Mumbai: Indian pharmaceutical companies are on the cusp of a transformation from being generic drug makers to creating a pipeline of complex generics, speciality and innovative products through enhanced focus on research and development (R&D). Glenmark Pharmaceuticals Ltd’s growth strategy also revolves around making this transition. In fact, it is among the few Indian firms that started investing in new drug development way back in the year 2000. But unlike most of its peers that are continuously exploring opportunities for acquisitions to propel growth, Glenmark believes in growing organically by leveraging the strong product pipeline it has built over the years through indigenous research. In an interview, Glenn Saldanha, chairman and managing director of the Mumbai-based company, shares his vision of how he plans to grow the business in a challenging environment. Edited excerpts:
Glenmark has maintained that it wants to grow the business organically. Why so, especially when we are seeing consolidation in the pharmaceutical sector globally?
There are different approaches to building this business. Our approach is that we have a very good pipeline of products launching in the market over the next three to five years. So we feel comfortable that the underlining business will grow at about 15-20% CAGR (compound annual growth rate) on a five-year basis. We have always believed that the transformational step for Glenmark would be when we launch something innovative. So, we are right now putting our capital into research to drive the next levers of growth. Our peers, on the other hand, are looking at acquisitions either of companies or products. When you go out to acquire a product, you are competing with big firms like a Pfizer or a Merck. Why would someone give you the product when these players have much bigger marketing muscle and deeper resources? So, it is very hard to follow the in-licensing strategy for novel products. That’s the reason why we took the build-out route and we have been working on innovation for the last 16 years. Our goal is to do cutting-edge innovation and eventually out-license the product.
Do you plan to out-license all your innovative products or will you pursue development and commercialization for some drugs entirely on your own?
We are open to out-licensing our entire pipeline at this point of time. For the products which are in our core therapeutic areas of oncology, dermatology and respiratory, we are trying to look at joint development or trying to hold on to rights to certain markets, either exclusive or semi-exclusive rights, where we will build our own commercial front-end and use that to market these products. For products which are not in our core therapeutic areas, like pain for instance, we will out-license the product for worldwide rights and give the entire thing away to the partner. So, I think it’s a different deal structure that we are looking at for different opportunities.
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The company expects complex generics, speciality and innovative drugs to drive growth in the next decade. What are the risks and challenges in achieving these goals?
In the next four-five years, we have good visibility for our generic business, that it will grow at 15-20%, but we feel that the generic business will slow down thereafter and we will replace it with our innovative and speciality products. The path to innovation is much riskier when compared to a pure generic business but we will keep our R&D spend at 11% of sales, net of out-licensing income. That will enable us to strengthen our operational cash flow and balance sheet. We have chosen this path of innovation which is difficult but we have built our expertise and capabilities in this area. The company currently has seven novel drugs and six speciality drugs under development and these products are expected to contribute 30% to total sales by 2025.
What are the plans for in-licensing of drugs?
We don’t do in-licensing of novel products. Our in-licensing is only on the generic side. The in-licensing happens for products for which we do not have capability internally. We have 15 in-licensing deals either signed or in advanced stage discussions, which have a total addressable market size of $12 billion.
Generic players are facing pricing pressure in the US. In such an environment, what will be the growth drivers for Glenmark until the speciality and innovative products are launched in the US?
We file about 20 abbreviated new drug applications (ANDAs) a year in the US. We have some pretty exciting products which will get approved between FY17 and FY19. In the short run we have a generic of Zetia, which will cover us for the next six months. We expect to garner $200 million-$250 million from sales of the Zetia generic during the exclusivity period. I think the pipeline looks very strong to tide over the near term.
What is your strategy for emerging markets? Are you looking to expand manufacturing capabilities in these markets?
Emerging markets will continue to account for about 20% of sales and won’t grow beyond that in the next few years because the US contribution is growing. On the manufacturing side, there is a possibility that at some point we may put up a facility in Russia. We still don’t know. It could be organic or it could be a small acquisition of a facility. We have a sizable presence there and so if I look at emerging markets, the only possibility is Russia.