For the hapless citizens of Delhi, winter is a difficult time. The dipping mercury brings respite from the heat, but the air quality worsens, emblematic of India’s struggle with relentless pollution. Other Indian cities face this predicament too, leading to a rising incidence of asthmatic problems in children and chronic obstructive pulmonary diseases (COPD) among senior citizens. In fact, COPD, according to the U.S.’ Centers for Disease Control and Prevention, has been identified as the second highest cause of death in India after cardiovascular causes.
This also explains the sustained relevance of pharma major Cipla, which has built its business on an understanding of the human respiratory system and created a repository of drugs for a wide range of lung ailments. At the end of FY19, Cipla, with a turnover of ₹16,792 crore and net profit of ₹1,528 crore (according to Capitaline data), ranked No. 1 in respiratory therapy in the country with a 21.8% share of the market. Its respiratory drugs business grew at 19%, outpacing the 11% growth exhibited by the overall India market. No wonder, Cipla is at No. 91 on the Fortune India 500 list this year, up nine places from last year.
Cipla’s growth comes on the back of a period of positive change for the generic drugmaker, founded in 1935. Forty-three-year-old SaminaVaziralli, Cipla’s executive vice chairperson, and Umang Vohra, 48, managing director and group chief executive officer, have spent the last four-odd years fixing some fundamental issues that were holding back growth. The measures included exiting unprofitable global markets, divesting businesses, and establishing a front-end marketing setup in the U.S. in 2015. Cipla also acquired two U.S.-based drugmakers, InvaGenPharmaceuticals and Exelan Pharmaceuticals, in 2016.
The building blocks for Cipla 2.0 in place, the company is thinking big impact again. Like the kind Cipla had two decades ago when, under the leadership of Yusuf Khwaja (Y.K.) Hamied, it achieved global recognition for pioneering affordable access to life-saving medication for HIV/AIDS patients at a dollar a day. At that time, similar drugs were selling at $12,000 per patient per year. The afflicted in the poorest countries of Africa consideredHamied, 83, currently Cipla’s non-executive chairman, a messiah while global big pharma called him a pirate for making low-cost generic versions of their drugs.
Cipla has once again found a crusade that can have a far-reaching effect: It has joined the fight against anti-microbial resistance(AMR), a growing global concern about drug-resistant, potentially life-threatening, microbes. Apart from that, the company is planning to take on the menace of respiratory diseases internationally. Given Cipla’s established forte, it wants to capitalise on the opportunity for limited-competition, specialty drugs in this area, along with other therapies. In the pipeline, also, are products that can help deliver drugs to the human body through the lungs.
If that is not enough, it wants to build relevance beyond selling pills, by partnering customers in their health and wellness needs through strategic stakes in tech-based healthcare companies.
In a nutshell, Cipla is ready to do more.
Strengthening the core
On the back of its acquisitions and partnerships (see chart) and a blockbuster drug in the form of its generic version of Sensipar, used to treat complications in end-stage renal diseases, Cipla has created a $600-million business in the U.S. But the competition for the generic has intensified with other pharma majors launch-ing their own versions of the drug.
As a result, Cipla wants to turn its attention to a familiar area to retain the growth momentum in the region. “We will be innovators in the lung delivery space. We understand how the lung works and sell a lot of products in India and other emerging markets, which we can now bring to the U.S.,” says Vohra, who joined the company in 2015. “We also think that smaller doses of medication delivered for other ailments through the lungs can be more effective.”
Fortuitously for Cipla, many of the specialty drugs that are currently going off-patent in the U.S. are for respiratory diseases, the company's strong suit, says Vohra. Cipla plans to launch two respiratory drugs in the U.S. in quick succession: An albuterol inhalation product (in FY21) and a generic variant of GSK’s inhaler Advair (in FY22). “The real pivot for Cipla will be when we have respiratory products in the developed markets. The true test is in developing drug and device combinations for which there are virtually no existing generic products,” points out Vaziralli.
Since its suite of respiratory products is relevant for all regions with high air pollution levels, China is a compelling market for Cipla. It is in the process of commissioning a manufacturing unit an hour away from Shanghai, a city infamous for its poor air quality. This factory will make and sell respiratory inhalers, offering a convenient alternative to public nebulising stations where children are forced to spend considerable time daily.
Staying on the innovation path, Cipla, in partnership with U.S.-based company Pulmatrix, is trying to develop Pulmazole, a medicine for a fungal infection. This can be delivered straight to the lungs in small doses through an inhaler. With tablets, patients take in 10-20 times the required medication, which is undesirable, says Vohra. Also, in India, Cipla plans to introduce a first-of-its-kind inhaled insulin for diabetics, in partnership with MannKindCorp., a U.S.-based company.
Vaziralli, who worked with Goldman Sachs in the U.S. as an investment banker before joining the family business in 2011, says being a late mover in the U.S. has actually worked to the company’s advantage. Cipla was relatively less singed by the price erosion that many generic drugmakers suffered due to intense competition and supply chain consolidation—distributors had joined forces, augmenting their bargaining power. Moreover, the U.S. Food and Drug Administration (USFDA) has become far more stringent in its regulatory audits of global manufacturing sites that supply drugs to the U.S., leading to warning letters and import alerts for many drugmakers.“
The U.S. market has been rebased for a lot of people due to pricing pressure and regulatory overhang. Luckily for Cipla, we were just building in the U.S. and therefore haven’t taken much of a hit,” says Vaziralli, who is Hamied’sniece and non-executive vice-chairman M.K.Hamied’s daughter. “Because we had a relatively smaller base, you can say that we had a late mover advantage. We are hoping that having acquired assets that are closer to the finishing line, with an established proof of concept, we can hit the market with new products fairly quickly.”
A case in point is Cipla’s recent acquisition of a 33.3% stake in U.S.-based Avenue Therapeutics for $35 million, a deal which was completed in February 2019. Avenue’s flagship product is an intravenous variant of Tramadol, a painkiller that is less susceptible to substance abuse than other opioids that are creating an addiction epidemic in the U.S. As there is no approved Tramadol injection in the U.S. at present, Cipla hopes to be the first to launch this product in hospitals there.
Breaking the resistance
Apart from the painkillers, Cipla’s institutional sales expansion plan hinges on its AMR programme since antibiotics that can fight drug-resistant bacteria are usually administered in hospitals, after all else has failed. According to Access to Medicine Foundation, 10 million individuals worldwide could die annually from complications related to AMR and India carries one of the largest burdens of the drug-resistant pathogens in the world. “We believe that this[AMR] will be a major global setback in the immediate future and Cipla is working with the international community, governments and colleagues worldwide to contribute in the crusade to fight this disaster facing all of us,” Hamied told Fortune India in an email.“Personally, for me, healthcare is about combining business acumen with a humanitarian outlook. Our entire focus is centred on the welfare of patients, access to affordable medicines and that no one should be denied medications. Cipla has always stood for quality, reliability and sustainability of production of its medicines and as to what we have to do to advance newer treatment.”
In October, Cipla acquired a novel anti-infective called Elores for the Indian market from Venus Remedies that uses antibiotic resistance breakers to treat difficult infections. Earlier in July, Cipla’s U.S. arm bought an intravenous Plazomicin drug from Achaogen Inc., which acts against drug-resistant bacteria in urinary tract infections.
Charu Sehgal, lead of the life sciences and healthcare practice at Deloitte India, says that AMR is a “real challenge” that has emerged over the last seven-eight years. Doctors and pharma companies are being pressed into action to counter it. There has been much discussion on the need for circumspection in prescribing antibiotics, since they are often given as the first line of treatment, when they should be the last line of defence, she says. “Pharma companies are also being called upon to dispose medical waste at their manufacturing sites more carefully so that these antibiotics don’t seep into groundwater, which can lead to AMR in human beings,” says Sehgal. “From the point of view of research, there is obviously a need to get into the next level of discovery to treat drug-resistant pathogens.”
Looking beyond the pill
Along with the strides that Cipla continues to make in the U.S. and other global markets like South Africa, where it is now the third-largest medicine supplier, the drugmaker wants to remain “over indexed” on India. It is still Cipla’s largest market with 38% of turnover, says Vohra, who was heading Dr. Reddy’s Laboratories’ generics business in North America before joining Cipla.
The 84-year-old company continues to make and sell low-cost- and high-volume drugs in India, but it is aware of the significant winds of change blowing across the Indian pharma market. And it wants to prep accordingly. Vohra says that the drug distribution ecosystem here is consolidating similar to how it played out in the U.S. with some super distributors acquiring smaller peers. This shift is compounded by the emergence of e-pharmacies selling to consumers at discounted prices online. Moreover, the government wants to regulate and put a cap on the prices of some essential drugs for more affordable healthcare.“
These trends are forcing us to look at patients very differently and see how we can best connect with them. Also, there is a transition happening around the world from illness to wellness where patients want to manage their own health using technology,” Vohra says.
In this context, in 2019, Cipla acquired strategic stakes in two technology companies—Branded in South Africa and Wellthy Therapeutics in India—to deepen its presence in digital therapeutics. Brandmed helps patients manage chronic lifestyle diseases using technology to track intervention outcomes; Wellthyassists its Indian users in managing diabetes.“These acquisitions will give us share of voice with consumers by bringing us closer to them, while making them responsible for their health and wellness,” says Vaziralli. Sehgal of Deloitteagrees, saying that patients are no longer passive recipients of treatment, but active participants in their own healthcare.
“Technology has created a better ability to diagnose, predict, prevent, and manage diseases. Therefore, pharma companies need to partner with the entire ecosystem through collaborations,” Sehgal says.
Companies like Wellthy and Brandmed also help connect doctors with patients, and this can potentially have a positive rub-off on Cipla’s core drugs business. “With consolidation in the distribution chain post GST and higher competition, pharma companies have to shift to a demand-led model wherein they get doctors to prescribe their branded medicines,” says Dr. Abhishek Sharma, pharmaceuticals and healthcare sector analyst at IIFL Institutional Equities. “This can be aided by technology that helps pharma companies connect patients to doctors, while collecting data on what is being consumed where and by whom.”
To deepen its focus on the health and wellness space, Cipla also plans to grow its OTC(over the counter) products business, with the mindset of a packaged consumer goods maker.OTC is already a ₹200-crore business for Cipla and includes two key products—Nicotex(nicotine chewing gums and lozenges) aimed to help smokers quit and Cofsils, a sore throat lozenge. Vohra says that there are more products residing in Cipla’s prescription business which can transition to OTC; other launches are likely too. This means, OTC can potentially become a ₹1,000-crore business for Cipla, saysVaziralli, and could be spun off as a listed company in the future.
None of these plans appear to be a by-product of lofty ambition. Instead, they are the result of how Vaziralli, Vohra and the Hamiedbrothers, who sit on the board of Cipla, have read the tea leaves of change in the pharmaceutical business globally. Which explains the intent to crusade, to expand and, as Vaziralliputs it, “not remain a pharma company... we want to be a healthcare company by going beyond the pill”.
(This story was originally published in the December-March issue of the magazine.)
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