Last Updated : Jan 27, 2018 02:18 PM IST | Source: CNBC-TV18

Davos 2018: Looking at acquisitions that add value, says Sun Pharma’s Israel Makov

Watch the interview of Israel Makov Chairman, Sun Pharma with CNBC-TV18's Shereen Bhan from the sidelines of World Economic Forum (WEF) at Davos 2018, in which he shared his views on the road ahead for the company.

CNBC TV18 @moneycontrolcom

Watch the interview of Israel Makov Chairman, Sun Pharma with CNBC-TV18's Shereen Bhan from the sidelines of World Economic Forum (WEF) at Davos 2018, in which he shared his views on the road ahead for the company.

Below is the verbatim transcript of the interview.

Q: President Trump has just arrived in Davos, he is going to be speaking tomorrow, as a business leader what is the expectation from him?

A: Look I am a Chairman of Sun Pharma not the chairman of the state department, not chairman of any USA Government offices so I don’t want to make a foray to try to guess what the President Trump is going to say. But I am sure that he is going to say important things.

Q: What is happening as far as the pharma business is concerned specifically the generic business? We have seen the largest number of approvals coming in from the USFDA for generic is 2017 I believe the largest in US history. It has put a lot of pressure on pricing. Is it expected to get worst?

A: No, I don’t think so, first of all let them put it right, for many years the industry was complaining that the FDA is very slow in approving products. So, temporarily there is a flood of approvals, there is more intense competition. The generic industry is going into business cycle. It is always go into a business cycle once it is little bit down, once it is little bit up but the generic industry is going to stay there, it is not something that is going to disappear. It is a very important component of the healthcare industry. Without a generics the healthcare industry cannot really meet their price target.

Q: Given the fact that you expect more competition and more competitive pressure what is that going to mean in terms of business for Sun I mean US is your largest market?

A: First of all it is the largest market, but we are gaining foot and gaining market share in other markets like emerging markets and other markets. We just have to be better, we have to compete, we have to do things in a better way. We will compete and we will survive it. It is not something that is risking us and we are ready to do it and we are doing it.

Q: As you said that you are ready to brace the competition, but just from an investor’s perspective what does it do in the long term to the margins for a business like yours?

A: First of all I don’t think this business cycle is going to be very long, I don’t think so. Therefore in long term Sun is going to provide a very nice return to each investor like it did for many years. What we do, we also changed in recent years, we add to our portfolios specialities and we invest a lot in speciality products but there are different type of competition and they can provide much better margins and satisfy the shareholders.

Q: You pre-empted my question because that is exactly what I was going to ask you about the focus on the specialty side of the business and building out that portfolio. What can we expect in the near term?

A: In the near term we expect to invest more in building up our specialty portfolio. We are going also to get sales to increase sales but it is not going to be over months. It is going to be over years. It is a slow process it is not a fast process but I think that in 2020 significant specialties will comprise a significant part of our assets.

Q: Can you quantify that for us in any broad term?

A: No, but it will be much more significant.

Q: Speaking of the competitive landscape and we are given to understand that there is fair amount of pharma assets that are on the block. Is the acquisition route something that you are looking at this point in time? Anything that is looking interesting to you?

A: First of all we are looking at the acquisitions all the time. It is not just now. But we are not looking for huge acquisitions, we are looking for acquisitions that will give us really added value. That added value is by acquisition of products, products that has potential to grow or companies that have products that has potential to grow, and there is another class of a potential acquisition. This is an emerging market where we want to get a better leadership position.

Q: So would it be fair then to say that priority areas when it comes to acquisition or acquisition strategy will be a large chunk of it to be able to gain markets share in the emerging market?

A: No, I didn’t say that I said that this is one part of our search for acquisitions and another part is as I said to get products and added value of the products. An acquisition is not something that you make a decision next month I am going to make an acquisition. This is not going to happen, we have to be very patience, we are not under any pressure we are going to select than choose the acquisition that is really suitable to us and giving their best return on investment (ROI) in our terms.

Q: Anything that is looking interesting or that is on your radar currently from an acquisition perspective?

A: Of course.

Q: From a product perspective are there any gaps that you would like to plug in your portfolio which you could do inorganically?

A: First of all, we are doing a lot organically, if you look at our R&D, we expanded the investments there in the last few years quite a bit and this is for speciality products, complex products. So we have quite large, good and innovative R&D and have lot of organic growth but we also acquire products because you cannot develop everything and we want to get a critical mass of products.

Q: On investments in the specialty side of business, can we expect significant uptick as far as your R&D spends are concerned?

A: We have already increased our R&D expenditures in the last three years and we will continue to stay at the level it is need to meet our needs. It will be in capacity required to achieve our goals

Q: What are the other issues that the Indian pharmaceutical industry is grappling with - issues related to the USFDA - significant number of warnings letters etc came in 2016-2017 to Indian Pharma Company for example your Halol plant - so what is the reason for so much regulatory action from the USFDA.

A: Firstly, USFDA is making inspections not only in India but all over the world and are taking steps to correct things. The few things that wanted remediation in Halol plant, which we have been completed and we have invited them to come and are expecting them to re-inspect.

Q: Any timeline for these re-inspections?

A: US FDA is taking their own time but we have invited them to come.

Q: What is the outlook for India and other markets?

A: Our business in emerging markets is growing and in India, we are by far a leading pharmaceutical company and we keep and we protect our position as the leader, not only in general but in every medical segment. I think the macros for India looks positive and so expect positive growth from India. More people are expected to come into the economic circle and get treatment. There is a positive outlook for pharmaceutical market in India.

First Published on Jan 25, 2018 08:33 pm

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