeptide-1 Receptor) agonist at the American Diabetes Association Virtual 80th ScientificSessions. GLP-1R agonists are used to treat patients with type 2 diabetes.

The data demonstrated significant outcomes on various diabetic parameters evaluatedviz. glucose reduction decrease in HbA1c (an important marker for clinical efficacy)augmented insulin secretion lowering of glucagon level and a marked and meaningfulreduction in triglyceride levels. All these outcomes with GL0034 were found to be higheror significant to the currently marketed once a week GLP-1R agonists compared in thestudy. GL0034 also induced a larger body weight reduction 1.9x and 3.8x times higher thanthe two different standard once a week GLP-1R agonist drugs compared in the study withsimilar food consumption. We look forward to validating this data in human clinical trialswith the Phase-1 trials likely to commence by Q3FY21.

In May 2020 Sun Pharma in-licensed SCD-044 a new chemical entity targeted as apotential oral treatment for atopic dermatitis psoriasis and other auto-immune disorders.SCD-044 is entering Phase-2 clinical trials.

CGMP compliance

With global CGMP standards undergoing constant upgradation over the past many yearsthe pharmaceutical industry needs to be constantly on its toes with an unwavering focus on24x7 compliance which in turn raises compliance costs. Adherence to these qualitystandards and ensuring that each manufacturing facility remains compliant has become a keypriority for pharmaceutical companies worldwide.

During the year many of our facilities underwent successful audits by multipleregulatory agencies including the USFDA. Our Halol facility was inspected by the USFDA inDecember 2019 which resulted in 8 deviations. The facility was subsequently classified as"Official Action Indicated (OAI)" which implies that all new approvals for theUS market from this facility will be put on hold till it is cleared by the USFDA. We havealready initiated the corrective actions required to get the facility back intocompliance.

Focus on improving productivity

We are continuing with our efforts to reduce expenses to achieve an optimum coststructure relevant to todays business and market realities. These efforts are beingimplemented in multiple areas of the business with greater involvement of people in orderto make the Company more efficient. Further enhancement of manufacturing efficienciesoptimising manufacturing footprint rationalising generics R&D investments reducingfixed costs and interest cost are some of the areas targeted for efficiency improvement.

Overall outlook

We will continue to focus on growing each of our businesses faster than the market inwhich we operate. R&D investments in developing a differentiated generic pipeline aswell as in building our specialty pipeline will continue in the coming years.

Our strategy of developing the specialty business as an additional growth engine hasstarted delivering with a gradual ramp up in specialty revenues. We expect this momentumto continue over the next few years although the COVID-19 pandemic and lockdowns may throwup some uncertainties in the near-term. The specialty business is also helping us to moveup the pharmaceutical value chain and bring in more innovation to our business. We haveinvested significant resources over the past few years in building this business and arenow focusing on commercial execution to ensure that future cash flows justify thesesignificant investments.

Generics will continue to be an important part of the overall healthcare managementglobally. Focus on healthcare may increase in the post-COVID period and hence generics arelikely to retain their importance as an effective and economical health solution. SunPharmas strong positioning in the global generics industry and continued investments forthe future will ensure that it remains a prominent player in this space.

Despite our proactive COVID risk response initiative we do estimate some softening ofsales in the near term due to the lockdowns and economic slowdown across variouscountries although it is difficult to quantify the impact as of now. Our endeavour willbe to ensure that we are the least impacted.

Key focus areas for us will be:

1. Employee protection and keeping workplace COVID-19 free

2. Digital engagement with doctors and patients

3. Supply chain protection ensuring optimum utilisation of our factories and workingclosely with vendors to ensure continuity of supply

4. Enabling work from home for employees wherever and whenever it is necessary

5. Focus on cash collection and cash conservation in the business to ensure adequateliquidity

6. Continuing our focus on improving R&D productivity and throughput

7. Focus on cost optimisation and target higher efficiencies

8. Continue to invest in developing new technologies and innovative products

Our talented employees have done a remarkable job of ensuring business continuitydespite the multiple disruptions resulting from the COVID-19 pandemic and lockdowns. Allour teams including Supply Chain HR IT Finance Manufacturing have worked tirelesslyto:

1. Maintain adequate supply of our products in various markets

2. Enabling WFH for a large number of employees in a very short time

3. Ensuring overall productivity without compromising on safety protocols

We are also grateful to our Board of Directors for their guidance and support in theseuncertain times.

We are thankful for your support as a shareholder and we hope that you will continue torepose your confidence in us in future as well.

Warm regards

Dilip Shanghvi

Managing Director

Sun Pharmaceutical Industries Ltd.