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Strong business model…
We met the management of Cadila Healthcare (CHL) to get an insight
into their business model and growth plans. CHL is an integrated large
size pharmaceutical company with a strong foothold in domestic
formulations and global generics. It also has a presence in APIs,
consumer healthcare, CRAMS, animal healthcare and biologics. CHL is
the first Indian company to manufacture vaccine for swine flu. Global
pharma major Abbott signed an agreement with the company to market
24 products of CHL in 15 high growth emerging markets. It has recently
commissioned an API manufacturing facility under the Nycomed JV. In
the last four years, the company did five acquisition outside India and
two in India.
Business model
Domestic market
CHL is the fifth-largest player in the Indian formulation market with a
market share of 3.7% as per a recent ORG IMS report. Around 40% of
total sales come from the domestic market. It has a strong presence in
therapeutic segments such as cardiovascular (CVS), gastro intestinal (GI),
female healthcare (FHC), anti-infective (AI), respiratory and pain
management in the domestic market. Total 16 of its brands are from the
top 300 brands list.
CHL is aggressively expanding its product portfolio with average launches
of 50 products (including line extensions) per year. The company has inlicensing
agreements with MNCs like Bayer Schering Pharma, Boehringer
Ingelheim, Nycomed, Baxter and Genzyme Inc. To further increase its
market share in the cardiology and respiratory segments, it has recently
added ~400 people taking the total field force count to more than 4400.
CHL has a small presence in the vaccines and biosimilars business. It
market two vaccines i.e. anti-rabies vaccine and Vaxiflu-S Vaccine in the
domestic market. Till date, it has launched two biosimilars. Sales from
biosimilars account for 3% of total domestic market sales. It is developing
a strong pipeline of 15 biosimilars and two novel products.
International Markets
CHL operates in regulated markets like US, EU, Japan and semi-regulated
markets such as Latin America, Asia Pacific, Africa and Middle East
regions. Nearly ~44% of sales come from international operations.
The company entered into the US market in FY05. Around 18% of the
total sales come from this market. Till date, it has filed 115 ANDAs with
the USFDA, received approvals for 58 products and launched 35
products. Of the launched 35 products, it enjoys more than 20% market
share for 14 products. It is planning to launch eight to 10 products every
year.
In EU, CHL operates in France and Spain. Sales from both markets
account for nearly 8% of total sales. Till date, it has launched 90
molecules in the France market and 30 in the Spain market. It is planning
to increase its presence in both markets by increasing product launches.
CHL operates in the Japanese market through its subsidiary Nippon
Universal Pharma. Till date, it has launched 24 products and all products
were in-licensed. Currently, it is building up a product pipeline and
expects to launch in-built products in the next fiscal. It has a field force of
30 in the Japanese market.
In the Brazilian market, CHL markets both branded generics and generic
generics. It entered the generic market by setting up a wholly-owned
subsidiary Zydus Healthcare in FY06. Later, in FY08, it acquired Nikkho
and forayed into the branded generics market. Till date, 60 dossiers were
filed in both the generic and branded space from India of which 20 got
approved and 14 were launched. The sales from Brazilian markets
currently accounts for 5% of total sales. The company is planning to
increase the product portfolio in both the branded and generic markets
with eight to 10 launches every year.
CHL operates in more than 20 semi-regulated and emerging markets of
Asia Pacific, Africa and Middle East regions. It is currently focusing on
South Africa, Taiwan, Philippines, Uganda, Sudan, Sri Lanka and
Myanmar markets. It entered the South Africa market in the last fiscal by
acquiring Simayla Pharmaceuticals.
Consumer business
CHL is a leading player in the niche Indian consumer wellness market with
three strong brands, namely, Sugar Free, EverYuth and Nutralite through
its subsidiary Zydus Wellness. CHL holds 72% of its stake in Zydus
Wellness. The management plans to expand the consumer business by
launching new line extensions in existing brands and venturing into new
brands.
JVs
CHL has tied up with two MNC players i.e. Nycomed and Hospira and one
Indian biotech firm Bharat Serums and Vaccines to supply intermediates,
API and formulations.
Under Zydus Nycomed JV (50:50), so far the company was supplying
intermediates for anti-ulcerent drug Pantoprazole. As the patent for
Pantoprazole is set expire in the 2011, CHL has extended the supply
agreement with Nycomed to supply 14 APIs of which eight will be
supplied by JV and four will be supplied by CHL. It has recently
commenced its API manufacturing facility under this JV.
Zydus Hospira JV is a 50:50 joint venture between CHL and Hospira. This
JV plans to manufacture six oncology products for both EU and US
markets. Currently it is supplying three products to EU and one product to
US market.
Alliance
Global pharma major Abbott signed an agreement with the company to
market 24 products of CHL in 15 high growth emerging markets. CHL
holds an option to add 40 more products.
R&D
CHL is developing 12 new molecules (NMEs), of which ZYH1 and ZYI1 are
in Phase III and Phase II clinical trails. It spends nearly ~6-7% of sales on
total R&D expenditure.
View
Cadila Healthcare is one of the few pharma companies with a diversified
business model. The topline has grown at a CAGR of ~26% over FY06-
FY10 driven by both organic and inorganic growth. The management is
aiming for sales to touch US$1 billion in the current fiscal and US$3 billion
by FY16. We expect the company to continue the growth momentum on
account of a strong domestic presence and growing tractions from
regulated and semi-regulated markets.
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