Q2 Results: What Top Indian Firms Said On China, Deal Appetite, GLP-1s

Leading Indian companies such as Dr Reddy’s Laboratories, Sun Pharma and Cipla have deployed distinct strategic approaches to drive their business in China, a tough market to crack by any yardstick but one that cannot be ignored either.

At their earnings calls for the second quarter of fiscal 2025, these frontline firms outlined where things stand on key products, sites and what may be in store in China, amid a seeming thaw in the generally frosty relations between the two countries. The Indian companies, which are sitting on a sizeable kitty of funds, also shared their M&A outlook.

Scrip pieced together some of the key commentary on these topics, alongside the growing wider India pharma interest for a play in the globally hot GLP-1 segment.

Dr Reddy’s Laboratories

GPO Exclusion, Niche Opportunities To Build Brands

Dr Reddy’s, which has had a long-standing presence in China, has had a rough patch after the National Medical Product Administration pulled the firm’s atomoxetine hydrochloride capsules from the country’s procurement activities following certain “defects” in aspects such as manufacturing process validation, and quality control.

The Indian firm also found itself on the “violation list”, with the China National Joint Drug Procurement Office reportedly suspending “the company’s qualification to apply for participation in the national centralized drug procurement activities” until 28 February 2026.

Dr Reddy’s has two legal entities in China – a representative office that operates via a B2B (business-to-business) model and Kunshan Rotam Reddy Pharmaceutical, which is a joint venture with the Rotam Group of Canada.

Asked about the ongoing challenges in the China market, Dr Reddy’s CEO, branded markets (India and emerging markets), M V Ramana, told Scrip that apart from participating in the group purchasing organization (GPO), the JV also has niche products and “we will be able to build the brands.”

“We are currently not allowed to participate in the tenth GPO that got announced. Four of our products are included in that GPO. We’re waiting for the rules of the GPO to be published, and we would then see how this will play out,” Ramana explained.

Nevertheless, he remained upbeat about wider China prospects, noting that the company had received around nine approvals so far in the country in the current financial year.

“Our strategy for China, in terms of filing for products at the rate of about 14-15 products and getting approvals and bringing them into the market, will continue. We will continue to look for niche opportunities to build brands,” he added in an interaction with the media.

In 2019, Dr Reddy’s emerged as the first Indian generic firm to bag a win for the supply of olanzapine under China’s new centralized drug procurement program.

Day 1 Entry For Semaglutide

Like several other Indian firms, Dr Reddy’s is eyeing a play in the GLP-1 space.

CEO Erez Israeli underlined that the GLP-1 segment is “very important” for the company, primarily because of the firm’s focus on peptides, especially on the active pharmaceutical ingredients (API) side.

“In addition to semaglutide, liraglutide, etc, we are talking about 14 or 15 GLP-1s that are coming up. Obviously, those will mostly be with the patent dates that will be in the next decade. But we are going for the entire segment as we speak,” Israeli declared on the Q2 earnings call for FY25, which ends on 31 March next year.

Specifically, for semaglutide, Dr Reddy’s expects to be on “day 1 in all the markets that will be open,” where the firm has clearance to launch from an intellectual property standpoint.

“That’s basically the plan and we are ready with our internal capabilities on both APIs as well as our formulations,” the CEO added.

Dr Reddy’s and other peers like Sun Pharma, Natco, Zydus Lifesciences and Alkem Laboratories are among the local firms already advancing semaglutide solution for injection (synthetic origin) in India, going by proposals that have been under review by specific subject expert committees (SECs) that advise the Indian drugs regulator. Israeli said that the company’s plans also include oral semaglutide.

It’s not immediately clear whether Dr Reddy’s will pursue opportunities in China for semaglutide, where the patent for Novo Nordisk’s Ozempic and Wegovy expires in 2026.

“In a couple of emerging markets where you have the 2026 opportunity, wherever we feel that we’d be able to leverage the product development that we have done for semaglutide, we would be able to take the product [there],” Ramana told Scrip. No specifics were shared, though.

Peer Cipla also expects to participate in the semaglutide generic space and be amongst the first wave of entrants in India. The company had earlier indicated that it has plans for the oral version of semaglutide in India to begin with and may also look at the injectable version, depending on the market opportunity.

Sun Pharma

Ilumetri Doing Well In China

India’s top ranked drug maker, Sun Pharmaceutical Industries, appeared upbeat about the prospects for Ilumetri (tildrakizumab) in China.

Sun’s founder and managing director, Dilip Shanghvi, said the firm was “very happy” with the kind of traction Ilumetri (sold as Ilumya in the US) had seen in a relatively short period of time since its launch in China.

“Looking at the offtake as well as the projections we are getting from our partner in China, we think that the product is doing quite well,” Shanghvi said on the Q2 FY25 earnings call, but he provided no specifics on actual sales.

“We expect it to become a more meaningful product as time progresses,” he added.

Sun had in June 2019 out-licensed tildrakizumab to a subsidiary of China Medical System Holdings (CMS) for development, regulatory filings and commercialisation in the greater China area. Ilumetri was included in China’s National Reimbursement Drug List from January 2024

The listing is expected to improve local access to, and the affordability of, the therapy. China is expected to emerge as a key market for Ilumetri, though Sun, known for its understated tenor, has been cautious about ratcheting up expectations.

In Europe, Ilumetri is marketed through partner Almirall, while the product has been out-licensed to Hikma for the Middle East and North Africa. Global sales of Ilumya stood at $580m (+21.7% YoY) in fiscal 2024.

More widely, Sun has indicated that the opening of the China market and the growing penetration of generics in Japan present good long-term opportunities for Indian companies, including itself.

Disciplined M&A Approach, Ophthalmology Assets

Sun, which made its foray into the US market via the acquisition of Caraco Pharmaceutical Laboratories way back in 1997, has used deals as a key prong to build out its specialty pipeline.

It’s $576m acquisition of Concert Pharmaceuticals in FY23 gave it access to deuruxolitinib, a potential best-in-class oral JAK inhibitor for the treatment of alopecia areata. More recently, Sun struck a deal with Philogen to commercialize its late-stage cancer immunotherapy, fibromun. Sun had earlier partnered with Philogen for Nidlegy (daromun) in Europe, Australia and New Zealand.

Sun’s chief Shanghvi said that the company expects to continue to leverage its strong cash position to strengthen its pipeline with products that are “close to market.”

To an analyst’s question on whether it was becoming tougher to acquire near-commercial products in Sun’s focus areas, Shanghvi said he couldn’t really offer a historical context to such deal-making, but maintained that he doesn’t envisage a situation “where if we’re interested in an asset and since our area of focus is relatively narrow, we’d have too many competing potential bidders.”

Sun’s CEO (North America), Abhay Gandhi, had previously told Scrip that the company had been able to make acquisitions at “sensible valuations,” which enabled it to both invest in the product’s success and also potentially get the anticipated returns. “I think it’s a strategy of patience, prudence and a bit of perseverance,” Gandhi said at the time.

Sun also appears to be keeping an eye on the China R&D funnel and Gandhi has indicated that the company has started a process of evaluation, though things were at an early stage.

To a wider question around whether Sun was open to acquiring a platform technology or perhaps still preferred the drug-wise approach in its core areas, Shanghvi kept things simple. Sun’s approach to an acquisition is to find a way to manage the targeted business much better than the current owner, he said on the earnings call

“And it needs to help us strategically, help us grow our top line and bottom line in a strategic kind of way. That will continue to remain our priority and focus,” he underlined.

He preferred not to take a view about the size of the target product/market, because he believes it’s better to play in a market in which “we compete for products which are not aggressively competed [for] by big pharma. We have a relatively small subset because we are a small company and we need to recognize and reflect that in our action and plan.”

Shanghvi also indicated that Sun continues to look at opportunities that can enhance its portfolio in ophthalmology, but underscored that it is “very disciplined” in its approach.

“We don’t get emotionally committed to the new product. So, unless it makes business sense we don’t progress. We haven’t unfortunately been able to identify something which is both exciting and can help us create long-term value,” he explained in response to an analyst’s question.

As of 30 September 2024, Sun reported a net cash position of $2.6bn at the consolidated level.

The company’s specialty pipeline includes a promising early stage GLP-1 receptor agonist, GL0034 (utreglutide), indicated for obesity, which is expected to move into Phase II studies by the first half of 2025. The company expects to look for a “global partner” to develop and market GL0034 internationally.

Cipla

China Facility FDA Approval Opens Up Opportunities

Cipla received a significant fillip recently when its facility in Qidong, China cleared an audit by the US Food and Drug Administration, opening up potential new opportunities for the Mumbai-based firm. The company hopes to commence supplies to the US by the second half of FY25 and indicated in its latest annual report that it is looking to supply respules from its newly approved China facility.

Meanwhile, Cipla (EU) Limited, a wholly owned arm of the company, recently completed the conditions with respect to the acquisition of a 6.9124% equity interest in Cipla (Jiangsu) Pharmaceuticals Co. Ltd., China, making the latter a wholly-owned step-down subsidiary.

Cipla’s managing director and global CEO, Umang Vohra, said that the Chinese arm was largely set up for manufacturing. Its site, which has been cleared by the FDA, can manufacture for several markets outside of China, including the US.

While the first goal is to use the entity/capacity for manufacturing, the company also has a list of pipeline products specifically for China. “Some may be from the facility itself or may not be from that facility,” he noted at a press briefing.

On whether Cipla had filed products like generic Pulmicort (budesonide) respules for the China market, Vohra declined to provide granular specifics at the company’s earnings call, but said that “you can expect us to be a player in that market because of the facility in China.”

Cipla had earlier won a bid under China’s volume-based procurement (VBP) plan to supply esomeprazole magnesium delayed-release oral suspension in 10/20/40mg strengths, emerging as the only VBP bid winner for all three strengths.

Deal Interest In The US

Cipla also continued to indicate an interest in deals, with India and the US being the key markets of focus for now.

Cipla’s global chief financial officer, Ashish Adukia, said that the company would look to make acquisitions in India in the domestic formulation space mainly, followed by deals in the US.

“We keep looking at a differentiated portfolio, which comes with some stickiness in the revenue and [is] not facing erosion and where there is some entry barrier. We look at those kind of portfolios in the US and as we speak we are looking at some,” Adukia disclosed on the Q2 FY25 earnings call.

Adukia elaborated that in the US the company was looking at assets that are in the “institution side.”

“So, more injectables kind of assets where we have built infrastructure of an institutional business through lanreotide now. The idea would be to also feed that with products so that you can actually realize some economies of scale out there,” he added.

Cipla’s cash and cash equivalent balance stood at INR84.12bn ($996m) as of September 2024.

To an analyst’s question around whether the company was comfortable with the valuation of assets currently available, Adukia underscored that just because the firm has cash, it won’t pay more than what it views as the value of the asset.

“The value of the asset depends on what it can do at the base level and what synergies are available with our business,” he added.