Dilip Shanghvi: Creating Milestones All The Way
For pharma tycoon and founder of Sun Pharmaceutical Industries Dilip Shanghvi, it is all about identifying new and profitable growth drivers in a rapidly changing pharmaceutical landscape. “There are both opportunities and challenges,” says the first-generation entrepreneur, in the latest annual report of the company, addressing his shareholders.
Opportunities include an ageing population across the globe that automatically spruce up the requirement of modern medicines. However, rising healthcare costs, increasing competition, customer consolidation are a few challenges that pharmaceutical majors need to battle to move up in the value chain.
Shanghvi, a son of a wholesale drug businessman in Kolkata, founded Sun Pharmaceutical in 1983 with an initial capital of Rs 10,000. The idea was to make psychiatric drugs. Today, it is counted among the world’s leading speciality generics makers.
Ever since its inception, Sun Pharma has been making headlines for the acquisitions it has made – the most significant one being that of scandal-tainted rival Ranbaxy in April 2014 for $4 billion (about Rs 24,000 crore) through an all-stock merger deal. The merger was announced in March 2015 after prolonged delays due to investor complaints and an investigation by the Competition Commission of India.
From then to now, the company has entered its fourth year with the integration of Ranbaxy into Sun Pharma. “The synergy benefits from this integration are reflected in our financials in FY17 and we expect to build further on these synergy benefits in FY18,” says Shanghvi.
In 2016-17 financial year, Sun Pharma’s topline grew by 9 per cent to Rs 302 billion. In the US, which is a large contributor to its overall revenues, “we faced increased pricing pressure driven mainly by customer consolidation and higher competitive intensity,” says Shanghvi. The company also faced anticipated delays in product approvals at the Halol facility – it is an important one since it holds a key for Sun Pharma’s US formulation business.
According to industry estimates, Sun Pharma’s US formulations contributed 45 per cent revenue in 2017. From the Indian branded generics, its revenues stood at about 26 per cent. Emerging markets, on the other hand contributed lower revenue. During the same year, Sun Pharma’s subsidiary Taro recorded an 8 per cent decline in overall revenues for the year. This was mainly driven by a difficult pricing environment in the US, resulting from increased competitive intensity and buying consortium pressures.
However, from the India formulations business, the company recorded a steady 8 per cent growth, while its performance in emerging markets improved, resulting in 26 per cent growth in revenues. “This growth was broad-based across emerging markets and was driven by improvement in underlying business supported by stable currencies,” says Shanghvi.
The company bets big on R&D and going forward, Shanghvi says it is expected to drive the journey of moving up the pharma value chain. In the 2017 fiscal, Sun Pharma’s R&D investments stood at Rs 23 billion wherein it invested significantly in enhancing its product pipeline for the emerging markets and other non-US developed markets.
“We continued to build our specialty pipeline during the year and simultaneously investing in developing the requisite front-end for this business in the US. We expect this trend to continue in future as well,” says Shanghvi.
One of the significant milestones in the 2017 fiscal includes Sun Pharma’s entry in Japan. Besides, it also enhanced its presence in Russia. All in all, the company is undergoing a gradual transformation and “we need to cross many milestones in this transformation,” says Shanghvi.
