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Unformatted text preview: AUGMENTING
GROWTH
ENGINES 2016 -2017
SUN PHARMACEUTICAL INDUSTRIES LTD. Rea chin g Pe o p le . To u chin g Live s . CONTENTS
02 AUGMENTING
GROWTH
ENGINES 2016-2017
SUN PHARMACEUTICAL INDUSTRIES LTD. Reaching People. Touching Lives . The cover design of this year’s annual
report focuses on the theme of ‘Augmenting
Growth Engines’. It takes an abstract
approach to illustrating multifaceted
connections that come together to drive
growth, which is representative of multiple
growth engines. 32 Key Performance
Indicators Board’s Report 03 62 Ten Year Financial
Highlights Corporate
Governance 04 80 Managing
Director’s Letter Standalone Financial
Statements 08 170 Management Discussion
and Analysis Consolidated Financial
Statements CORPORATE OVERVIEW 01-07 STATUTORY REPORTS 00-00
08-79 During the year, we enhanced our R&D
investments for developing complex
generics and specialty products. These
strategic investments will enable us to move
up the pharmaceutical value chain. We are
also investing in enhancing our product
pipeline for emerging markets and other
non-US developed markets. At Sun Pharma, we have consistently
focused on augmenting the long-term
growth drivers for the Company. As a
part of this approach, we have added
another growth engine to our business the specialty business – which is gradually
evolving for us. This is besides our existing
growth engines of the generics and branded
generics businesses. We also continued to build our specialty
pipeline; and invested in developing the
requisite front-end for the US specialty
business.
We are undergoing a gradual transformation
as we continue to invest in enhancing our
global specialty and complex generics
pipeline. These investments will enable
us to augment long-term growth avenues
for future. FINANCIAL STATEMENTS 80-278 At the same time, we have ensured that our
patients remain at the centre point of all our
strategic initiatives. Our existing business
of generics and branded generics is an
integral part of the solution to lower global
healthcare costs. Our specialty strategy
focuses on improving patient outcomes
either by targeting unmet medical needs or
by enhancing patient convenience through
differentiated dosage forms WE ARE NOT JUST
COMMITTED TO
AUGMENTING OUR
GROWTH AVENUES,
PATIENT CARE REMAINS
AT THE CORE OF OUR
STRATEGY.
A N N UA L R E P O RT 2 0 1 6 - 1 7 1 69,644
363,997
FY17
29.0
18.9
FY16 13.1
FY14 18.9
12.4
FY13 FY15 11.0 FY17 7.5
FY11 5.6
FY10 FY17 45,457
FY16
327,418 278,009
FY15 183,178
FY14 148,862
FY13 121,322
FY12 93,798
FY11 FY16 45,394
FY15 31,415
FY14 29,831
FY13 26,567
FY12 18,161
FY11 13,470
77,254
FY10 69,414
7.8
FY09 FY08 FY17 FY09 FY08 48,879
149,404 124,130
FY16 FY10 18,780
FY09 15,509
FY08 FY17
23,138
FY17 FY16
23,025
FY16 FY15
FY15
FY15 6.4 49,827
FY14 ADJUSTED EARNING PER SHARE
(POST EXCEPTIONAL ITEMS)*
(` per share) FY12 322,016 279,397
45,145 29,295
FY12 FY13 25,214 15,328
FY10 FY11 14,625
FY09 96,848 CARRYING VALUE OF PROPERTY, PLANT &
EQUIPMENT AND OTHER INTANGIBLE ASSETS
(` in Million) 10,354 RESERVE & SURPLUS
(` in Million) 10,418
FY14 7,042
FY13 4,449
FY12 3,313
FY11 2,242 3,320
FY09 FY10 2,859
FY08 19,550 R&D INVESTMENTS
(` in Million) FY08 NET PROFIT AFTER MINORITY INTEREST
(` in Million) 166,326
FY14 116,880
FY13 84,910
FY12 42,123
FY10 60,827 44,808
FY09 FY11 35,017
FY08 TOTAL INCOME
(` in Million) 291,453 KEY PERFORMANCE
INDICATORS (CONSOLIDATED) * During FY11, each equity share of ` 5/- was split into five equity shares of ` 1/- each. * During FY14, the Company issued bonus shares in the ratio of one equity share of ` 1/- for every share held. * During FY15, the Company’s equity shares have increased to 2,406 Million due to the merger of erstwhile Ranbaxy Laboratories Ltd. (RLL) with the Company,
wherein 0.80 equity share of ` 1 each of the Company have been allotted to the shareholders of RLL for every 1.00 share of ` 5 each held by them.
The Company has adopted Ind-AS accounting standards with effect from 1st April, 2015. Hence, FY16 onwards, the financials are reported as per Ind-AS and are not
strictly comparable with previous years. For FY15, balance sheet items are as per Ind-AS. 2 S U N P H A R M AC E U T I C A L I N D U S T R I E S L I M I T E D CORPORATE OVERVIEW 01-07 STATUTORY REPORTS 00-00
08-79 FINANCIAL STATEMENTS 80-278 TEN YEAR FINANCIAL HIGHLIGHTS
CONSOLIDATED ` in Million
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Revenue from Operations 34,606 43,751 38,086 57,279 80,195 112,999 160,804 273,920 284,870 315,784 Total Income 35,017 44,808 42,123 60,827 84,910 116,880 166,326 279,397 291,453 322,016 Profit for the year (after
minority interest) 15,509 18,780 13,470 18,161 26,567 29,831 31,415 45,394 45,457 69,644 2,859 3,320 2,242 3,313 4,449 7,042 10,418 19,550 23,025 23,138 134 222 159 236 362 427 556 1,178 783 1,679 2,725 3,098 2,083 3,077 4,088 6,616 9,862 18,373 22,242 21,459 9% 8% 6% 6% 6% 6% 7% 7% 8% 8% Equity Share Capital 1,036 1,036 1,036 1,036 1,036 1,036 2,071 2,071 2,407 2,399 Reserve and Surplus 48,879 69,414 77,254 93,798 121,322 148,862 183,178 278,009 327,418 363,997 Property, Plant & Equipment
and other Intangible assets (at
cost/ deemed cost) 15,960 21,476 23,340 45,473 54,269 75,763 86,505 143,616 187,212 217,315 Carrying value of Property,
Plant & Equipment and other
Intangible assets 10,354 14,625 15,328 25,214 29,295 45,145 49,827 96,848 124,130 149,404 6,565 18,595 31,664 26,557 22,129 24,116 27,860 35,028 18,299 11,919 33,995 35,485 28,542 58,622 76,749 86,618 126,969 135,488 167,973 150,666 207 207 207 1,036 1,036 1,036 2,071 2,071 2,407 2,399 Adjusted Earing per Share (post
exceptional items) (In `)* 6.4 7.8 5.6 7.5 11.0 12.4 13.1 18.9 18.9 29.0 Earnings per Share-Basic (In `)* 74.7 87.8 65.2 17.5 25.7 28.8 15.2 18.9 18.9 29.0 Earning per Share-Diluted
(In `)* 71.8 87.8 65.2 17.5 25.7 28.8 15.2 18.9 18.9 29.0 Particular Operating Performance R&D Expenditure
a) Capital
b) Revenue (Excluding
Depreciation)
c) % of Turnover Financial Position Investments
Net Current Assets Stock Information
Number of Shares (Million) * During FY11, each equity share of ` 5/- was split into five equity shares of ` 1/- each. * During FY14, the Company issued bonus shares in the ratio of one equity share of ` 1/- for every share held. * During FY15, the Company’s equity shares have increased to 2,406 Million due to the merger of erstwhile Ranbaxy Laboratories Ltd. (RLL) with the Company,
wherein 0.80 equity share of ` 1 each of the Company have been allotted to the shareholders of RLL for every 1.00 share of ` 5 each held by them.
The Company has adopted Ind-AS accounting standards with effect from 1st April, 2015. Hence, FY16 onwards, the financials are reported as per Ind-AS and are not
strictly comparable with previous years. For FY15, balance sheet items are as per Ind-AS. A N N UA L R E P O RT 2 0 1 6 - 1 7 3 MANAGING DIRECTOR’S
LETTER THE GLOBAL
PHARMACEUTICAL
L A N D S C A P E I S R A P I D LY
CHANGING. HENCE,
BUSINESSES OF
F U T U R E W I L L N E E D TO
D E V E LO P A N A B I L I T Y TO
C O N S T A N T LY M O V E U P I N
THE PHARMACEUTICAL
VA L U E C H A I N . T H I S
W I L L M A N DAT E
IDENTIFYING NEW AND
P RO F I TA B L E G RO W T H
D R I V E R S I N O R D E R TO
G E N E R AT E C O N S I S T E N T
S H A R E H O L D E R VA L U E . Dear Shareholders,
The global pharmaceutical landscape is rapidly changing. There
are both, opportunities and challenges. Opportunities include an
ageing population, leading to growing needs of modern medicines
at affordable cost and evolution of new chemical and biological
approaches towards targeted drug delivery. At the same time,
rising healthcare costs (which force governments to intervene on
pricing), increasing competitive intensity, customer consolidation
and increased focus on value delivered; imply that businesses of
future will need to develop an ability to constantly move up in the
pharmaceutical value chain. This will mandate identifying new
and profitable growth drivers in order to generate consistent
shareholder value. HIGHLIGHTS OF FY17
Our FY17 topline grew by 9% to ` 302 Billion which, was in line
with our annual guidance. In the US, which is a large contributor to
our revenues, we faced increased pricing pressure driven mainly by 4 S U N P H A R M AC E U T I C A L I N D U S T R I E S L I M I T E D customer consolidation and higher competitive intensity. We also
faced anticipated delays in product approvals at the Halol facility,
driven by the cGMP compliance remediation efforts at the facility.
However, the US performance was partly boosted by the 180-day
exclusivity on generic Imatinib, which expired in July 2016. Overall,
we recorded 2% growth in the US for the year.
Our subsidiary Taro recorded 8% decline in overall revenues for the
year. This decline was mainly driven by a difficult pricing environment
in the US, resulting from increased competitive intensity and buying
consortium pressures.
We recorded a steady 8% growth in our India formulations business,
while our performance in emerging markets improved, resulting
in 26% growth in revenues. This growth was broad-based across
emerging markets and was driven by improvement in underlying
business supported by stable currencies. CORPORATE OVERVIEW 01-07 STATUTORY REPORTS Our R&D investments for the year were ` 23 Billion, targeted mainly
at developing complex generics and specialty products. R&D is the
engine, which will drive our journey of moving up the pharmaceutical
value chain. We are also investing in enhancing our product pipeline
for 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. BUILDING THE SPECIALTY BUSINESS
Over the past few years, we have allocated significant resources
in building the specialty business. Since this business is in an
evolutionary stage, it currently does not generate revenues
commensurate to our investments. Our current profitability is after
taking into account these investments.
Our specialty initiatives target the global market with the US being
one of the important markets. Our strategy entails building a pipeline
of patented products for global markets with a focus on improving
patient outcomes either by targeting unmet medical needs or by
enhancing patient convenience through differentiated dosage forms.
Specialty projects have long-gestation timelines and we have to
cover a long distance in this journey. Our initiatives in this segment
cover the entire value chain, from in-licensing early-to-late stage
clinical candidates, as well as getting access to on-market patented
products. Dermatology, Ophthalmic, Oncology and CNS are the key
segments targeted through these initiatives.
Over the past two years, we have also focused on establishing
the requisite front-end capabilities for our specialty business.
This involves setting up relevant sales force (for promoting these
products to doctors), establishing the required regulatory and
reimbursement teams along with support staff. 00-00
08-79 FINANCIAL STATEMENTS 80-278 W E C O N T I N U E TO
A L LO C AT E S I G N I F I C A N T
RESOURCES IN BUILDING
O U R G L O B A L S P E C I A LT Y
B U S I N E S S . C U R R E N T LY,
THIS BUSINESS IS
IN AN INVESTMENT
P H A S E A N D D O E S N OT
G E N E R AT E R E V E N U E S
C O M M E N S U R AT E TO
OUR INVESTMENTS. OUR
S P E C I A LT Y S T R AT E G Y
E N TA I L S B U I L D I N G A
P I P E L I N E O F PAT E N T E D
PRODUCTS FOR GLOBAL
MARKETS WITH A FOCUS
O N I M P ROV I N G PAT I E N T
O U TC O M E S .
and Almirall announced the validation of the regulatory filing of
tildrakizumab with the European Medicines Agency (EMA). Post the
close of the year, we announced the acceptance of the regulatory
filing of tildrakizumab by the USFDA. Hence, tildrakizumab is now
awaiting regulatory approval from both the US and Europe.
3. During the year, Sun Pharma announced the launch of
Gemcitabine InfuSMART in Europe. InfuSMART is a technology in
which oncology products are developed in a ready-to-administer
(RTA) bag. With the roll-out of Gemcitabine InfuSMART, Sun Pharma
becomes world’s first pharmaceutical company to manufacture and
launch a licensed RTA oncology product. SIGNIFICANT RAMP-UP IN SPECIALTY PIPELINE
During the year, we significantly ramped-up our specialty portfolio.
We enhanced both, our specialty pipeline as well as our on-market
portfolio. Some of the key highlights are:
1. We received approval from USFDA for the New Drug Application
(NDA) related to BromSite™ (bromfenac ophthalmic solution)
0.075%. This product was subsequently commercialised in
November 2016.
2 We also continued our investment in the development and
commercialisation of tildrakizumab, which we had in-licensed from
Merck in 2014. In May 2016, we announced positive results from
the Phase-3 trials of tildrakizumab to treat chronic plaque psoriasis.
Subsequently, in July 2016, we announced a licensing agreement
with Almirall S.A. (Spain) for the development and commercialisation
of tildrakizumab for psoriasis in Europe. In March 2017, Sun Pharma 4. We also in-licensed ELEPSIA XRTM (Levetiracetam Extended
Release tablets) from Sun Pharma Advanced Research Company
Ltd. (SPARC). ELEPSIA XRTM was approved by the USFDA in March
2015. However, in September 2015, SPARC received a complete
response letter (CRL) from the USFDA rescinding its earlier approval,
citing that the compliance status of the manufacturing facility of the
Company at Halol was not acceptable on the date of approval. We
are currently in the process of de-risking these filings by transferring
them to alternate facilities.
5. In October 2016, Sun Pharma announced the acquisition of
Ocular Technologies (Ocular), which gives us exclusive worldwide
rights to Seciera™ (cyclosporine A, 0.09% ophthalmic solution)
targeted at Dry Eye Disease. Subsequently, we announced successful
Phase-3 confirmatory clinical trial results for Seciera™. Coupled with
Sun Pharma’s existing ophthalmic portfolio consisting of BromSite™, A N N UA L R E P O RT 2 0 1 6 - 1 7 5 Xelpros™ and DexaSite™ this acquisition will enable Sun Pharma to
significantly expand its ophthalmic presence and reach to millions of
patients - globally. We expect to file this product with the USFDA by
Q3FY18.
6. During the year, we also enhanced our specialty oncology
portfolio through the acquisition of a branded oncology product,
Odomzo®, from Novartis. Odomzo® (Sonidegib) was approved by
the USFDA in July 2015. It is a hedgehog pathway inhibitor indicated
for the treatment of adult patients with locally advanced basal cell
carcinoma (laBCC) that has recurred following surgery or radiation
therapy, or those who are not candidates for surgery or radiation
therapy. Odomzo® gives Sun Pharma an opportunity to meaningfully
expand its already established branded dermatology business
and support its expansion into branded oncology with a launched
brand. This acquisition has the potential to leverage and expand the
relationships that the Dusa sales team has with dermatologists that
treat common pre-cancerous skin conditions.
7. During the year, we also entered into an exclusive worldwide
licensing deal to further develop MM-II, a novel pharmaceutical
candidate for the treatment of pain in osteoarthritis. MM-II is a
novel non-opioid product that leverages the physical properties
of proprietary liposomes to lubricate arthritic knee joints, thereby
reducing friction and wear, consequently leading to joint pain
reduction. The product is based on patent-protected technology
licensed by Moebius Medical from the Hebrew University of
Jerusalem, Technion Israel Institute of Technology and Hadassah
Medical Centre. RANBAXY INTEGRATION
We are entering the third and the most important year of 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. We continue
to target US$ 300 Million in synergy benefits from this acquisition
by FY18 and are on track to achieve this significant milestone. The
synergy benefits will arise from both revenue and cost synergies and
will be driven by the combined technology capabilities, combined
R&D pipeline and the global product portfolio. GLOBAL cGMP COMPLIANCE
Given the stringent cGMP requirements of global regulators,
pharmaceutical companies need to focus on 24x7 compliance status.
Ability to successfully adhere to these cGMP standards has become a
key determinant of future for the pharmaceutical industry.
During the year, Sun Pharma made significant progress towards
24x7 cGMP compliance. Many of our facilities underwent successful
audits by multiple regulatory agencies, including the USFDA. At the
same time, remediation work continued at some of the facilities,
which have been impacted by cGMP deviations. 6 S U N P H A R M AC E U T I C A L I N D U S T R I E S L I M I T E D WE ARE ENTERING
THE THIRD AND THE
M O S T I M P O RTA N T Y E A R
O F I N T E G R AT I O N O F
R A N B A X Y I N TO S U N
PHARMA. THE SYNERGY
BENEFITS FROM THIS
I N T E G R AT I O N A R E
REFLECTED IN OUR
FINANCIALS IN FY17 AND
W E E X P E C T TO B U I L D
FURTHER ON THESE
SYNERGY BENEFITS IN
F Y 1 8 . W E C O N T I N U E TO
TA RG E T U S $ 3 0 0 M I L L I O N
IN SYNERGY BENEFITS
FROM THIS ACQUISITION
BY FY18.
Our Halol facility, which was impacted by cGMP deviations in FY15,
underwent a re-inspection by the USFDA in November 2016. On
completion of the re-inspection, the USFDA issued nine observations
for the facility. While none of these are repeat observations,
compared to those issued for the September 2014 inspection, we will
need to remediate these nine observations also. We are currently in
the process of implementing the requisite remediation steps. New
approvals from this facility will continue to be on hold till we have a
successful re-inspection.
During the year, we also had a re-inspection of the Mohali facility
by the USFDA. Post the completion of the re-inspection, the USFDA
informed Sun Pharma that it will be lifting the import alert imposed
on Sun Pharma’s Mohali manufacturing facility and remove the
facility from the Official Action Initiated (OAI) status. This has
cleared the path for Sun Pharma to supply approved products from
the Mohali facility to the US market, as well as make this facility
available for future filings. The Mohali facility was inherited by Sun
Pharma as part of its acquisition of Ranbaxy Laboratories Ltd. in
2015. The USFDA had acted against the Mohali facility in 2013,
when it ordered the facility to be fully subject to Ranbaxy’s Consent
Decree of permanent injunction. Certain conditions of the Consent
Decree will continue to be applicable to the Mohali facility even
after the lifting of the import alert. This development illustrates Sun
Pharma’s commitment to work closely with the USFDA and strive for
100% cGMP compliance at its manufacturing facilities. CORPORATE OVERVIEW 01-07 STATUTORY REPORTS 00-00
08-79 FINANCIAL STATEMENTS 80-278 JAPAN ENTRY OVERALL OUTLOOK During the year, Sun Pharma initiated the process of transferring
marketing authorisations of the 14 brands (acquired from Novartis
in March 2016). The transfer of these brands has commenced in a
phased manner beginning October 2016 onwards. Simultaneously,
Sun Pharma entered into a distribution alliance with Mitsubishi
Tanabe Pharma Corporation (MTPC) for these brands. Under this
alliance, following the transfer of manufacturing and marketing
rights to Sun Pharma, MTPC will market and distribute all 14 brands
as well as provide information on their proper use to healthcare
professionals in Japan. Through this alliance, Sun Pharma can
leverage MTPC’s specialised expertise to create a strong business
foundation in Japan. As we target moving up the pharmaceut...
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- Fall '19
- Sun Pharmaceutical Industries Ltd, N N UA L R E P O
