Read the Conversation
EF: Taking the need to balance different economic and political situations into consideration, do you see the year 2023 as a challenge or an opportunity?
SN: Where there is a challenge, there is always an opportunity. The Mexican pharmaceutical industry is the second-biggest market in Latin America and the 11th-largest globally. The market has a solid set of fundamentals in place that cannot be easily affected by overnight changes. There may be some momentary disruptions here and there, but the market has been consistently growing, with segments like the prescription business and the generic business all indicating positive growth.
2023 is a year of opportunity, as seen in the major changes occurring in public sector procurement. Government policy has opened up the space for global international tenders, thereby giving companies with global footprints an opportunity to secure lucrative contracts. To effectively seize these opportunities, two elements are required. The first is agility in terms of supply, and the other is cost leadership. These two components are crucial for success in this particular market.
The fundamentals in the prescription business have not changed much other than the inflationary corrections that are happening in the market. However, if you look at the prescription business in terms of growth, it has been affected by the slow pace of regulatory approval for new products. This is a cause for concern because new product launches drive growth in the prescription business. Unfortunately, the trend indicates a decline in new products and a stagnation in the market as a result of the backlog of approvals. We are in this market and have felt the effect of this stagnation, with some of our important products delayed due to approval delays, and that has had a negative effect on our growth. Despite these challenges, I foresee growth in 2023, aided by the course correction in the generic drug business. There was stagnation in this business because of the lack of new launches. I strongly believe the Mexican pharmaceutical industry and healthcare sector are going to grow.
EF: What are your thoughts on COFEPRIS and its role in stagnating innovation and approvals?
SN: An improvement in COFEPRIS' operations, specifically with regard to regulatory approval, would lead to growth in the pharmaceutical industry, which would positively affect the economy. Companies rely on their existing offerings and new launches to grow, but they can only achieve this if their products are getting timely approvals and new approvals are dwindling in every company across the industry. We have delays of as long as two years, and that negatively affects investment and growth.
EF: How do you assess the progress of your goal to create value generics that will work as growth engines, and what are your future plans?
SN: This is a long-term plan. Nothing has changed in our fundamentals, and we remain committed to investing in our R&D to churn out these products, whether they be in incremental innovation, complex generics, biologicals, or some other form of first-to-launch generic product. We hope that the approval timeframe improves and that the launch of these products allows us to enter newer therapeutic verticals more quickly.
The plans are in place, and we have filed many interesting products in terms of incremental innovations and complex generics. The only setback is the approval timeline. I'm confident that the government will realize the importance of innovation in the pharmaceutical sector, as it will provide more options to the end user and improve market accessibility through competition, thereby lowering prices to the end user's benefit. This will be advantageous to all stakeholders and the overall economy. I'd like to encourage the government to create policies that speed up the development and approval of products that add value to the industry.
EF: Speedy regulatory approval is an important element of innovation. Should Mexico look to emulate the Singapore model?
SN: I believe there are lessons to be learned from the Singapore model. In 2014, Mexico used to complete regulatory approval in 8-12 months. There has been a significant shift in the last decade, resulting in delays. I agree that regulation should be stringent, but it should be done within reasonable timelines.
EF: Zydus showed impressive growth in the recent Q3 results. Could you tell us about your key growth drivers in Mexico? Which areas of products are driving growth, and where do you see further opportunities to expand your operations in the country?
SN: Globally, Zydus has an interest in multiple areas. It has a presence in vaccines, biologics, complex generics, and small molecules. To create a similar multi-presence approach in Mexico, Zydus requires a sizeable investment. We have evolved in Mexico. We have a strong presence in CNS systems, and we have new products in the pipeline that will be a growth driver for us in that particular segment. In 2025, depending on the regulatory approvals, we will be entering two new therapy areas, and that will bring in new investment and make us more competitive. We also want to leverage local partnerships in areas where we currently do not participate.
The public procurement market is another growth engine that offers unique opportunities for us to exploit. We have a global footprint and can use our reference countries, such as the USA and France, to leverage these opportunities. This will add value and healthy competition to the procurement process for the benefit of all stakeholders.
EF: How is Zydus promoting innovation in Mexico, and how do you assess the potential of the Mexican healthcare industry to become an innovation hub on a Latin American level?
SN: Investment in innovation usually happens in two steps. One is in R&D, and the other is a byproduct of R&D; how does this add value to the participating market? If you want to bring new innovations to the Mexican market, you need to go through the New Molecule Committee and conduct local clinical trials. These are the things that bring investment here and support innovation-associated organizations such as CROs, whose exposure to new molecule inventions would give support to the local innovation cause. It's very difficult to have an R&D program in every country. Usually, you would have one central R&D centre in New York, for example, where all the research is done, and then they would bring those products that would require investment in terms of clinical trials and analytical methods. Biologics is a rapidly evolving area where the infrastructure required for clinical trials and basic QC is not currently present in Mexico. However, as more players enter the market, all these CROs will invest in the infrastructure needed to deliver on those expectations, and we will be able to run a local QC, local stability, and a local CT.
We are also creating value in terms of increased participation, infrastructure developments, and market access for patients. Our focus is on Mexico, where we want to introduce new products that will enable the market to gain exposure. CROs will get exposed to those molecules that are not currently available, and that will add value to the bandwidth of their businesses.
EF: Yaneth Giha from FIFARMA spoke about the need in Latin America for stakeholders to work together for the sustainability of the healthcare system. Could you elaborate on how you partner with different stakeholders and companies within the sector and how you ensure the sustainability of your operations?
SN: It is incredibly difficult to break into the market alone. For example, if the market requires a ten-million-dollar investment, five companies could come together to bring a new molecule to market. Each would have to spend at least two million dollars. However, by the time those five companies gather, the market will have changed, and economic factors will have pushed the investment price higher. The return on investment gestation period is quite long, especially in monoclonal antibodies. It’s a very costly endeavour, especially when entering a highly regulated landscape. Collaboration reduces those costs, and the expenses are divided among the partners. It becomes a synergy where each party brings a unique strength. For example, one party may specialize in R&D and the other in marketing. If they collaborate, the task of bringing a product from the lab to the market becomes easier. If one party tries to go about it individually, it’s a tall order because the landscape may be unknown to them. The cost of going over that learning curve is pretty high. We can leverage the partners' strengths and identify the right partners who are skilled in those particular therapy areas.
R&D will be able to churn out various therapies to cover different areas such as gastroenterology, cardiology, psychiatry, and neurology. It's not advisable to have a presence in all the therapy areas; instead, focus on one asset that has much intrinsic value. For example, I would identify a partner who is good at cardiology. I don't have a long-term plan to be in that particular scene, but I have three assets that I want to leverage in this market for the end-user and partner's benefit. This is how the R&Ds complement each other. We have been quite successful in building relationships with some of the local companies that are interested in our products, and they market them on our behalf and identify opportunities. This results in a win-win situation.
EF: Zydus Mexico will be celebrating ten years of operation in 2023. How has that journey been?
SN: Yes, we will be celebrating our 10-year anniversary. I think it's been a fulfilling journey. I joined Zydus after one and a half years of commercial operation, and at that time, we were in an investment mode. The decisions that we made in terms of participating in specific segments and consolidating others have worked well for us, and we are now in an expansion mode. We have grown, and we have overcome all the challenges that we have faced in the last ten years. Management is very confident that the business can be scaled to the next level with more value addition. Relevance is one of the most important features of any company. For example, if an organization has to survive for 70 years, it has to keep its relevance in the market; otherwise, it will become extinct.
The lessons of history are very clear, and the people who don't keep a company relevant will either sell it or merge with some other companies and vanish. A company's purpose and vision must be aligned and consistent in terms of delivering relevance. Our relevance in the Mexican market is that we bring quality products and fill in the gaps if they are not available, thereby improving market access. That approach has allowed us to concentrate on a few key areas of therapy. This enables us to develop investment discipline and achieve our break-even goals. Everything has gone well with Zydus, and we are now celebrating one decade. We have a new vision. We are on the cusp of past glory, present reality, and an exciting future journey. This will not be complete without innovation. That innovation will take place in the next five years. We want to have an element of innovation that adds value to the end users as well as the country in which we operate.
EF: If you had to open your own startup company in the Mexican health sector, what would you create and why?
SN: I see many opportunities in the digital landscape. There are a lot of cutting-edge analytical tools out there. Many disruptions are happening in every industry because of digital innovations and the speed at which the adoption of technology is happening, whether it is in a research area, a supply chain area, a manufacturing area, or marketing. Every industry is going through digital disruptions, and I think there is a huge scope in which, as a startup, you need to be distinctive. If you look at the pharma industry, digital adoption is actually a greater opportunity in terms of A.I. and analytics. The slate is still empty, and not much has been written. That is the area in which I feel that there is a great opportunity in Mexico.
Secondly, if you look at the other areas of technology transfer, such as co-marketing, this is always a win-win collaboration because the pharmaceutical industry's return on investment gestation period is very long. If you are smart with your collaborations and identify the right partners with the right attributes, synergy can do magic. I think global companies need to think along those lines. That will reduce the gestation period for the return on investment. The learning curve will be reduced through artificial intelligence. Similarly, in collaborations, if you do proper analytics where one party creates the asset, and the other leverage their strength in the market, everybody makes money. That is the order of the day that I feel the industry should move more aggressively towards so that everybody survives and prospers.
EF: Our project is called the "roadmap to the future." If you had to create a road map and base it on three pillars, what would those pillars be?
SN: Once upon a time, Zydus used to be classified as a pharmaceutical company. If you look at the healthcare sector today, pharmaceuticals are no longer just pharmaceuticals. It is now a biological, genetic, or medical device company. Zydus Lifesciences Limited, for example, is the result of a rebranding after a 27-year journey. We have evolved and transformed ourselves in response to the changing times. We have a legacy of over 70 years in healthcare of being dedicated to life in all dimensions. As a pharmaceutical company, we are supposed to deal with only small molecules. Healthcare solutions have changed many technologies, such as CRISPR technology in genomics, monoclonal antibodies (mAbs) in biology, small molecules, and medical devices, all of which are providing cutting-edge solutions for unmet medical needs. Healthcare is no longer focused on pharmaceuticals only. It has diversified. There are many solutions and many realities.
If you assume that you will continue to be a pharmaceutical company for the next decade, you are going to be extinct because the mAbs are taking over the small molecules, and the small molecules are overtaking devices, which are overtaking something else. You must consider your presence in all of these, whether it is preventive medicine such as a vaccine, an acute therapy medicine, or genomic medicine. All these things are happening in parallel, and a company has to have a vision and invest in each pillar.
The first pillar is going with the trend. First, you have to offload your baggage. That baggage that ensured your survival for 70 years will not ensure your survival for the next 70 years. You have to learn what the future challenges are. You have to reinvent your business through a new vision and rebranding. This is extremely important for any company to move forward. This is the first fundamental because you have to understand today's and tomorrow's realities, no matter how big and strong you were in the past. Disruptions are happening at a rapid pace in all industries and threatening well-established companies. Assess your business and prepare it for tomorrow's challenges. Zydus has been working in mAbs, biologics, vaccines, devices, and small molecules in its own way because it requires substantial investment. We have the vision to be an innovative company and want to transition from being generic to being innovative in the next decade.
The second pillar involves expanding bandwidth or expertise. It is critical that you understand the investment or cost of expertise, whether you are collaborating or forming a partnership. You can't achieve everything on your own.
Once these two pillars are in place, you need to solidify your plans. You must have a strong level of conviction to execute these plans because many large organizations start well but fizzle out pretty quickly. A company must survive regardless of how many times its CEO is replaced. There must be consistency and trust in the process. These are the three important pillars that I strongly feel we should have.
EF: Is there any final message that you would like to give or something that we didn't ask you about that you feel we should be talking about?
SN: COVID has taught us many things and has caused us to elevate and rewrite many practices, not only in our industry but in every industry. This particular experience has helped us be more prepared in the case of a pandemic. This has led to some adjustments in the global supply chain. It has also highlighted the importance of a country's self-reliance to protect its own people. The role of healthcare workers is now at the forefront, and we have discovered previously unknown potentials for online pharmacies and telemedicine. Telemedicine has evolved, as has the need for industry and government collaboration.
Analytics has come into the spotlight. Today, they have become a major tool. A lot of positive practices have emerged because of COVID. I think we need to adapt and consolidate those things that will enable the industry to expand further and do well in terms of the overall economic perspective. I believe in the saying that "the health of the country is the wealth of the country." This is extremely important because we are all stakeholders. Healthcare spending is the most difficult challenge for every country's budget. It is growing phenomenally. If you look at it from that perspective, healthcare has created an economy. So many things are improving. It is extremely important that a country's health policies be a priority for any government, and the direction should be how to make health markets more accessible. Human life must be preserved by making access to healthcare more affordable. I believe that every government—not just the Mexican government—and every industry must work together to make tomorrow better for future generations.