Since its inception in 1979, Ajanta Pharma Ltd. which is an Indian Pharma Company is engaged in manufacturing and marketing of pharmaceutical products. It is mainly into formulations and also has good presence in the OTC segment. Its exports comprise around 70% of its total market, which is expected to grow at a good rate in few years, so as to establish a worldwide presence. Some of the well known brands owned by the company include Thirty Plus - Energy Capsules, Figurin - Herbal Slimming Capsules, Stamina - for Vigour and Vitality, Pinkoo Gripe Water - Carminative for children, Trimol - Pain Reliever, Livoplus - Liver protector against alcohol to name few.
Mr. Yogesh Agrawal, aged 33 years, is a Management Graduate from Johnson & Wales University, U.S.A. After completion of his studies in 1994, for a period of five years he established a very strong presence of Ajanta Pharma in the Western African markets through the Mauritius subsidiary Ajanta Pharma (Mauritius) Limited, which he headed as a CEO. Since 1999 he assumed the charge at Ajanta Pharma Mumbai as Executive Director. He is responsible for the overall day to day management of the Company in general and international marketing in particular. After his taking over, export business saw exponential growth with entry into many new markets and continuously increasing product portfolio. He has taken-up aggressive product registration process in the international market.
The India Infoline team of Anil Mascarenhas, Mukesh Modi and Veebha Salvi met the new generation decision-makers of Ajanta Pharma. Mr. Yogesh Agrawal, Executive Director, Ajanta Pharma Ltd. says that the company has built its structure in over 40 countries to prevent over dependence on any particular country or product.
Could you explain the structure of your business operations?
Over the years, we have built strong capabilities in the international market. Our revenues from export sales last year were 63%. This has climbed to 75% in the current year. We expect this rising trend in exports to continue in the coming years. Our structure has been built on a wide spread of 40 countries and a reasonably large product basket, which enables us to grow faster and reduce our dependence on any particular country or product. We are continuously adding more countries and products in all regions.
Are you changing your business mix?
We have segmented our main business divisions into Pharma, OTC and Institutional sales. Pharma division deals in prescription drugs and is the major contributor to our business. We have divided the world market into six territories i.e. India, Central Asia, Western Africa, South-East Asia & America, West Asia & Anglo Africa and Europe. Our focus is on exports, which contributes 75% of our total sales. Currently, our products are available in more than 40 countries and we are adding more countries and products in the coming years.
What are the therapeutic areas covered by you?
Our major focus is on therapeutic segments of Cardiovascular, Ophthalmology, Dermatology, Gynecology, and Nutraceuticals and to some extent Antibiotics. We have a specialized division of Cardiovascular and there again, our specialisation is very defined.
What is your strategy for penetrating the international markets?
We commenced our international operations in unregulated markets like South-East Asia and Africa. During the last two years, we moved into semi-regulated markets like Brazil, Philippines and Jordan. After achieving success in the above markets, the only markets remaining for us are the regulated ones like USA and UK. We are at an advanced stage of formulating our strategy to penetrate these markets. Here, one has to be careful, considering the financial resources that are required for the same.
What are some of the issues coming in the way of Indian Pharma firms after the implementation of Product Patents regime?
The opportunities we (Indian Companies) had of launching new products in a year?s time of its introduction anywhere in the world have closed down with the product patent regime. This may be one of the negatives for Indian pharma companies. However, the level of confidence of the MNCs about contract manufacturing to be given to Indian pharma companies is more than a silver lining. Moreover, the in-licensing possibilities from MNCs have also opened up.
As far as we know, no MNC pharma has exercised its product patent right to stop the production of a drug by Indian Pharma (who till date use to adopt a different process to produce the same drug as researched by MNCs.), as the patent controller office is yet to issue any patents for the applications made in "black box". However, within six months to a year?s time, as the patent office starts to grant the patent to the molecules already introduced by the Indian companies, such products would have to be withdrawn by the Indian companies. Moreover, FY06 would be a transition period for all the pharma companies to adapt and adjust themselves under the product patent regime. Therefore, there shouldn?t be any haste by MNCs for patent implementation.
As far as Ajanta Pharma is concerned, challenging MNCs under product patent would not be advisable as it is a very costly issue. Secondly, we have established a number of brands in the markets and would rather concentrate our efforts to grow our business. We would like to wait and watch as to view the approach of other pharma companies, both Indian and MNCs, towards the patent law.
Tell us some of you new products planned this fiscal?
Our new product launches in FY05 include a niche product called "Latenoprost" - eye drop under Ophthalmology and "Adacin & Clindamycin" cream under Dermatology. We are launching a series of brands till the end of FY05. We already have 35 to 40 brands in the Indian market in our various divisions and this number is adequate for us now.
Our new product called "Gate" (Gatifloxacin eye drop) launched last year is doing quite well and currently is a market leader in its segment. Another launch last year was "Met XL" which is a NDDS preparation. This is useful in hypertension and congestive heart failure and is doing well in the markets. "Ezemibe" (Ezetemebibe tabs) is not doing well because as per doctors, "Ezemibe" alone isn?t a good therapy for lowering cholesterol in heart patients but if it is combined with "atorvastatin " it comes out with good results. We have recently introduced a combination product "Atorvastatin + Ezetemebibe" which is being received well with the doctors.
What are your sales and marketing strategies that would give a big thrust to the business model?
Our prime strategy is to establish brand image in India as well as International markets. We have already established our presence in over 40 countries and what we need to do is to further penetrate into these markets. Considering the huge market size, we have a very minor share in many of these markets, which offers enormous potential for us. Hence, our entire focus would be to further enhance and expand our business in the existing territories.
We plan to launch select molecules in the therapeutic segments.
In the international markets, we are aggressively registering a number of products in new countries as well as the countries where we are already present. Hence, the increase in the product portfolio and adding new countries will give us the required growth momentum.
The most important aspect in international marketing is registration of products. Being in the international markets for the last five years, we know how to deal with it as we have gone through this learning curve, which no one can escape. We can understand the complexities of the international market much better, which at times can be much tricky and confusing.
What are the main concerns for the growth of Ajanta Pharma?
One of the concerns for Ajanta Pharma is excise duty abatement, which was not raised to 50% but restricted to 40% in the Budget ?06. This will not only hurt the bottomline of Indian pharma companies but also trickle down to consumers who will end up paying higher prices for the medicines. Besides, this has affected the SSI units quite severely who were depending on the manufacturing tie-up with the larger companies. Secondly, in case of grant of patent to any sensitive or critical product, this could result in withdrawal of the molecule from the market, which may affect the consumers who are used to taking this drug. For us, VAT doesn?t seem to be a big concern though it would affect one month?s sales i.e. March as the trading community will keep its inventories to the lowest possible level to take the maximum benefit.
Any tie-ups or major alliances that Ajanta Pharma plans in the near future?
We have different kind of alliances with few select companies. We have a tie-up with Ranbaxy for selling our six Nutraceuticals/natural products in three countries. Ranbaxy has significant strengths in these countries and addition of our products including flagship brand "Thirty Plus" augments the strengths of both the companies. Secondly, we have an alliance with Allergan for Co-marketing Gatifloxacin eye drops in India only (and not in international markets as was misreported earlier).
Could you comment on your financial performance?
Our company?s performance has been excellent during the last three years. We posted a strong growth during this period with sale increasing from Rs730mn (FY02) to Rs1.02bn (FY03) to Rs1.21bn (FY04). During the current fiscal too, our performance has been in line with this trend. We achieved a growth of 25% in sales for the nine-month period ended Dec?04 and the profits increased by 46% for the same period. We have practically doubled the sales in three years and we hope to continue the growth of 25% plus in the current fiscal as well.
Could you throw some light on your in-house R&D activities?
Our R&D expenditure would continue to be at about 1% of our turnover and as the turnover grows, the absolute amount spent on R&D would also increase. We are not in basic research as this area relates to great degree of uncertainty and a longer timeframe. Our R&D has three main aspects of research namely:
- Formulations development - where we have the confidence to crack any of the products required. We have already achieved success in many of them
- NDDS (Novel Drug Delivery System) - which involves taking the existing molecule and modifying the delivery/release pattern for better efficacy of the product
- Bringing the natural product to the level of allopathic. We are pioneer in Nutraceuticals segment as we were the first to take natural beta-carotene to doctors, which was never done before by any of the pharma companies. Within a period of six months our competition was forced to change their formulation from synthetic beta-carotene to natural beta-carotene, which talks about the success of our product "Carofit".
Contract research would be a very interesting proposal to work on and we might think of it in future as we possess the required capabilities but we aren?t into it as of now.
What are some of the strong points for Ajanta Pharma?
We have a well-balanced and unique business model that allows us to go steadily in both domestic and international market. Besides, we have the portfolio in ethical products, Nutraceuticals as well as natural products. Importantly, the Nutraceuticals and natural products do not fall under the patents of MNCs. Also, our OTC division is strong and contributes well to our revenues. We have developed good equity in the distribution and trade. Our brands like "Pinkoo Gripe Water", "Thirty-Plus" and few others have strong recall value among people, which we plan to leverage going ahead.
Any message to your shareholders?
Our shareholders have put faith in us and we are grateful to them. I can say that investment in Ajanta Pharma is one of the best investments they can make. We are confident that we will meet their expectations and continue to perform well in the coming years.