Transcript

[Sandeep Murthy] You would think that we would set up a panel with someone who would have great things to say about generics and talk fabulously about the scope and scale of the industry and the opportunity. 

The first thing that happened when the two of them met today... she said, you're killing my industry. 

And he said, no, but we're helping it. 

So maybe that's a good place to start. Sid, maybe you can start by saying, how are you helping someone lose margin? 

[Namita Thapar] Start with the killing.

[Siddharth Gadia) I think this is the only session, contradictory personalities… all sessions you had one supporting the other.

[NT] Yeah, I'm not going to support him at all.

[SM] We have to make sure the other side of the story is told as well.

[SG] I think whatever we are riding on has been built by a lot of businesses before us. But, how we are helping the (pharmaceuticals) industry is that we are really showing the way to future growth. 

There are many studies. In India, the market is $25billion or $28 billion. Not because of the price but because of the sheer number of people who are not taking medicine because they cannot afford medicines. So the market has to expand a lot, provided medicines become affordable and doctors and healthcare become accessible. 

The cost of medicines has to be reduced… we have such a big population now, right? 1.5 billion population, but not many people are able to afford medicine. 

If medicines become affordable for those people, it will become the next big thing.

[SM] So you're expanding the market.

[NT] Jokes apart, generics are needed because he's absolutely right. In India, it's not just the metros, right? You have not just the upper class, but you have the middle and the lower middle class, where affordability is a very big issue.

You need many more Zenos and many more pharmaceutical companies to bridge this gap. 

But I think from a purely capitalistic perspective, it is hurting the pharma industry, because there was a time when we used to enjoy 12% plus growth. In the last couple of years, we've been somewhere around 8%. 

And, I think when we really look at what has slowed down the growth, it's really the onslaught, or just the increase or the penetration of generic-generics. And not just pharmacies like him. I think he said 180 pharmacies. There's a crazy number, right?

But not just that… even hospitals. So Apollo now has their own private label, which is also in the generic-generic space. There's substitution. Because when you're sick, you'll go to the pharmacy that's inside the hospital and then they'll substitute the brand that the doctor has written with their cheaper brand. So this whole substitution at the chemist level is a trend now, and that's the way things are going to be. 

Pharma companies have to shape up and come up with truly innovative ways of convincing the consumer that there is still value to paying a little more for our brand versus the generic-generic. And how we convince a consumer of why we are better, whether it is a certain molecule or lesser side effects, what it is that we offer that’s different for which we can charge a higher price, that onus is now on us.

[SM] Given the commoditized nature of it, do you think that it’s viable, possible to actually differentiate in any way?

[NT] I'll give you two answers. One is differentiation. So for example, hypertension, most common condition… We've come up with something called chirality. And chirality means you give half a dose without the side effects. So take pedal edema. Ankle swelling is very common in hypertension. Our chiral molecule reduces pedal edema by 80%. Something like that, if you charge a higher price, it's got an innovative angle to it. Doctors are prescribing it. Patients are buying it. 

Now, let me give you another example of where innovation doesn't matter. 57% of Indian women are anemic. With 57% being anemic, most are not taking the medicine. There are 45,000 gynaecologists  in India. Emcure is number one in women's health. My number one brand, which is Orofer, only 9,000 gynaecologists prescribe. So when I make my strategic plan for the next five years, it's about how I can go from 9,000 to 45,000.

[SM] Why only 9,000? What's the issue? They're not prescribing anything?

[NT] A lot of them are not prescribing because they're not detecting it. They're not asking the woman to go and get a blood test done on time. They're not detecting the signs. Or the women, they're supposed to take it long term. There's a compliance fall-off in this country. People take it for a month, and then they stop taking it. And then they don't go for their retest to see if the hemoglobin levels have gone up. 

So it's a very chalta hai attitude in this country. If we can tap into more doctors prescribing, more women not stopping their medication, there's scope for everybody. It's a very untapped healthcare market in this country.

[SM] That's a lot of what you've (Siddharth Gadia) talked about in the past as well, right? The idea of being a health solution provider. And if you even look at the new format stores, you’ve really tried to embrace this idea of providing much more than just a distribution point for medicine.

[SG] Correct. I think what pharma companies can do more and I think the one thing which they will definitely do… currently they have no engagement with patients. As their next lever, they will have to really engage with patients and consumers. 

For us medicine is the biggest part of (the healthcare pie). Medicine is the biggest part in terms of out-of-pocket expenses. So that is the first piece of healthcare which we want to democratize. Because that is the essence, and that is what our core existence is… to democratize healthcare.

Having said that, when we opened our 20th or 25th store, we offered a lot of healthcare tests at the store. That is where we saw patients coming up… they were taking medicine but not doing any test. When we did the test they saw that, for example, sugar is high. They were taking medicine, but the sugar was still high. And, so they went back to the doctor and got a double dose for the next day. So for the patient, she got saved because of the test.

So, accessibility, a complete solution is not available and that becomes a future growth opportunity for companies like us.

We opened a store yesterday, day before yesterday and installed a healthcare device where consumers can take tests. And everybody has been standing in queue for hours just to do the test. 

So, accessibility and affordability is an issue, and that is also another opportunity for players like us.

[SM] You've (Emcure) gone from, I guess, a nice private company life where you didn't have to deal with outside people… now all the nuances of the business get reflected every quarter, and you have to deal with it. You're heading the largest part of the business here. What do you think about these kinds of changes, how do you manage that, and what was that transition like?

[NT] So there are two parts to going public. One is governance and the second is the quarter-to-quarter pressure.

The governance part was a non-issue because to my father's credit, he always had the best auditors, the best set of board of directors, the best ERP. It was run like a public company. We didn't have to make any changes. And then, of course, the two private equity players always helped with the barrage of questions. 

But the quarter-to-quarter thing is not always healthy if it's not taken well. I'll give you an example. We have a division called Xenex. It sells medicines to gynaecologists as well as orthopaedics. We decided we want to split it and make specialized divisions where it's cut in the center. When you do any such restructuring, for the medical representative to really get a hold of things, for us to map it to cities and doctors, for it to really start giving you returns, it takes time. But ultimately, it’s the right thing to do, because it's more focused, more specialized. 

But with things like that, people are not willing to take those chances because… it'll affect the quarterly sales. And we are the most profitable, so it'll affect the EBITDA, and it'll affect the share price. 

So sometimes I feel that we do get a bit myopic in taking some of these bold decisions, because we're too worried about what the quarter will look like, and that's a constant fight between someone like me, who's running the business, versus the CFO, who has to answer the investors. So that is not something that I'm enjoying. But I think it's a journey. We're very new to being public. We went public in early July  2024. So I think over a period of time, people will get less hyper and more long term is what I'm hoping… 

[SM] Let’s talk about distribution in general… there's a million pharmacies in this country, right? And now we've talked about doctors being fragmented, the pharmacies being fragmented. With 170-180 pharmacies in Mumbai, we haven't even scratched the surface of what's possible here. When you think about distribution for the drugs that you will keep rolling out, how helpful is any organization of distribution? You saw online distribution come about, e-pharmacies. What impact does all of that have for you as a marketer and a manufacturer?

[NT] So, you know, if you can't beat them, join them, right? It's as simple as that. 

So when online pharmacy came, you're like, where is this going to pan out? We started selling on online pharmacies. When nutraceuticals came, we launched our brand, Arth. 

Similarly, for generic-generics, we said, okay, let's join it. So now Emcure has a generic-generic division which does Rs 100 crores a year, and next year we'll do Rs 200 crores. 

So that's what I do. If I know that something's a trend, I just make sure I'm part of the trend.

[SM] And you're (Siddharth Gadia) selling their products as well?

[SG] No, we made our own brand. 

[SM] This is a really tough panel. I shouldn't have structured it this way. I just thought, two nice people trying to find common ground…

[NT] We did go to him and said, would you keep Emcure products? And he said, no, these molecules, I have my private brands. I'm not keeping your products.

[SM] I want to come back to this question of trust, because I absolutely agree with you on one of the challenges… Indigo did a great job actually saying that low cost doesn't mean low quality, right? So now here you've had to build Emcure as a brand, and it's been built over decades. Do you think you’ve found a shortcut to how someone can do that in this space to ensure that trust gets created?

[NT] It's a shortcut, but it's damn expensive. Partnership with doctors. You have to build that with doctors. And doctors are being wooed by many pharma companies. It becomes a race, right? Because the key opinion leaders, you want them to talk about Emcure’s brand, and you want them to do a trial and then share the results or publish it in an international journal. 

So how well do you convince the key opinion leaders to partner with you for research, for trials, for publications, for speaking at conferences. 

That's where you have to really… I have a very large medical team. I have almost 25 people in my medical team in-house. Then it's a doctor-to-doctor conversation, not an MBA-to-doctor conversation.

[SM] So you (Siddharth Gadia) have been avoiding the doctor channel and now you’ve started to embrace the doctor channel in your own way.

[SG] That is absolutely right. We have avoided (the doctor channel) because we believed that it would increase our costs. And therefore we will not be true to what we wanted to stand for.

However, we have seen that at certain stores, the prescriptions have started coming. It was an opening for us. We realized that doctors, at certain instances, wanted to write out a prescription… they are seeing 20-30 patients a day and there are 3-4 patients who they know will not take the branded medicine. It's an affordability issue. That is where we said that we will do an education campaign with doctors to make them aware that there is a very high quality generic-generic brand, Zeno (GoodAid) available at affordable prices.

[SM] The volume of deals you see on Shark Tank, do you see much coming from the pharma space in that world? 

[NT] Not in the pharma space, but lately, a lot in the neutraceuticals space. 

So there's definitely a huge tailwind, like, you call it the COVID revenge, right? Whether it's travel or, you know, other areas, you've seen certain trends or sensibilities emerge post COVID and becoming more health aware and just popping a lot of supplements is definitely a trend that's a post COVID trend globally. 

So there have been a lot of nutraceutical companies that have come on Shark Tank, but none in the pharma space, because pharma is a different animal. I mean, the kind of capex involved in starting pharma, you have to be extremely foolish to do that. And I think most startup founders are actually doing things a little easier. 

[SG] Pharma as a space is slightly high involvement and different category than anything else. Neutraceuticals as an industry is growing. Also, a lot of people now in the 25-30 age group are really taking to neutraceuticals.

The transcript has been edited for readbility.