Margin improvement will happen once new approvals come in: Pankaj Patel of Cadila Healthcare
In an exclusive chat with ET Now,Pankaj Patel, Chairman & MD at Cadila Healthcare spoke extensively on the SEZ at Ahmedabad and the inspection at the other unit of the company. Edited excerpts:
ET Now: We believe that your Ahmedabad SEZ was also inspected in the month of Jan last week. Can you confirm that for us, give us an indication of what happened there?
Pankaj Patel: Yes the SEZ facility also was inspected in the last week of January and the inspection was also smooth and only one of 483 which is a minor one was issues which is already addressed.
ET Now: So what is the status of your observation at the Ahmedabad SEZ and can you give us more details on that?
Pankaj Patel: It was just simple process, change in SOP with respect to particular thing where the issuance authority to be changed which has been already done.
ET Now: Sources indicate that the Baddi and Ankleshwar API will be inspected next, can you confirm that?
Pankaj Patel : So our next facility which is going to be inspected is Baddi facility.
ET Now: So when is that Baddi inspection happening?
Pankaj Patel: It should be in next maybe two weeks or so.
ET Now: You have indicated that the Moraiya plant has got 483 no observations. Can we start expecting and anticipating new approvals from this plant?
Pankaj Patel: So usually after the inspection is over, the report is submitted to the agency and the agency then study the report and finally releases the warning letter and then approval process starts. Our estimate is that it should take couple of months before we will start seeing product approval coming in.
ET Now: Does this event also mean that the warning letter is lifted and you can get approvals immediately is what I am trying to understand?
Pankaj Patel: So I think it is very clearly we can say that we had an inspection subsequent to the warning letter. The inspection was concluded without any observation so that is what we have informed the market. Based on that we believe that now the warning letter will be lifted, however, there is a procedural aspect involved in lifting the warning letter and start giving approvals which may take couple of months as I mentioned.
ET Now: Which are the major products that are filed in from this plant and since the start of the events with the US FDA, how many exactly have been transferred?
Pankaj Patel: So I think very important part is that we have significant number of products which are pending approval from this plant including some key products like Lialda which will be now clear for approval sooner. Significant part of our ace product, important products are from this facility.
The second point is that we have moved about 12 products out of this facility to our another facility so that is already approval we have got from a new facility and we have launched it. As far as the site transfer for pending approval product is concerned, we believe that though we have filled from other site, now we should be getting approval from Moraiya only.
ET Now: Lialda, Prevacid and Toprol are filed from here, can they see a launch from here over the next six months?
Pankaj Patel: I cannot give you timeline. It depends upon when FDA approve but we believe that yes all of these important products would be launched in the financial year FY18.
ET Now: Last time we believe that only the oral solid part was inspected and not the full plant, now was that the case or was the entire facility inspected this time?
Pankaj Patel: The entire facility was inspected.
ET Now: Now you have 200 pending ANDA approvals, how many of these are filed from Moraya?
Pankaj Patel: So about 60 are from Moraya facility which are pending for approval and many of them we should see the approval coming in.
ET Now: What has been the amount spent on the remediation of the Moraya plant till now?
Pankaj Patel: Well I cannot give you a specific number but we invested over a period of last two years in terms of improving the overall automation in the plant and also doing significant work in the culture building for quality in the whole facility. So investment number I cannot give you specific but we have invested significantly to make the plant fully compliant and the result is that now that FDA was satisfied with our plant inspection this time.
ET Now: In the conference call you said that the Cadila management expects at least 15-20 approvals every year ex Moraya, now how will this change post this clearance?
Pankaj Patel: So we should expect significant approval coming in, in FY18 we expect 40 plus approvals may be happening now.
ET Now: Cadila has also further gained market share in the Asacol HD to 60% what is the way ahead for this drug and would you have the option to launch your own version too?
Pankaj Patel: I think Asacol, we have currently launched a generic, authorised generic and we currently intend to continue with authorised generic.
ET Now: If you see the Q3 numbers the EBITDA margin has fallen to a three-year low because of the high pricing pressure and the lack of new launches as well, do you think this clearance will now change this trend for you in the next quarter to come?
Pankaj Patel: Definitely once we see the product approval happening, including some of the very important products, we will definitely see the margin improvement happening.
ET Now: We believe that your Ahmedabad SEZ was also inspected in the month of Jan last week. Can you confirm that for us, give us an indication of what happened there?
Pankaj Patel: Yes the SEZ facility also was inspected in the last week of January and the inspection was also smooth and only one of 483 which is a minor one was issues which is already addressed.
ET Now: So what is the status of your observation at the Ahmedabad SEZ and can you give us more details on that?
Pankaj Patel: It was just simple process, change in SOP with respect to particular thing where the issuance authority to be changed which has been already done.
ET Now: Sources indicate that the Baddi and Ankleshwar API will be inspected next, can you confirm that?
Pankaj Patel : So our next facility which is going to be inspected is Baddi facility.
ET Now: So when is that Baddi inspection happening?
Pankaj Patel: It should be in next maybe two weeks or so.
ET Now: You have indicated that the Moraiya plant has got 483 no observations. Can we start expecting and anticipating new approvals from this plant?
Pankaj Patel: So usually after the inspection is over, the report is submitted to the agency and the agency then study the report and finally releases the warning letter and then approval process starts. Our estimate is that it should take couple of months before we will start seeing product approval coming in.
ET Now: Does this event also mean that the warning letter is lifted and you can get approvals immediately is what I am trying to understand?
Pankaj Patel: So I think it is very clearly we can say that we had an inspection subsequent to the warning letter. The inspection was concluded without any observation so that is what we have informed the market. Based on that we believe that now the warning letter will be lifted, however, there is a procedural aspect involved in lifting the warning letter and start giving approvals which may take couple of months as I mentioned.
ET Now: Which are the major products that are filed in from this plant and since the start of the events with the US FDA, how many exactly have been transferred?
Pankaj Patel: So I think very important part is that we have significant number of products which are pending approval from this plant including some key products like Lialda which will be now clear for approval sooner. Significant part of our ace product, important products are from this facility.
The second point is that we have moved about 12 products out of this facility to our another facility so that is already approval we have got from a new facility and we have launched it. As far as the site transfer for pending approval product is concerned, we believe that though we have filled from other site, now we should be getting approval from Moraiya only.
ET Now: Lialda, Prevacid and Toprol are filed from here, can they see a launch from here over the next six months?
Pankaj Patel: I cannot give you timeline. It depends upon when FDA approve but we believe that yes all of these important products would be launched in the financial year FY18.
ET Now: Last time we believe that only the oral solid part was inspected and not the full plant, now was that the case or was the entire facility inspected this time?
Pankaj Patel: The entire facility was inspected.
ET Now: Now you have 200 pending ANDA approvals, how many of these are filed from Moraya?
Pankaj Patel: So about 60 are from Moraya facility which are pending for approval and many of them we should see the approval coming in.
ET Now: What has been the amount spent on the remediation of the Moraya plant till now?
Pankaj Patel: Well I cannot give you a specific number but we invested over a period of last two years in terms of improving the overall automation in the plant and also doing significant work in the culture building for quality in the whole facility. So investment number I cannot give you specific but we have invested significantly to make the plant fully compliant and the result is that now that FDA was satisfied with our plant inspection this time.
ET Now: In the conference call you said that the Cadila management expects at least 15-20 approvals every year ex Moraya, now how will this change post this clearance?
Pankaj Patel: So we should expect significant approval coming in, in FY18 we expect 40 plus approvals may be happening now.
ET Now: Cadila has also further gained market share in the Asacol HD to 60% what is the way ahead for this drug and would you have the option to launch your own version too?
Pankaj Patel: I think Asacol, we have currently launched a generic, authorised generic and we currently intend to continue with authorised generic.
ET Now: If you see the Q3 numbers the EBITDA margin has fallen to a three-year low because of the high pricing pressure and the lack of new launches as well, do you think this clearance will now change this trend for you in the next quarter to come?
Pankaj Patel: Definitely once we see the product approval happening, including some of the very important products, we will definitely see the margin improvement happening.
