Read the Conversation
EF: Please give us an overview of Zydus' current operations in Brazil. What is the importance of Brazil for your company?
GK: As Zydus Brazil's CFO, I also oversee critical functions such as IT, supply chain, legal, and business development, which provides me with a comprehensive perspective on the Brazilian pharma market.
In 2007, Zydus acquired the local pharmaceutical company Nikkho, which had a more than 50-year history in the Brazilian pharma market. Since then, we have been operating under the name of Zydus-Nikkho Pharmaceutical.
However, we recently restructured our LATAM business, making Brazil the head of LATAM.
In the global scenario, Africa and Latin America remain untapped and underserved markets. While the US market is saturated, Europe faces economic challenges, and Asia-Pacific is highly competitive, with Southeast Asia already targeted by Chinese and Asian companies. Latin America and Africa are the remaining viable options to grow any company globally for the next 15 to 20 years.
Latin America, with nearly 600 million people, offers significant potential as a consumer market. Brazil, with a market value of approximately $25 billion, is the largest pharmaceutical market in the region. We will initially focus on Brazil as our cornerstone in Latin America and gradually extend our operations throughout the region.
Given Brazil's vast size, diverse geography, and varied population, achieving nationwide medicine distribution is paramount to our strategy. We aim to expand extensively in Latin America, leveraging our existing presence in Brazil. We also plan to introduce new products in the near future, enhancing our footprint and providing quality healthcare services to the people of Brazil and the broader Latin American community.
EF: Zydus is positioning Brazil as the head of LATAM. What does this mean for your portfolio, and what areas are you looking to explore?
GK: Our growth strategy is tailored to the unique needs of each market. Zydus has an exceptional product portfolio spanning various therapeutic segments.
We have products ranging from cancer drugs to multivitamins and plan to provide the Brazilian market with high-quality, innovative products within the central nervous system (CNS) segment. We operate a manufacturing facility in Brazil and engage in both over-the-counter (OTC) and prescription (OTX)drugs.
EF: What should be the fundamental pillars of Brazil’s health industry?
GK: There are four fundamental ways in which the Brazilian pharma market can grow in the future.
The first is innovation. The industry must constantly introduce new products and remain vigilant for future pandemics and unforeseen challenges. Our approach should involve proactive consideration of emerging disease variants and immediate threats akin to COVID.
We need a shift in perspective. The conventional approach was to react to the current major disease, but the next pandemic might involve a new ailment. Pharma companies in Brazil should enhance their overall research and development efforts, raising their innovation quotient to meet future challenges and prepare for the next pandemic.
The second pillar relates to product quality, which has to be further improved in Brazil. Zydus is quite optimistic about this aspect because, as a responsible pharma company, we emphasize high-quality product supply to people.
The third key pillar for the growth of the Brazilian pharma market, and Zydus' contribution to it, is distribution. Currently, the distribution of pharmaceutical products and the market are unevenly spread, with most of the population residing in the North and South regions. However, the highest market value is concentrated in the South, particularly in São Paulo and Rio de Janeiro.
The main goal is to promote an even nationwide distribution. Lastly, "Health is wealth." A healthy Brazilian population will be more efficient productive, and will add more value and economic well-being. To achieve this, it is crucial for government healthcare spending to increase. Currently, it averages around 10% of GDP, translating to 1000 reais per person for a population of 200 million.
Ideally, this spending should range from 1500 to 2000 reais, depending on economic dynamics and available resources. The government should aim for at least 15% of GDP in healthcare spending. Presently, 25% of the population relies on private insurance. Therefore, a stronger emphasis on government healthcare spending and medicine accessibility is required for all it´s needed.
Zydus is committed to contributing to the growth of the pharma market by developing innovative products, widespread distribution, and supporting the population with these innovations.
EF: How and in what areas should Brazil improve to attract much-needed investment to the healthcare sector?
GK: There are two fundamental things that the Brazilian economy has to improve to attract innovation and high-level investments.
Firstly, a tax reform is imperative. Brazil's tax system is exceedingly complex. Out of 195 countries in the WHO, Brazil ranked close to 183 in terms of ease of taxation. The number of filings is immense, and time spent on tax-related matters represents about 20% of departmental efforts hindering business operations. Even though there are some reforms in the pipeline, the implementation time is taking too long for this urgent matter.
The second critical concern is the high cost of capital. Due to the high interest rate, the country relies on external funding. However, the fluctuating dollar rate poses significant investment risk and hampers investments in the Brazilian pharma market.
As a result of inflation, the cost of working capital of fresh investment becomes very expensive. Therefore, one challenge the government has to address is controlling inflation and the exchange rate fluctuation.
With a positive outlook that Mr. Lula's new government will bring in fresh investments, we eagerly anticipate forthcoming announcements that will benefit both the broader economy and the pharmaceutical sector.
EF: What advice would you give fellow leaders in the industry when it comes to leading international teams in the market?
GK: I have worked in diverse countries like Malaysia, Singapore, Japan, Mexico, India, and Brazil, and I have experience with teams in Hong Kong and the US. Through my experience, I have gained a good understanding of different work cultures and learned that each country’s way of working differs.
Nevertheless, I consider three factors important when building a team culture. Firstly, view your employees as family, recognizing that they spend a significant portion of their lives at work. We at Zydus propose to collaborate as a family to enhance the company.
Secondly, it is important to enjoy the work you are doing. Joy is crucial for reaching your highest productivity potential. I encourage my team to take pleasure in their work, fostering collaboration to maximize outputs.
Thirdly, I advise my teams to live their life because there are no second chances. Complaining about trivial matters is a waste of time; instead, focus on what truly matters and enhances productivity. The problems of the past are today´s joke. When you look back at the bigger picture, you often realize that we spent time and energy and get worried about things that were not an issue at all.
Different countries have different cultures. Latin American people enjoy work and productivity increases when you love your work.
EF: What will you be celebrating at the end of the year for Zydus and yourself?
GK: One of this year's significant achievements is Brazil's elevation as the hub of the LATAM pharma market. We have broadened our focus beyond Brazil, expanding our horizons to encompass the entire region in our business development efforts. One product can enter various countries, and this has been a good and optimistic change.
We are proud that Zydus has grown to become a large global innovation-driven pharma company and are committed to boosting our presence in Brazil. We specialize in providing high-quality and niche products to our partners, who, in turn, distribute them widely throughout the market, including collaborations with the top five pharma companies in Brazil.
To further elevate the Brazilian market, we emphasize that innovation and research and development (R&D) activities should reach new heights. We can advise our partners when we have already completed the necessary research and have manufacturing facilities in place, eliminating the need for duplicate R&D efforts. India is now a leading hub for pharmaceutical supply, and Zydus stands out as an innovator in the field, with plans to introduce innovative products to Latin America.
As a research-based pharma company, we invest significantly in developing new medicines, including complex ones for diverse markets. Utilizing pre-existing research speeds up the availability of medications to patients. That is our cause for celebration. We are proud of our role in reaching patients in the Brazilian pharma market through our innovative products and valued partners.
