Torrent's Medicine Man
by P.B. Jayakumar December 12, 2016
India's leading drug companies like Sun Pharmaceuticals, Lupin, Cipla, Wockhardt and Dr. Reddy's Laboratories had forayed into the US, the world's biggest generic drug market, many years ago - some in the early 1990s and others in the early 2000s. Compared to them, Ahmedabad-based Torrent Pharmaceuticals was a late entrant in 2008. Today, Torrent is one of the leading generic companies in the US. It has netted over $400 million in 2015/16 from the sale of its generic drugs in the US market.
A couple of recent acquisitions - one for a branded formulation footprint in India and another for dermatological products for global markets - and business backed by aggressive research-based product development helped Torrent Pharmaceuticals Chairman Samir Mehta earn the 'Best CEO' award for the pharma sector in our study this year. Its US business, in particular, is on a tear - revenues have soared to Rs 2,671 crore in 2015/16, from Rs 832 crore in the previous year, a growth of 221 per cent. This was primarily on account of the launch of a new product in the US market, Aripiprazole, which is used to treat certain mental/mood disorders. The drug had limited competition and Torrent could gain over $250 millon from this drug in a year. A year before, it had exceptional gains of $80 million from Duloxetine, another depression and anxiety drug generic with limited competition.
Ahead of the curve
Torrent has remained ahead of the curve in terms of strategic decision-making when compared to peers, observe analysts. "In domestic formulations, it concentrated on high-yielding chronic therapies such as cardiovascular and neuropathy when most of the Indian players were growing in anti-infectives (acute). It was one of the early entrants in the Brazilian market and acquired a marketing company in Germany in 2005, and struck a contract manufacturing deal with Novo-Nordisk in the Indian market for Insulin. And just when it was witnessing slowdown in domestic formulations, it acquired Elder's lucrative formulations business," note Siddhant Khandekar, Mitesh Shah and Nandan Kamat, pharma analysts with brokerage ICICI Securities, in a report.
"The delay in the US foray was not intentional. We were assessing the US market and launching products that require big investments. When all others were investing in that market, we were trying to stabilise our domestic and other overseas markets," says Sudhir Mehta, Chariman Emeritus of the company and elder brother of Samir Mehta. Torrent started off with four neurological disorder drugs for that market and slowly over the years expanded the portfolio. Now Torrent has about 61 approved drugs in the US and another 22 are awaiting the nod of the US drug regulator, Food and Drug Administration (FDA). "Of these, we think some are first to file (FTF) limited competition products and going forward, we will be filing 15-16 products every year in limited competition, complex to make generics for the US market like oncology drugs, oral solids, creams and ointment", says Samir Mehta, Chairman of Torrent Pharma for the past three years.
When Mehta (53) joined Torrent in 1986 after his commerce graduation and an MBA from an Ahmedabad college, his father and his elder brother Sudhir had stabilised the company after a roller-coaster start. The company was founded by his father, late Uttambhai Nathalal Mehta, a medical representative who worked with Sandoz for about 15 years. At the time, Torrent pioneered the concept of niche marketing - it started with TrinicamPlus, a combination of three drugs for mental disorders. It was a success and Torrent soon forayed into selling cardiovascular drugs.
The biggest break came when Torrent expanded business to the erstwhile Soviet Union (USSR) in the early 1980s. The company had the first-mover advantage and in the first year of business clocked Rs 8 crore in that geography out of a total revenue of Rs 14 crore. As the business in USSR flourished, the overall business rapidly grew to over Rs 170 crore within two-three years. But the disintegration of USSR in 1991 dealt a big blow to Torrent. "All our expansion plans to other geographies and diversification into power were affected by the USSR disintegration and it took years for us to stablise," remembers Sudhir, who manages the company along with his brother.
From the 2000s, the company again started to explore new geographies, US and Brazil among them. Today, it is the largest Indian generic company in Brazil. In 2005, Torrent did its first acquisition, Heumann Pharma of Germany, a generic business unit of Pfizer.
While Torrent's Brazilian business showed a de-growth of 17 per cent to Rs 506 crore in 2015/16, its domestic formulation business had revenues of Rs 1,825 crore in 2015/16, 13 per cent higher than the previous year. This was mainly powered by its acquisition of Elder Pharma's branded domestic formulations business in India and Nepal in 2014 for Rs 2,004 crore. Torrent is planning to launch another 160 products in the domestic market over the next five years. "We have been investing 4-6 per cent of revenues in R&D, which will increase to 6-8 per cent in the coming years," says Samir.
Torrent is also working on new chemical entity (NCE) projects and at present has seven products in the pipeline, of which one is in the third phase of trials. While most other companies are trying to develop generics of biologic drugs, Torrent followed a different strategy and inlicensed three products from Mukesh Ambani-controlled Reliance Life Sciences (two are in the market).
With a cash consolidated balance of Rs 2,000 crore, Torrent is dreaming more. "We have been looking for an acquisition in the US market and are yet to zero in on a suitable target," asserts Samir.