Wednesday, August 29, 2012

PHARMA: MID SIZE COMPANIES

Ever since the growth models of the 1990s began to elude the big guns of Indian pharma, a sordid phase of consolidation seems to have set in; raising fears of total disaster for the players. However, there is a light at the end of the tunnel with an interesting clutch of mid-sized players showing the way towards future sustainability and growth.

So where and how did the good times for the mid-sized players begin in this scenario? It all started in 2005 when the patent regime was enforced in India. At that point of time, these companies were small entities and found the going even tougher. On one hand, they were battling the patent regime and on the other they faced stiff competition from global and Indian giants. Some went into oblivion but others decided to fight hard and reinvent themselves. Necessity ultimately became the mother of invention and these companies began to develop smart business models that thrived as the best were faltering. As mentioned earlier, Arch Pharmalabs became a `12 billion entity by manufacturing just three API's. Similarly, there is another company that is now doing very well and has a turnover exceeding `6.5 billion. Unimark Remedies was founded in 1983. Till 1995 its primary business came from marketing drugs of large pharma and chemical companies. Soon, the company realised that after being in the industry for almost 12 years, its team knew which products were selling like hot cakes in the market. With this assumption, the company took the plunge into the API manufacturing segment. After tasting success as an API manufacturer, Unimark Remedies decided to tie up with competitors by asking them to manufacture products that Unimark could no longer do on a large scale. In turn, Unimark started selling such APIs based on a profit sharing agreement. Unimark has so far filed for 12 patents and is doing very well.

Another success story is that of Acharya Chemicals. This outfit was founded in 1974 with an initial capital investment of `40,000. It started its production with a few products like Benzyl Benzoate IP and Methyl Nicotinate IP/BP. The plant set up was with two 50 ltr. and 20 ltrs distillation assemblies along with 1 centrifuge, 3 vacuum pumps and 1 water ejector. In its pursuit to innovate the company came up with an R&D lab in 1980. Despite the small size, Acharya Chemicals had huge ambitions. Although it operated in the API and clinical trial domain, it soon realised that the future lay in contract manufacturing. After a tie up with a giant Swiss pharmaceutical company till 1999, it realised that its core strength was in Chemistry. Starting with a capital of `40,000 today the company has a turnover ranging between Rs.300 million and a cumulative production capacity of around 200TPM of Chemical Entities. Aurobindo Pharma, which had humble beginnings in 1986, has now become an inspiration for many pharma companies. Bulk actives are Aurobindo’s core area of competence. It has become an internationally reputed name. In 2009, Pfizer entered into a deal with Aurobindo Pharma for contract manufacturing of 39 drugs. Since 1986, Aurobindo has invested significant resources in creating infrastructure for APIs and the results are showing. As of August 2010, Aurobindo Pharma expects its revenues from US to go upto $350 million as compared to the $200 million last year. The crux was that these players carefully chose their areas of competence and pursued them with unbridled aggression.


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posted by Editorial at 2:33 PM