Sun Pharma Annual Report-FY17.pdf - AUGMENTING GROWTH ENGINES 2016-2017 SUN PHARMACEUTICAL INDUSTRIES LTD Rea chin g Pe o p le To u chin g Live s

Sun Pharma Annual Report-FY17.pdf - AUGMENTING GROWTH...

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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
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