Two years ago, drug companies were accused of “getting away with murder”. Perhaps, President Trump was overstating it. Theatrics is a politician’s forte. But, Indian companies soon began facing the heat in that market. Once their favourite hunting ground, the US market turned into a nightmare. There was price erosion, worsened by the consolidation of buyers and an increase in the number of suppliers. Biggies with high exposure — Sun Pharma or Lupin or Dr Reddy’s — are still grappling with the crisis.
Amid these turbulent times, there is one company, which has a business model in place, to tackle the headwind emanating from the US market — Ahmedabad-headquartered Torrent Pharma. In 2014, the company had decided to focus on domestic business and specialty products. This strategy has now paid rich dividends.
Speaking exclusively to Outlook Business at their plush office facing the Sabarmati river, Aman Mehta, chief strategy officer, says, “It was a conscious decision to continue with a greater focus on India, although we had a robust pipeline in the US market. How we looked at the US five years ago is very different from how we are looking at it now. It enabled us to allocate more resources to the branded markets.” His father and chairman of the company, Samir Mehta, has been instrumental along with his brother Sudhir Mehta in the strategy shift that Torrent Pharma undertook. Similarly, the brothers have steered the Torrent Group following the ‘diversify to minimise risk’ mantra.
Currently, the domestic market accounts for 42% of the company’s revenue, while the troubled US market contributes 21%. Torrent Pharma also has a strong presence in Brazil and Germany, which contribute 13% and 9%, respectively, to the revenue. With lesser dependence on the unfavourable US market, strong geographical diversification and fortifying of India business, Torrent has managed to grow at a decent pace over the past five years. Sales have grown at a CAGR of 13% to Rs.74.62 billion and Ebitda margin has expanded