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How top Indian drug makers like Sun Pharma,

Glenmark are building a brands business in the US
By Vikas Dandekar, ET Bureau | Updated: Jan 07, 2017, 12.43 AM IST

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Telling signs of a midlife crisis are apparent

among top Indian drug makers as fatigue sets in RELATED COMPANIES
Sun Pharma
on a marathon run of two decades selling
generics in the US. A long hold by the US FDA on Glenmark
Indian manufacturing facilities has left the
Aurobindo
industry with sobered expectations. The
narrative is moving to building brands, portfolio balancing and
predictable revenues.

EXPAND

Sun Pharma, Dr. Reddys, Glenmark, Zydus Cadila, Aurobindo and their
ilk are embracing a new life. Deploying investments to bolster
indigenous research and lapping up late clinical stage drugs or new
brands is heralding a seismic shift from churning copies of drugs to the
daunting world of innovative or differentiated brands.
BUILDING BRANDS
Top drug maker Sun Pharma is the first off the block in shaping those
ambitious plans. Focusing sharply on ophthalmology, cancer and
dermatology products, last month it paid Rs 1,190 crore ($175 million)
to Swiss pharmaceutical giant Novartis for rights over Odomzo, a brand
approved in 2015 by US FDA, that helps treat a form of advanced skin
cancer.

For the home grown

drug maker the task,
though uphill, is cut out.
Odomzo will closely rival
the $50 billion biotech
behemoth Roches
Erivedge. It is an odd
match, critics say, but

match, critics say, but

Sun has finite choices.
Its founder and CEO Dilip
Shanghvi is known for
strategic manoeuvres
that led his company to
scale the top slot among
the local peers. Moving
into new research drugs
over the next few years
seems top of mind for
the man thrifty with
words.
Innovative brands as
opposed to supplying
generics to distributors
is a significant shift.
Indian companies are at
a stage of maturity
where building a pipeline
is important, says Sujay
Shetty who heads the
Indian lifesciences
business for PwC, the
global consulting firm. A
similar view is expressed
in a note from Chirag
Talati of Kotak
Institutional Equities.
Talati said Odomzo can
generate $80 million in sales by 2020-21 with peak potential of $120150 million. The forecast appears modest against the money shelled
out by Sun but the excitement is palpable in adding heft for the future.
Suns Levulan drug/device combination for actinic keratosis, a form of
pre-cancerous cells, gives it access to dermatologists who account for
70% of prescriptions for laBCC (locally advanced basal cell carcinoma).
Combined with MK-3222 (a drug licensed from Merck and being
developed for psoriasis), we believe Odomzo will help raise Sun
Pharmas brand profile amongst dermatologists and help leverage the

Pharmas brand profile amongst dermatologists and help leverage the

field force to drive prescription share, Talati explained.Assets acquired
by Sun over the last two years brings further clarity. In 2014, it bought
MK-3222, a late stage experimental psoriasis drug from Merck. If
approved by the US FDA, Sun will jostle with Janssen, Eli Lilly and
Novartis.
Opinion is divided on how well Sun can manage in reaping the rewards
from its psoriasis drug against the established giants but it is largely
seen as a calculated step. In Sept. 2015, Sun picked InSite Vision,
which enabled the recent commercial launch of BromSite, its first
branded eyecare drug. In October 2016, the company acquired Ocular
Therapeutics for $40 million, digging further into the ophthalmology
market. Odomzo could kick start a branded oncology play, as indicated
by Kirti Ganorkar, the global head of business development at Sun
Pharma at the time of announcing the deal.
BRANDED PLAY
Going forward, we expect increased R&D spends in development of
future product pipeline in specialty and differentiated products, Sun
Pharma told ET. While R&D is considered the engine that helps a
company deliver products, brand marketing is an art and numerous
examples abound of wayside kills. Sun Pharma is fueling top dollars to
rope in talent from global drug firms to embellish its marketing unit in
the US. An expert who has studied marketing trends in the US said if
the efforts reach fruition, Sun may see its sales surge past a billion
dollars from specialty and branded or OTC business as its US revenues
could double to over $4 billion by 2020.
PwCs Shetty said the moves to grow a branding business is expected
and will only intensify. Profits from generics is cut to the bone except
in a few cases. Companies are moving on the maturity curve and cherry
pick brands in the next three to four years, he noted reminiscing how
Israeli giant Teva had a head start with its blockbuster multiple
sclerosis drug Copaxone that clocked peak sales of over $4 billion. A
similar roadmap but one that leans on a differentiated portfolio is being
put into play at Hyderabadbased Dr. Reddys Labs.
The company that reported revenues of $2.4 billion last year has for the
past few years devised its differentiated strategy. It has about 85
pending filings (ANDA/NDA). Almost two-thirds of these are complex
generics or those that have limited competition. Drilling further,

generics or those that have limited competition. Drilling further,

injectables are likely to be a key growth driver accounting for a third of
the revenues by 2020, the company told ET.
Abhijit Mukherjee, COO, Dr. Reddys said most branded products have
evolved out of in-depth research and work with physicians and
patients. We continue to work with physicians to create the Rx
(prescriptions) pull and at the same time, collaborate with payers to
have enough coverage for these drugs. Between dermatology and
neurology drugs alone, Dr. Reddys has fanned out over 100 sales
employees in the US. Last year it launched Zembrace SymTouch, a
novel drug and device combo to treat acute episodes of migraine pain.
With its R&D spend spiraling to 11%-15% of sales, Dr. Reddys is hoping
to gain further traction in its US brands business. It has identified drugs
that require complex characterization, novel regulatory pathway and
are approved at the back of large and complex clinical studies.
Although its biosimilars ambitions is moving at a slow clip in India, its
US filings for cancer drugs rituximab and Peg-GCSF as early as 2014
indicates interest in selling drugs with higher regulatory benchmarks,
even it the clinical trials take a substantially longer time for regulatory
reviews..
RIGHT REVENUE MIX
Utkarsh Palnitkar, head of KPMGs lifesciences practice said brandbased growth may take time to build but it is far less risky for larger
companies as compared to generics. Over time it may help change the
revenue mix, he said. Aurobindo Pharma is another company that is
expected to dive deeper into selling complex drugs. Experts noted AB
rated drugs in the US or drugs that show therapeutic equivalence to
other drugs may be a potential area being explored by the company.
The company did not respond to mails from ET. One market analyst
believed Aurobindos contribution from complex generics could vault
five-fold from a low base of $37 million in 2015-16 to about $200
million in 2020. Against that, its revenues from plain generics may seek
a slower uptick from $753 million to $1.28 billion during the same time
frame.
Over its most recent earnings call, N. Govindarajan, Managing Director,
Aurobindo Pharma informed analysts about plans to develop complex
products like hormones, oncology, liposomal and microsphere depot
injectables which can be expected to be filed from the beginning of the

injectables which can be expected to be filed from the beginning of the

2017-18. Mumbai-based Glenmark is another drug maker to have a
strong ambition on discovering new drugs.
With arguably the most successful track record in researching drugs
and out-licensing them among its Indian peers, Glenmark envisages at
least a third of its revenues to come from specialty and innovative
drugs by 2025. At a recent media briefing, Glenmark showcased nine
drugs that are in the works at its network of research labs based in the
UK, Switzerland and India. Through its proprietary BEAT (Bispecific
Engagement by Antibodies based on T-cell receptors) technology,
Glenmark has built a pipeline of biological drugs to treat cancer.
Company executives believe these have the potential to compete
against drugs that are considered to be best in class at present. Zydus
Cadila, the low profile Ahmedabad-based drug maker has similar plans
on branded drugs. The drug maker is conducting Phase II trials for its
flagship drug Saroglitazar in the US for diabetic dyslipidaemia and
NASH (non-alcoholic steatohepatitis) commonly known as the fatty
liver disease.
CHALLENGES AHEAD
While the market opportunities to sell brands appear optimistic, that
road is less treaded by Indian companies and obvious challenges can
lead to adversities. Developing drugs is a costly affair and in popular
estimates a global drug maker typically spends close to $2.5 billion to
get a drug from the lab to the market. Plus, regulatory clearances go
through a tough screening process.
That apart, acceptance in the market is subject to comparative
effectiveness against competing brands and reimbursement by
insurance companies. Drug makers are also besieged by
manufacturing lapses at their Indian sites. Perpetual scrutiny by the US
regulatory agency has dented confidence as barring a few exceptions,
most firms are battling fundamental quality issues, some of which
require serious remedial action failing which they may risk reputation.
In the opinion of an analyst who has held a negative view on the sector
growth, deficiencies at Indian sites may cloud near to medium term
earnings. Although a few others believe the observations are on
expected lines and may be resolved over two to three years. Also, an
ongoing investigation by US federal agencies and the US Department of
Justice could deter companies from charging a high price for the

Justice could deter companies from charging a high price for the
brands to the patients. Although known to be business friendly,
healthcare is a high decibel debate in the US. The new President will
keep a tight lid on pharmaceutical companies both generics and
branded. Its a leap of faith, he cautioned.
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