See Rs 400cr increase in top line over next few yrs: Hetero

Menaka: Can you talk us through the opportunity that Sofosbuvir presents to your company in terms of both what it will mean for your bottom line and the kind of tie-ups that you are looking at besides what you have already announced with regards to Dr. Reddy’s?

A: Sofosbuvir will present a big opportunity for our organisation. As of today there are around 11 million patients in the county who need treatment for Hepatitis C and only around 3,000 patients are getting treated in the country because the earlier form of drugs of interferon was not easily accepted and success rate was only 40 percent. Sofosbuvir presents a success rate of more than 95 percent in terms of therapy and so, it will make a huge impact in terms of patient access because of the recent launch of Sofosbuvir.

Menaka: What impact will it have on your company’s top line and bottom line?

A: In the first year I do not think it is going to make a significant impact in terms of our top line and bottom line but in next couple of years, as the number of patients will increase, we are going to see a minimum of around Rs 300-400 crore increase in terms of the top line.

Menaka: You were going to talk to us about your other tie-up plans. Currently, do you only have a tie-up with Dr Reddy’s to distribute the drug?

A: Apart from Dr Reddy’s we have a tie-up with Cipla, we have a tie-up with Ranbaxy and we are also marketing the product ourselves. The basic objective is because Sofosbuvir is a restricted product wherein the number of patients is very small, we want to increase the customer base and more and more companies marketing these products are going to increase their customer base, that is why we have tied up with other companies as per Gilead’s alliance with us.

Ekta: What will you be pricing the drug at as compared to the players such as Natco that have already launched the drug as well as Gilead which is pricing it at USD 300 approximately in the Indian market? What would be the revenue share that you might have with Gilead as well as with the likes of Dr Reddy, Cipla and Ranbaxy?

A: If you look inside, Gilead has maintained a pricing of around USD 900 for a three month therapy. USD 300 is for a month therapy. So, we are trying to price in the same range of USD 900 for the complete cost of therapy of three months that is 12 weeks. So, in terms of relationship with Gilead, we have to pay a nominal royalty to Gilead for the sales which we make as part of our overall arrangements into place.

Menaka: Can we also talk about, besides the opportunity that Sofusbuvir presents to your company, the other one has unfortunately been the swine flu drug, an ailment that as hit Mumbai very hard over the last few months and in fact across the country. What has your supply situation been with regards to that, while I hesitate to talk about it as a revenue opportunity given all the pain that all patients have been facing through the country, I would still like you to talk about it.

A: If you look inside in terms of swine flu preparedness, Hetero is a licensee of Roche since past 10 years. As part of the licensee obligation, we have to maintain a fixed inventory of the product irrespective of whether there is a demand or not.

We have always maintained a buffer stock of about 1 million patients for the product in inventory in the form of our active pharmaceutical ingredient or in the form of the finishing dosages. So supply was never an issue in terms of swine-flu drug. As of today, in last three and a half months, we did revenue of around Rs 20 crore in terms of the swine flu drug, our brand, Fluvir.

Ekta: At present, how much is your production capacity for Fluvir?

A: In terms of production capacity on a monthly level, we can give around one million doses. Once our active pharmaceutical ingredient (API) is available, we can increase to around 15 million doses per month in terms of production.

Production is not an issue in terms of the capacity because being a licensee of Roche, we have certain obligations and we always keep an inventory of one million patients equivalent at any point of time for any emergencies of this sort.

Anuj: What happened to your IPO plans and when can we see that because you had one plan way back in 2007, after that we never heard anything on that? Now it is great going for Pharma so would you be looking to tap the capital markets?

A: I can only laugh at this question.

Anuj: Why so? Was it because you had earlier looked at an option like this?

A: No, we have never looked in the past as well. It was just a preliminary feeling but we have no intentions of going to IPO at any point of time right now.

Ekta: We have spoken about Competition Commission of India (CCI) approvals that have come in for two big domestic mergers that have taken place within the pharmaceutical space. Sun, Ranbaxy as well as Sharsuna and Strides. Does domestic acquisition interest Hetero at all and can you enlighten us on this in terms of your cash on books at this point?

A: If you look inside we are increasing our domestic presence in the country. We have already expanded our field force from around 1,200-2,000 and in next two years of time we want to increase our field force to around 3,500 by adding another 3-4 divisions.

Our focus on domestic (market) has increased in last two to three years of time and we will be increasing our focus in the Indian market as well, we feel the market is growing very fast. With the changing in the environment conditions and the dynamics of the people’s thought process, we feel that Indian market is going to grow in the next couple of years at a very good rate.

Menaka: What do you think are the opportunities for Hetero in the days to come or in the months to come? What is your outlook on the Indian Pharmaceutical Industry?

A: If you look inside for the opportunities for Hetero as a company we have more than 200 products in place in our basket and among these 200 products we are selling only around 25-30 molecules in big numbers. So remaining 175 molecules have got good potentialities and we feel that with these 175 molecules in next couple of years of time, we expect to double our sales.

Menaka: So that is specifically for your company in terms of regulatory challenges, United States Free Trade Agreements (USFTA) challenges, outlook for the industry for the months to come because the US is one of your key markets as well?

A: If you look inside, as part of our strategy, US is one of our key markets but it has never been more than 10 percent of our total sales. We have diversified our business into so many markets whereas 90 percent of the sale comes from the markets other than the US.