SUN PHARMACEUTICALS INDUSTRIES LIMITED
ANNUAL REPORT 2009-2010
DIRECTOR'S REPORT
Your Directors take pleasure in presenting the Eighteenth Annual Report and
Audited Accounts for the year ended March 31, 2010.
Financial Results
(Rs. in million except dividend
per share and book value)
Year ended Year ended
March 31, March 31,
2010 2010
Total Income 26467 40437
Profit after tax 8987 12653
Dividend on Equity Shares 2848 2848
Corporate Dividend tax 473 484
Transfer to various Reserves 3000 4500
Amount of dividend per equity
share of Rs. 5/- each 13.75 13.75
Book value per equity share of Rs. 5/- each 276 249
Dividend:
Your Directors are pleased to recommend an equity dividend of Rs. 13.75 per
equity share of face value Rs. 5/- each (previous year Rs. 13.75 per equity
share of face value Rs. 5/- each) for the year ended March 31, 2010.
Management Discussion and Analysis:
The management discussion and analysis on the operations of the Company is
provided in a separate section and forms part of this report.
Human Resources:
A dedicated team of over 8000 multicultural employees have been pushing
boundaries of your organisation to maximize opportunities across our
corporate office, Company's various R&D Centres & 19 plants (including
associate companies) spread across three continents. The potential and
ability to deliver consistently is established by our remarkable team,
evident from our consistent growth. The Company recognises the importance
and contribution of our people. Performance orientation and ethics are high
priority areas. The supportive work environment and opportunities for
career advancement within the Company itself, helps retain talent. Your
Directors recognise the team's valuable contribution and places on record
their appreciation for Team Sun Pharma.
Information as per Section 217(2A) of the Companies Act, 1956, read with
the Companies (Particulars of Employees) Rules, 1975 as amended, is
available at the registered office of your Company. However, as per the
provisions of Section 219(1)(b)(iv) of the said Act, the Report and
Accounts are being sent to all shareholders of the Company and others
entitled thereto excluding the aforesaid information. Any shareholder
interested in obtaining a copy of this statement may write to the Company
Secretary/Compliance Officer at the Corporate Office or Registered Office
address of the Company.
Information on Conservation of Energy, Technology Absorption, Foreign
Exchange Earning and Outgo.
The additional information relating to energy conservation, technology
absorption, foreign exchange earning and outgo, pursuant to Section
217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of
Particulars in the Report of the Board of Directors) Rules, 1988, is given
in Annexure and forms part of this Report.
Corporate Governance:
Report on Corporate Governance and Certificate of the auditors of your
Company regarding compliance of the conditions of Corporate Governance as
stipulated in Clause 49 of the listing agreement with stock exchanges, are
enclosed.
Consolidated Accounts:
In accordance with the requirements of Accounting Standard AS-21 prescribed
by the Institute of Chartered Accountants of India, the Consolidated
Accounts of the Company and its subsidiaries is annexed to this Report.
Subsidiaries:
The Ministry of Corporate Affairs, Government of India, has granted
approval that the requirement to attach various documents in respect of
subsidiary companies, as set out in sub-section (1) of Section 212 of the
Companies Act, 1956, shall not apply to the Company. Accordingly, the
Balance Sheet, Profit and Loss Account and other documents of the
subsidiary companies are not being attached with the Balance Sheet of the
Company. Financial information of the subsidiary companies, as required by
the said order, is disclosed in the Annual Report. The Company will make
available the Annual Accounts of the subsidiary companies and the related
detailed information to any member of the Company and its subsidiaries who
may be interested in obtaining the same. The annual accounts of the
subsidiary companies will also be kept open for inspection by any investor
at the Registered Office & Corporate / Head Office of the Company and that
of the respective subsidiary companies. The Consolidated Financial
Statements presented by the Company include financial results of its
subsidiary companies.
Finance:
CRISIL continued to reaffirm its highest rating of 'AAA/ Stable' and 'P1+',
for your Company's Banking Facilities throughout the year enabling your
Company to avail facilities from banks at attractive rates. The Company
does not offer any Fixed Deposit scheme.
Corporate Social Responsibility:
Your organization continued to support activities in two areas-- health and
education. Other areas of support were disaster relief and civic utilities
around the plants and research centers, where assistance was provided on a
need basis.
Directors:
Shri Sudhir V. Valia, Shri Hasmukh S. Shah and Shri Ashwin S.Dani retire by
rotation and being eligible offer themselves for re-appointment.
Shri Subramanian Kalyanasundaram was appointed as an Additional Director,
and Chief Executive Officer & Whole-time Director of the Company for a
period of five years from April 1, 2010 to March 31, 2015, by the Board of
Directors by way of circular resolution passed on March 31, 2010, and holds
the office as a director up to the ensuing Annual General Meeting. The
Company has received requisite notice under Section 257 of the Companies
Act, 1956, from a member to propose his name for being appointed as a
Director of the Company.
Directors' Responsibility Statement:
Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956, with respect to Directors' Responsibility Statement, it is hereby
confirmed:-
(i) that in the preparation of the annual accounts for the financial year
ended March 31, 2010, the applicable accounting standards have been
followed along with proper explanation relating to material departures;
(ii) that the Directors have selected appropriate accounting policies and
applied them consistently and made judgements and estimates that were
reasonable and prudent so as to give a true and fair view of the state of
affairs of the Company at the end of the financial year and on the profit
of the Company for the year under review;
(iii) that the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities;
and,
(iv) that the Directors have prepared the annual accounts for the financial
year ended March 31, 2010 on a 'going concern' basis.
Auditors:
Your Company's auditors, M/s. Deloitte Haskins & Sells, Chartered
Accountants, Mumbai, retire at the conclusion of the forthcoming Annual
General Meeting. Your Company has received a letter from them to the effect
that their re-appointment, if made, will be in accordance with the
provisions of Section 224(1-B) of the Companies Act, 1956.
Acknowledgements:
Your Directors wish to thank all stakeholders and business partners, your
Company's bankers, financial institutions, medical profession and business
associates for their continued support and valuable co-operation. The
Directors also wish to express their gratitude to investors for the faith
that they continue to repose in the Company.
For and on behalf of the Board of Directors
Dilip S. Shanghvi
Chairman & Managing Director
June 14, 2010 Mumbai
Annexure (1) to Directors' Report 2009-10 2008-09
CONSERVATION OF ENERGY
A. Power and Fuel Consumption
1. Electricity (a) Purchased
Unit (in '000 KWH) 43,396 48,104
Total Amount (Rs. in Millions) 245.8 260.0
Rate (Rs./Unit) 5.7 5.4
(b) Own Generation through Diesel Generator
Units (in '000 KWH) 2,783 2,421
Units per Litre of Diesel Oil 3.0 3.2
Cost (Rs./Unit) 11.1 11.6
(c) Own Generation through Gas
Units (in '000 KWH) 24,852 13,059
Units per M3 of Gas 10.6 3.8
Cost (Rs./Unit) 4.2 5.1
2. Furnace Oil:
Quantity (in '000 Litres) 2,591 5,223
Total Amount (Rs. in Millions) 62.7 130.6
Average Rate 24.2 25.0
3. Gas (for Steam):
Gas Units (in '000 M3) 7,334 3,661
Total Amount (Rs. in Millions) 68.2 38.6
Average Rate (Rs./Unit) 9.3 10.5
4. Wood/Briquitte:
Quantity (in '000 Kgs) 8,852 -
Total amount (Rs. in Millions) 19.9 -
Average rate (Rs./Unit) 2.2 -
B. Consumption per unit of production:
It is not feasible to maintain product category-wise energy consumption
data, since we manufacture a large range of formulations and bulk drugs
having different energy requirements.
C. Energy conservation measures:
1. Internal and External Energy Audits for improvisation and continuous
monitoring of Power Factor.
2. Alternative energy sources like Gas & Steam have been used in place of
electricity for heating of De-mineralized water, fluid bed dryers for
producing hot air systems for coating department and for maximisation of
condensate recovery of biomass to improve efficiency.
3. Installation of Cogeneration Power Plants including biomass based at
various locations to generate electricity and use waste heat from power
plant to achieve overall best efficiency of electricity generation.
4. Using refrigerated type air dryer instead of desiccant type to reduce
air losses and installation of evaporative cooling units for AC outdoor
units to improve efficiency.
5. Replaced LRP insulation to Puff insulation in all chilled water and
brine pipe lines for waste heat recovery to improved chilling efficiency.
6. Maximization of Condensate recovery of Boilers to improve efficiency.
TECHNOLOGY ABSORPTION A. Research and Development:
1. Specific areas in which R&D is carried out by the Company:-
We continue to be one of the most aggressive investors and developers of
generic-related pharmaceutical research and technology in the country, with
research programs to support our generic business pursued at our modern R&D
centres. Our expert scientist team is engaged in complex developmental
research projects in process chemistry and dosage forms, including complex
generics based on drug delivery systems at these research centres. This
research activity supports the short, medium and long term business needs
of the company, in India and all the other markets that your company
invests in.
Projects in formulation development and process chemistry help us introduce
a large number of new and novel products to the Indian market including
products with complexity or a technology edge. Process chemistry enables us
to be integrated right up to the API stage for important products. This
helps us maintain our leadership position in the Indian market with
specialty formulations and derive market and cost advantage from API's
developed and scaled up In-house. Further, it helps us to compete in the
international regulated markets across US / Europe.
The team also works on projects involving complex drug delivery systems for
India Complex API like steroids, sex hormones, peptides, carbohydrates and
taxanes which require special skills and technology, are developed and
scaled up for both API and dosage forms. This complete integration for some
products works to the company's advantage. These projects may offer higher
value addition and sustained revenue streams.
2. Benefits derived as a result of the above R & D:
In 2009-10, about 39 formulations were introduced across marketing
divisions, (not including line extensions, but including complex products).
All of these were based on technology developed in house. Technology for 16
API was commercialised. For some of the important API that we already
manufacture, processes were streamlined so as to have more energy efficient
or cost effective or environment friendly processes. A large part of our
API sales is to the regulated market of US / Europe, and this earns
valuable foreign exchange and also a reputation for quality and
dependability. The company's formulation brands are exported to 40
international markets where a local field force promotes the same.
The Department of Scientific and Industrial Research,Ministry of Science
and Technology of Government of India has granted approval to the in house
research and development facility of your Company under the provision of
the Income Tax Act, 1961.
3. Future plan of action:
A state of the art bioequivalence facility with a functional capacity of
220 beds with a well equipped, Phase 1 Clinical unit and ECG Core
Laboratory for clinical studies and safety studies and the same is being
expanded to more than 300 beds. Eighteen high capacity LCMS, fully
computerised blood chemistry labs capable of comprehensive analysis are
being used extensively for biostudies. This facility has been inspected for
India and for the US.
Rs in Million
4. Expenditure on R & D Year ended Year ended
31st March, 31st March,
2010 2009
a) Capital 159.0 221.7
b) Revenue 1440.8 1313.3
c) Total 1599.8 1535.0
d) Total R&D expenditure as % of Total Turnover 8.5% 5.4%
B. Technology Absorption, Adaptation and Innovation
1. Efforts in brief, made towards technology absorption, adaptation and
innovation
Year after year, your company continues to invest on R&D revenue as well as
capex. A large part of the spend is for complex products, ANDA filings for
the US, and API technologies that are complex and may require dedicated
manufacturing sites. Investments have been made in creating research
sites,employing scientifically skilled and experienced manpower, adding
equipment and upgrading continuously the exposure and research
understanding of the scientific team in the therapy areas of our interest.
2. Benefits derived as a result of the above efforts e.g. product
improvement, cost reduction, product development, import substitution:
(a) Market leader for several complex products. Offers complete baskets of
products under speciality therapeutic classes. Strong pipeline of products
for future introduction in India, emerging markets, as well as US and
European generic market.
(b) Not dependent on imported technology, can make high cost products
available at competitive prices by using indigenously developed
manufacturing processes and formulation technologies.
(c) Offer products which are convenient and safe for administration to
patients, products with a technology advantage.
(d) We are among the few selected companies that have set up completely
integrated manufacturing capability for the production of anticancer,
hormones, peptide, cephalosporins and steroidal drugs.
(e) The Company has benefited from reduction in cost due to import
substitution and increased revenue through higher exports.
3. Your company has not imported technology during the last 5 years
reckoned from the beginning of the financial year.
C. Foreign Exchange Earnings and Outgo:
Rs in Million
Year ended Year ended
31st March, 31st March,
2010 2009
1. Earnings 8508.3 8281.1
2. Outgo 4629.0 4258.9
MANAGEMENT DISCUSSION AND ANALYSIS
Operational review:
2009-10 was an unusual year in that for the time in our listed history
there was a decline in sales - 9%. Profit before interest and tax reduced
29% and profit after tax stood at Rs. 13,511 million compared with Rs.
18,177 million in 2008-09.
As we had previously indicated, the primary reason for this shortfall was
that Caraco, our 75% US-based subsidiary, stopped manufacturing operations
from June 2009, resulting in a sales decline to US$ 22 million compared to
US$ 112 million from manufactured products in the previous full year of
operations.
Our ex-US business segments continued to perform well, delivering strong
sales and profit growth, while increasing their market share across
geographies. Excluding Caraco, our 2009-10 sales were Rs. 27,978 million
with a growth of 3% over the previous year.
Key performance indicators for 2009-10:
* Annual consolidated sales for 2009-10 of Rs. 39,040 million, a decline of
9% over the previous year
* Sales in India were Rs. 19,334 million, down 6%.
* International branded generic sales across 40 markets grew 29% to
Rs.4,883 million. This remains one of the fastest growing parts of our
business.
* Sales at Caraco were down 31% to US$ 234 million.
* We continue to hold reserves in excess of Rs. 77,200 million, earmarked
for suitable acquisition opportunities.
* Our R & D expense was Rs. 2,242 million, taking our cumulative R&D
expense to Rs. 18,073 million.
* Between Sun Pharma and Caraco, 84 ANDAs are approved and 123 await
approval by the USFDA. Fifteen more ANDAs received approval this year.
* Branded generic registrations received crossed 1,500.
* 246 patents were filed so far, of which 81 were received based on the
work by our research team
Business overview:
Indian Branded Generics continued to be the largest contributor to our
revenue, at 45%, followed by US Generics (28%) and International Branded
Generics (13%). API sales contributed 14%, a larger number than in the
previous years, largely on account of APIs that would usually be consumed
by Caraco but are now available for sale.
Our international business contributed 52% of our total turnover. By the
year-end, the total ANDA approvals stood at 84 with 123 more filings
pending approval with the US FDA. During the year, we invested Rs. 2,242
million in R&D. Our investments in capital expenditure were at Rs. 2,956
million, including our Sikkim formulations plant, which was commissioned
during the year under review.
Industry outlook:
IMS Health estimates the global pharmaceutical market in 2010 at over US$
825 billion, expected to grow 4-6%. Emerging markets, which accounted for
US$ 84 billion in 2008, are estimated to reach US$ 155-185 billion in 2013,
with a CAGR of 13-15% (IMS Health and Morgan Stanley estimates). In 2009,
the US generics market was valued by IMS at US$ 31 billion. BCC Research
estimates the US generics market in 2009 at US$ 34 billion. All the
business areas that we are present in offer attractive opportunities, and
we are well positioned to maximise sales and profit growth that these
opportunities offer.
India:
The Indian pharmaceutical market continued to register a healthy growth of
18% during 2009-10 to Rs. 417 billion (IMS MAT March 2010). While acute
care still dominates the market with over 60% share, chronic care continues
to outgrow the acute care segment and gain market share. Prescriptions
written by General Practitioners (GPs) account for 40% of the overall Rx
and are growing at 2%. In contrast, specialist Rx are growing at more than
5-6% per annum (Source: Morgan Stanley).
It is anticipated that India's specialty and super specialty therapies are
likely to account for 45% of the market by 2015 (36% in 2006) (Source:
India Pharma 2015, McKinsey). Socio-economic factors such as rising
incomes, increasing affordability of quality health care, steady increase
in health insurance penetration and a continued rise in chronic diseases
will drive the growth of the pharmaceutical market in India. IMS forecasts
suggest that the Indian pharmaceutical market will continue to register
double-digit growth and has high potential to double its size in five
years.
In addition, the government's emphasis on providing healthcare for the
under privileged with initiatives like the health insurance policy for the
poor, the Rashtriya Swasthya Bima Yojana and emphasis on improving the
delivery mechanism is expected to result in better volumes across the
industry.
The Indian pharmaceutical industry continues to witness a consolidation,
with MNCs continuing to acquire some Indian companies to benefit from the
attractive growth that this market offers. On the other end of the scale,
some of the regional companies are also gaining share, albeit from a low
base. Together with attractive market opportunities, competitive intensity
will increase.
Companies with capabilities to launch innovative medicines at affordable
prices, build strong brands, offer high quality medical information to
doctors and assist patients to manage their conditions better, will
continue to perform well.
While product patent protection offers newer opportunities to innovator
pharmaceutical companies, the Indian pharmaceutical market will continue to
be substantially dominated by branded generics across the foreseeable
future.
The US:
Total market: At an estimated US$ 300 billion dollars in size (January 2010
MAT), the US pharmaceutical market remains the world's largest, though it
registered only 6% growth. U.S. market growth in 2010 is expected to be 3-5
%. With US$ 74 billion worth products (sales) forecast to go off-patent
between 2009 and 2012, the US pharmaceutical market is likely to remain
sluggish across the foreseeable future.
Generics market: With an estimated size of US$ 34 billion, the US generics
market is one of the largest in the world. In terms of prescription share,
generics continued to increase their share and accounted for 72% at the end
of 2009 (from 55% in 2004). The growing preference for generics is also
reflected in the increase in generic drug penetration in the US from 47% in
1999 to 72% in 2009.
However, generics still only account for 17% of total sales by value.
In 2009, the US government implemented policy changes that extended cost-
effective healthcare coverage and are expected to be pro-generic. More
affordable insurance will reduce premium costs and enable more than 31
million previously uninsured Americans to afford healthcare. In addition,
the new competitive health insurance market will provide Americans a wider
insurance choice. Greater healthcare accountability is expected to keep the
premia down.
Emerging markets:
The estimated size of the pharmaceutical market in emerging markets
(excluding USA, Canada, EU, Japan and Australasia) is over US$ 90 billion,
registering double-digit growth and accounting for a majority of the global
pharmaceutical market growth in 2009. China stands out with a size of US$
32 billion and forecasted growth of 20-23%. All these markets are expected
to sustain a double digit-growth across the foreseeable future on the back
of a strong economic growth, rising population and an increasing
affordability for quality healthcare in these countries. IMS forecasts
suggest that the pharmaceutical market in emerging market countries will be
US$ 155-185 billion in 2013 (CSFB, Morgan Stanley and IMS data).
Japan: Japan's stringent quality standards tend to deter global entrants.
On the other hand, it is a fast-emerging generic market at US$ 3.5 billion,
with generic penetration at 15% by volume and likely to rise to 30% by
volume by 2012 (CSFB Pharma far marts, March 2010).
Europe: The European market for generics in 2009 was US$ 33 billion (IMS
data). Although generic medicines now fulfill over 50% of the demand for
medicines in Europe, they still only represent 18% of the total medicine
bill.
APIs:
India is a significant player in the global active pharmaceutical
ingredient (API) market, being one of the world's largest API
manufacturers. It ranks fourth by volume and thirteenth by value. It is
expected to generate sales worth US$ 6 billion in 2010, growing around 19%.
A bulk of the API production is exported to Europe (Source: Pharmabiz).
India is also recognised as one the world's lowest-cost producers of small
molecule APIs.
With an increasing pressure on global economies, especially advanced
nations, to reduce healthcare costs, India is set to play a significant
role in this space.
Business performance
1. Indian branded generics:
Overview:
Sun Pharma is India's sixth largest branded generics player, with a product
basket comprising 537 formulations and covering chronic therapy segments.
Several of our products are technically complex products with relatively
lower competition. We commanded a market share of 3.7% in 2009-10.
In 1995, we pioneered a therapy-focused marketing strategy where products
from different therapeutic segments were marketed by separate divisions.
Currently we market products through 18 divisions, facilitated by a strong
field force of more than 2,500 members covering more than 130,000
specialist doctors.
Almost 50% of our brands feature among the top three brands in their
specific spaces in India. Our top 10 brands contributed 20% to domestic
revenues while the top 50 brands contributed 53% in 2009-10, de-risking our
growth from an excessive dependence on a handful of blockbuster products.
Besides, our growth was balanced between established products launched
before 2006 accounting for 67% of our growth, and a continued launch of
differentiated products in the therapy areas of our focus.
Business realities in 2009-10:
Our domestic business revenues decreased 7% from Rs. 19,597 million in
2008-09 to Rs. 18,301 million.
According to IMS, we were ranked sixth with a 3.7% market share and 18% GR.
According to AWACS, a market audit firm at the wholesaler level, we ranked
fifth with a 4.3% market share and 15% GR.
A total of 48 new products were introduced across various divisions.
Technically complex products like Exapride (exenatide injection) and
Cardivas CR (carvedilol phosphate extended release) that differentiated our
product offering were launched during the year, as also Lambin (liposomal
amphotericin).
Major brands like Pantocid, Glucored, Susten, Aztor, Strocit and Gemer
registered double-digit growth in a competitive market, strengthening our
topline.
Pantocid, an antiulcerant along with combinations, emerged as the largest
selling product group in India from our portfolio.
We continued efforts in prescription generation for existing products, and
introduced new products.
We intensified our focus on building brands based on complex technologies.
In therapeutic segments, where we are a significant player, we strengthened
our leadership with strong execution and strategies. Similarly, in other
segments where we are late entrants, we continued to build our prescription
share.
We enriched doctor relationships and built trust through the scientific
promotions like PG CME meets and symposia where world-class speakers were
invited to share experiences with Indian doctors, etc.
We launched the antidiabetic injectable Exapride (Exenatide), a 39 amino
acid-based peptide in a patient-friendly delivery system device. Our
product can handle multiple doses and be reused, reducing the patient's
spend on the repeated purchase of the device.
> Octride, the peptide-based treatment for variceal bleeding, became one of
our largest GI products.
> Technically complex drugs like Gliotem (Temozolamide) and Gemtaz
(Gemcitabine) helped us differentiate and earn the trust of oncologists.
We launched Lambin (Liposomal amphetericin), a targeted treatment for
systemic fungal infections in immunocompromised patients.
2. US operation:
Overview:
Our presence in the US generic market accounts for around 28% of our total
sales, with formulation manufacturing facilities spread across six
locations, including several sites in India. This combination of
manufacturing sites with facilities -on mainland US and offshore - gives us
the flexibility to manufacture where it is most economical.
Our product basket comprises a prudent mix of generics and complex or
limited competition products. We have the flexibility to manufacture all
dosage forms ranging from tablets to injectables, eye drops and sprays. A
large number of products that we make are integrated into APIs and offer us
an effective control on costs.
We introduced products such as Amifostine, Lupreolide, Octreotide and
Vecuronium, which are technically complex, face a lower competitive
intensity and offer reasonable profitability.
Historical performance
Brand name 2007-08 2008-09
Net sales (US$ million) 350 337
Net sales (Rs. million) 14,139 15,460
ANDAs filed 47 35
ANDAs approved 24 16
Complex products Octreotide injection Amifostine injection
Irinotecan injection
Lupreolide injection
Pamidronate injection
Brand name 2009-10
Net sales (US$ million) 234
Net sales (Rs. million) 11,062
ANDAs filed 30
ANDAs approved 15
Complex products Azelastine Rivastigmine Nicardipine injection
Vecuronium injection
Business realities, 2009-10:
Despite the halting of production at Caraco, we reported a good growth of
distributed products.
* Began to build sales of the first few controlled substance ANDAs from our
Cranbury facility.
* Entered the oncology therapeutic segment; launched 10 products; built a
strong CNS product range (29 products) and CVS range (13 products).
* Received exclusivity for generic Eloxatin; continued to sell generic
Protonix at risk (we discontinued sales of both products in the first
quarter of 2010-11).
- Received a settlement fee from Forest Labs and Lundbeck for the Lexapro
patent dispute, with likely milestones should our process be used by them.
- Built credibility with customers by continually communicating
developments on the FDA issue with Caraco. Our team convinced customers
that the issue was ring-fenced only around Caraco, even as our other
operations for the US remained dependable and compliant.
The US generic market continues to be demanding, with extensive competition
from equivalently placed companies now extending to products even in the
exclusivity period. The FDA has been raising the bar on regulations, and at
times there have been significant delays for generic approvals at the FDA.
The FTC has also been keeping a close watch on generic-innovator deals as a
part of its mandate.
ANDAs approvals in 2009-10 and 2008-09
2009-10 2008-09 Cumulative
CNS 3 5 26
Pain 1 3 11
CVS 2 2 13
Oncology 2 3 11
Metabolism 1 - 7
Cough and cold 2 3 6
Antibiotic - 1 2
Allergy 3 - 5
Urology 1 - 1
Gastro - - 1
Endocrine - - 1
At Caraco, as required by the USFDA, the team is working closely with cGMP
consultants to identify and implement corrections to comply with FDA
requirements. Caraco has taken FDA approval on its work plan, and is now
working to put these corrections in place. Caraco has created a partial
reserve of US$ 15.9 million to account for losses due to inventory seizure
worth US$ 24 million by US FDA. It has drawn up a roadmap for transferring
some products to alternative manufacturing sites and has also begun to
market several products from Forest's Inwood business, as part of an
agreement.
Acquisition of Taro
One of the challenges in 2009-10 was the continuing dispute regarding the
acquisition of Taro, which is now pending ruling by Israel's Supreme Court.
However, there were three clearly positive developments that we are glad
about:
In December 2009, Templeton, which holds a 10% equity stake in Taro, (the
third-largest and largest-minority shareholder) withdrew its
appeal/opposition and came out strongly in favour of the takeover.
Templeton had opposed Sun Pharma's acquisition for about 30 months.
> At Taro's annual general meeting, the minority shareholders (78% of
minority votes polled) voted against the continued service of the Levitt
Board of Directors and the election of Taro's External Director nominees.
> In July 2010, the United States District Court for the Southern District
of New York dismissed the complaint filed by Taro seeking to block the
Tender Offer by Sun's subsidiary Alkaloida. The Court rejected Taro's
claims based on allegations that Sun and Alkaloida had failed to make
adequate disclosures concerning the offer. The Court also rejected Taro's
request for discovery, remarking that Taro had not explained any purpose
that discovery would serve. The Court also dismissed Taro's other claims,
including breach of contract and misappropriation of trade secrets, for
lack of subject matter jurisdiction.
3. Rest of the world
Overview:
Our global footprint now spans 40 pharmaceutical markets across four
continents, some 1,578 products already registered and nearly 900 products
in the regulatory pipeline in these countries. The emerging markets part of
our business grew by over 40% over the last seven years and we expect the
momentum to continue. Our key high-potential markets are Russia, China,
Brazil, Mexico, ex-CIS nations and South Africa. Considering the size, the
potential opportunities and to strengthen our competitive capabilities, we
established manufacturing operations in Mexico and Brazil. The regulatory
filing of products from these facilities has commenced.
Regulatory demands are becoming progressively stringent, increasing the
cost and timelines to register the products in a number of emerging
markets. In the last few years, some emerging markets amended their
regulatory requirements to match those of regulated markets with the need
to have detailed plant inspections and local bio-studies. These
developments have a potential to stagger our new product registrations in
these countries. However, we will aim to increase our footprint and augment
our product offerings across emerging market regions in a phased manner.
2005-06 2006-07 2007-08 2008-09 2009-10
Contribution to turnover (%) 8.0 9.0 7.0 9.0 13
Europe: Initiated exports to Europe for the first time in our history;
received 11 product approvals in Europe up to March 2010. At US$ 33
billion, key generic markets in Europe present an attractive opportunity.
We expect to create a meaningful EU presence with generics, building a line
of select hospital products that offer decent returns over the medium-term.
4. API business
overview:
Our backward integration into speciality APIs for key products strengthens
our position against competing global pressures. Several of our eight
world-class facilities are ISO 14001 and ISO 9002-approved. Many of our
plants hold approvals from the US FDA as well as regulatory authorities of
various developed countries
Our API basket currently comprises 170 products, of which a vast majority
are complex APIs. A large proportion of APIs manufactured are consumed in-
house.
We have standalone facilities in Panoli and Ahmednagar for peptides, anti-
cancers, steroids and sex hormones. Our Hungary unit manufactures
controlled substances from the basic stages, while the other manufacturing
facilities can handle multiple products. Our Tennessee plant holds quotas
for controlled substance API manufacture in the US. We add more than 25 API
processes annually, enriching our product basket.
In 2009-10, our API business grew 13% from Rs. 4,846 million in 2008- 09 to
Rs. 5,491 million in 2009- 10 and registered a 19% CAGR (last five years
leading to 2009-10). Our API revenues accrue from a global footprint
covering 56 countries. In the regulated markets, our business is largely
conducted with end-users. For a large number of products like
Pentoxifylline, Clomipramine and Mesalazine, we are a dominant, if not the
leading, international producer.
> Received approvals for eight APIs from various regulatory authorities;
this took the total regulated market-approved APIs to 89 out of 155 filings
made for DMF and CEP Enhanced our equipment productivity by reducing
process steps, improving chemistry and optimising manufacturing costs
through value engineering
2007-08 2008-09 2009-10
Contribution to turnover (%) 10 11 14
We intend to strengthen our presence in Japan and China, as also in the API
hubs of Germany and Italy.
Research and development:
Research and development lies at the heart of our success. Research is
undertaken at various R&D centres including two state-of-the-art centres,
accommodating 600 qualified scientists. Over the years, we developed sound
capabilities ranging from complex APIs to formulating complex, technology-
intensive products. Our research initiatives offer complex products to our
customers and patients.
Our Baroda research centre develops complex APIs and dosage forms for
India, US and Europe. Our Mumbai research centre focuses on the development
of differentiated dosage forms and generics for developed markets like the
US and Europe. The work at these research centres ensures that we have a
robust pipeline to feed all the markets that we operate in.
Our state-of-the-art research laboratories are equipped with extensive
facilities for pharmacokinetics, formulation development, organic
synthesis, clinical research and analytical development.
R&D commitment:
2005-06 2006-07 2007-08 2008-09 2009-10
Investment in R&D (Rs. million) 2,015 2,787 2,859 3,320 2,242
R & D investment as percentage
of net revenue 12 13 9 8 6
Our R&D focus:
Our R&D team focuses on creating difficult-to-replicate molecules/ products
involving complex technologies at competitive costs. This focus helped grow
the basket from five products in 1983 to 537 products in India (as on March
31, 2010).
Generic process research: We focus on developing complex APIs entailing
multiple-step chemistry in a cost-effective and environment friendly
manner. Our expertise covers complex products like steroids, anti-cancers,
peptides and hormones. This expertise reinforces our backward integrated
business model.
In 2009-10, our team added 28 APIs.
Generic formulation research: Our formulations research team focused on
developing niche and complex finished products, creating a differentiated
product pipeline and capitalising on first-to-file opportunities. In 2009-
10, our team launched 48 new products in India and filed 30 ANDAs in the US
taking the total to 207 ANDAs. In all, close to 900 dossiers are pending
approvals in other regulated and semi-regulated geographies. Complex
delivery systems: Our team developed delivery systems such as metered dose
inhalers, osmotic release formulations and nasal sprays, among others. In
2009-10, we introduced 26 products based on novel delivery platforms.
Intellectual property:
We possess a rich patent library. The cumulative filings stood at 246
filings, of which 81 were approved. We filed 13 new patent applications in
2009-10.
Regulatory Affairs:
Every step in the pharmaceutical value chain - product development,
manufacture and marketing - is marked by an adherence to regulatory
compliance. The regulatory norms vary widely across countries and are
periodically upgraded to meet increasing quality expectations.
The result is that with competition increasing, it is not merely enough to
meet regulatory compliance; it is now imperative to do so with speed and
emerge as a first-mover in a particular product or geography.
Our regulatory compliance is a competitive advantage that has enabled us to
establish a global footprint across 40 countries. Our regulatory team helps
strengthen (through increased product filings) and expand (by meeting
regulatory requirements of new geographies) this global presence.
Over the years, our team reduced the time for filing regulatory documents
despite growing regulatory complexities.
Highlights, 2009-10:
> Filed 14 DMFs in the US; received six DMF approvals during the year. We
emerged among the few Indian pharmaceutical companies with the maximum DMF
filings in the US - 99 (with 43 approvals) as on March 31, 2010.
> Filed seven Certificate of Suitability with the European Pharmacopoeia
(CEP) for strengthening our European presence; this took the total CEP
filings to 28, with 21 approvals in all.
> Filed 30 ANDAs for approval with US regulatory authorities; received
approval for 15 ANDAs; the total tally of ANDAs stood at 207 filed and 84
approved as on March 31, 2010.
Filed dossiers in 40 countries, including Taiwan, Japan, Canada, Australia
and China.
> Received approval for Sumatriptan prefilled injections from UK MHRA, the
Company's first device approval.
Approvals in 2009-10
DMF/CEPs approved ANDAs approved Products approved in
rest of the world
8 15 394
In 2009-10, we filed eight DCPs in Europe for complex products and received
approvals for five. We received our fastest DCP approval (as yet) in only
12 months for Olanzapine. As filing procedures and approvals get
increasingly complex, we are working to strengthen our regulatory team.
Quality:
Consistent quality is critical in the pharmaceutical sector, especially for
companies like ours that are present in quality-conscious regulated
markets.
We focus on high product quality standards, ensured by a 14-member quality
management team. The vindication of our quality focus is evident in our
manufacturing facilities holding certifications from some of the world's
most demanding regulatory bodies.
Intellectual capital:
The contribution of our team is critical to our performance. Intellectual
capital is the strongest driver of our growth. Our success is largely
derived from our ability to attract the best talent, create opportunities
to identify potential and groom our team for leadership positions by
providing a congenial environment to perform, lead and grow the
organisation.
We practice a policy of creating tomorrow's leaders from within the
organisation, providing a clear growth path to team members. This process
is facilitated through an institutionalised promotional system called
Career Progression Program (CPP).
A key challenge is protecting and retaining junior level employees
operating in the plants and factories. Our team is also replicating its CPP
programme across all manufacturing facilities.
Internal control:
Sun Pharma's defined organizational structure, documented policy guidelines
and adequate internal controls ensure efficiency of operations, compliance
with internal policies, applicable laws and regulations, protection of
resources and assets, and accurate reporting of financial transactions.
Moreover, the Company continuously upgrades these systems in line with the
best available practices.
The internal control system is supplemented by extensive internal audits,
conducted by independent firms of Chartered Accountants to cover various
operations on a continuous basis. |