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Cadila Pharma Optimist of Record Growth

Indian pharma to revive by Apr; see better margins: Cadila

Indian pharma to revive by Apr; see better margins: Cadila

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However, increased inspection is a positive for the industry, opines Pankaj R Patel, chairman and managing director, Zydus Cadila Healthcare. This, despite the fact that the company has received a warning letter from the US regulator.

Indian companies have obvious cost advantage and this cost advantage actually helps the company to compete in the US market. Pankaj Patel Chairman & MD Zydus Cadila No sector has been as badly hit by regulators’ punitive measures as the Indian pharma. The year gone by saw numerous USFDA import alerts, red flags, etc on various pharma majors that led to their stocks being hammered significantly. However, the increased inspection is a positive for the industry, opines Pankaj R Patel, chairman and managing director, Zydus Cadila Healthcare . This, despite the fact that the company has received a warning letter from the US regulator. Also read: Bet on IT, pharma, PSU banks for H12014: Cogito Advisors Speaking to CNBC-TV18, Patel says that Indian pharma will start recoving from April 2014 and that a double-digit growth is likely. Below is the edited transcript of the interview to CNBC-TV18 Q: The company’s US business was strong last quarter with a growth of close to 30 percent and that has been actually driving the business for Cadila, what is the guidance that you can give us on the US business itself and what is the pace and pipeline of approvals in the US market? A: US as a market offers a tremendous opportunity. Firstly, the market is very large and the Indian companies have just scratched the surface. The opportunity to grow in US for Indian companies is significant for two-three reasons. The market has a lot of untapped opportunities where generics have not yet come in. Furthermore, Indian companies have obvious cost advantage and this cost advantage actually helps the company to really compete on the US market. Over a period of last 10 years, Indian companies have established themselves into US market as a reliable supplier and I am clearly seeing that this will give us more opportunity in future and the growth journey will continue. Q: How have you read the recent spat of US FDA inspections and issues that have cropped up with Indian pharma companies, is it routine or is there an element of excess scrutiny these days? A: I think US FDA has responsibility to make sure that safe returns are available for the US population and in the process they have they have stepped up their inspection in India because India has emerged as a major supplier. It is actually going to help the industry in long-term because what will happen is that industry will graduate to the next level and I very strongly believe that this is a good thing to happen for us as an industry and it is going to become a boost to future growth for the industry. Q: The domestic business actually has been difficult for most pharma companies because of the new pricing policy, when do you see domestic pharma business recovering and by how much? A: I think the industry would start recovering now. I think the initial shock period is over and the cost reduction which has happened would also over a period neutralize. So , I expect by April, May when one year will be completed of the new pricing, one would start seeing higher growth which is going to be double digit. Industry for last couple of months has already shown positive growth and I see clearly by April-May the industry will move into double digit growth. Q: In your own company what is the pipeline of new chemical entities and how much of research and development (R&D) spend are you estimating? A: We continue to spend about 7 percent of our turnover on R&D and that will be continued in future as well. We have 20 different programs under which we are continuously working, we have three lead programs which are moving towards phase II clinical strategies and we will continue our journey. This is a very long-term journey as you know it takes 10 years to develop a new chemical entity and we are moving in a way to create a basket of products which will actually make us an innovation based company. Cadila Health stock price On January 14, 2014, Cadila Healthcare closed at Rs 886.10, up Rs 24.20, or 2.81 percent. The 52-week high of the share was Rs 924.60 and the 52-week low was Rs 631.00. The company’s trailing 12-month (TTM) EPS was at Rs 34.58 per share as per the quarter ended September 2013. The stock’s price-to-earnings (P/E) ratio was 25.62. The latest book value of the company is Rs 142.20 per share. At current value, the price-to-book value of the company is 6.23.

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