Mr. Arjun Handa, Managing Director & CEO, Claris Lifesciences Ltd

“We are not averse to the IPO and may explore the same at appropriate time in future”

June 24, 2009 12:00 IST | India Infoline News Service

Claris Lifesciences Ltd is an IPR driven international pharmaceutical company, in the business of manufacturing and marketing of high end injectables with focus on New Drug Delivery Systems for treatment of critical illnesses and diseases. Claris offers a range of niche technology Aqueous & Lipid emulsion injectable products across delivery systems such as bottles, vials, ampoules, non-PVC/PVC bags. The company's strength lies in its know-how and expertise in manufacturing and marketing injectable products. The company's range of products and delivery systems extends across Enteral and Parenteral Nutrition, Anaesthesia, Blood Products and Plasma Volume Expanders, Anti-infectives, Dialysis and Transplant, Oncology & Infusion Therapy. Globally, the company operates in more than 76 countries, through its subsidiaries, offices and marketing/distribution network, and a diverse customer profile covering institutions, large corporate hospitals and international aid agencies.

Mr. Arjun Handa is the Managing Director & CEO of Claris Lifesciences Ltd. An outstanding achiever, Arjun?s contemporary vision and paradigm have set the growth pace of Claris. As a promoter of the company and member of the Board, he has been actively driving corporate strategy, corporate governance, financial strategy, human resource philosophy and senior management initiatives. Arjun graduated in commerce and then went on to do his MBA in Boston, USA. Arjun is fully committed to Claris' vision. And, with inputs from his father, Sushil Handa, the founder and inspiring force behind Claris, he is confident of taking the company towards realizing its vision.

In an e-mail interview with Hemant P. Maradia of India Infoline, Mr. Handa says: ?We are not averse to the IPO and may explore the same at appropriate time in future?

Could you throw some light on the background leading up to the strategic deal with Pfizer? What factors do you reckon worked in favour of you?

There have been significant changes happening in the pharmaceutical industry over the last 12-18 months with many large innovator companies actively exploring their strategies for the Generic markets. Daiichi Sankyo acquiring Ranbaxy precipitated many such decisions and large companies started exploring these strategies seriously. In this context, Claris decided to be at the forefront of the change and therefore when this opportunity came up with Pfizer, we decided to pursue the same seriously.

We believe that Claris' focus on the Injectables has helped us carve out a niche for ourselves. We have purely been an injectables company right from inception. This gave us a significant head start in the Injectables and infusion technologies and products. We believe that for any large company, injectables is a desirable portfolio to augment their solid dosage form as they complement well to make a composite product basket. And in injectables there are not many companies who can offer complex injectable products as per the standards of USA and other regulated markets like Europe, Australia etc. We believe this has worked in favour of Claris.

What are the tangible and intangible benefits that will accrue to Claris Lifesciences from the Pfizer deal?

Pfizer is undoubtedly one of the strongest sales and marketing companies in the innovator drugs space. It has an extensive and capable sales force backed by a world class infrastructure, to ensure best returns from every molecule. At the same time, Pfizer has established its image as a top quality products company. This strong image in the market ensures that even after products go off patent, there is still brand loyalty to the Pfizer brand name.

Also, Pfizer has a strong product basket having an interesting mix of Innovator and Generic products. We believe that our alliance will help us reach to the market segments which we would not have been able to reach in medium term. Our relationship will give complementing strengths to both companies - Claris gaining advantage of Pfizer' large Sales and Marketing and Pfizer getting access to our high-end injectable product portfolio along with the Indian advantage.

Are you looking at alliance(s) with other MNC players for the emerging markets?

We are working on a big pipeline of products on existing and additional technology platforms. Claris is one of the strongest injectables companies in the emerging markets having more than 50 molecules registered in approximately 76 countries across the world. This makes us an ideal partner for any MNC having strategic plans to augment their presence in emerging markets. Claris is open and exploring new avenues to enter into similar alliances for other emerging markets.

Tell us something about your Ahmedabad-based facility? When did you get USFDA approval? How much time did it take to receive the clearance from the US regulator? Do you have any other plants in India?

Our facility is one of its kind, state-of- the-art, injectables facility housing highly complex injectables delivery systems, some of which are exclusive in India. The manufacturing facility was set up in 2002 and has undergone more than 100 inspections from various regulatory authorities across the world starting from USFDA, MHRA-UK, TGA-Australia and many others.

We have been approved by USFDA in March 2006. It took about three months for us get the approval from USFDA after being inspected. All our manufacturing facilities are based near Ahmedabad.

How much investment has gone into the Ahmedabad plant? Will you need more funds going ahead to ramp-up capacities here? If yes, which route are you most likely to adopt for raising capital? Any plans for an IPO?

Claris has pumped in significant investments in building up the world-class facility as per the regulated markets' requirements with technologies sourced from world leaders. We have been growing consistently over the past few years. With more and more products getting registered in additional countries, we expect this growth to continue. And as you would expect, any growth would need back up from the manufacturing. So we expect ourselves to keep on ramping up our capacities on an ongoing basis either on the existing technology platform or on a new technology platform.

Therefore, we need funds for such ongoing expansion plans in line with our growth plans. The last year has been relatively adverse for raising funds, but we have been able to set up our major investments before the economic crisis. However, we keep on leveraging all sources of funds in line with corporate financial strategy with an IPO being one of the sources. We are not averse to the IPO and may explore the same at appropriate time in future.

When do you plan to launch Ciproflaxacin, Metronidazole and Ondansetron in the US market? How big is the market for these three products?

We have already launched these products in the market and are marketing them in USA through our own subsidiary. The total market of these three products is approx. US$90-100mn.

What is your take on Biotechnology and what are the plans on this front?

Of course, biotechnology is the future technology which is catching everyone's attention considering the size of the market and also the number of products going off patent. This is also backed up by high entry barriers because of the technology, clinical requirements and the marketing infrastructure needs. All biotechnology products being injectable products, naturally fits into our core competence of manufacturing and also from the customers perspective. So we have serious plans on the biotechnology front.

In India and in certain selected markets we are already marketing certain biotechnology products. We plan to expand this portfolio significantly over next 3-5 years time adding more complex products like Monoclonal Antibodies and others.

Currently, we are sourcing these products from external partners for the markets. However, for the countries where we are not able to source products from the outside companies because of the regulatory limitations, we plan to set up our manufacturing facilities to manufacture our own Biotech products for those countries. We have a dedicated R&D team working on our plans since last 12 months.

Tell us about Xcelris Labs, the CRO set up by Claris promoters and its future plans?

Xcelris is purely a fee for service kind of Contract Development and research organization which we have set up in order to address the unmet need of various pharmaceutical and biotechnology companies across the world in the field of contract development and research. We have strong capabilities for product development. We are also offering Biotech and Genomic services, which are highly niche and specialized.

We believe there is a strong need for such expertise and services and through Xcelris we plan to serve them to develop highly complex products. We are in the early stages of setting up the company. However we plan to make it as a partner of choice for leading pharmaceutical and biotech companies for their development and other services' needs.

What is your outlook on the Indian pharma industry, especially the Generic players? What are the new, emerging trends that you foresee globally?

Indian Pharmaceutical Industry has a very bright future because of mainly two reasons, First: India's domestic pharma market is growing very strongly which will help Indian pharmaceutical companies significantly to grow, Second: Internationally, because of the inherent strengths of the companies to develop and supply cost effective products across the world. Therefore we are upbeat about the industry.

Across the world, the regulatory agencies have been tightening its belt in terms of the regulatory requirements to register products. This is making products from countries like China and other emerging markets very difficult to get entry in regulated and semi regulated markets. However, India, having many years of experience in supplying products to highly regulated markets is helping them to align and upgrade themselves to fulfill the new and tighter requirements of the regulatory agencies.

Of course, we cannot simply ignore the competition from other countries. One distinct possibility we are seeing happening is lot of consolidation in the Indian market reducing number of generic players. We also expect that more and more API manufacturing and sourcing will be from China whereas India will be more on the value added activities like finished formulation, high end molecules development, contract research etc.

We expect more and more Indian Generic players becoming very active in the Emerging markets not only on the back end but also on front end either acquiring local companies or setting up their own sales and marketing network.

What according to you will be the biggest challenges for the Indian pharma sector going forward?

Biggest challenge would be to maintain India's competitive advantage on cost. Though from regulatory capabilities perspective Chinese companies are far behind Indian companies but they are catching up fast and it would be difficult to match China on the cost front. Also, large Generic players from USA and other regulated markets have started having their presence in India and China either directly or through acquisitions. They have started getting advantage of lower costs of development and also of supplies. Hence, their dependence on Indian suppliers will go down unless Indian companies maintain its edge on the speed and cost.

How big is the opportunity in Injectables and Critical Care? How does Claris plan to capitalise on the same? What was the rationale behind Claris choosing this particular segment? Any plans to diversify into other segments?

We see Injectables and Critical Care a niche segments requiring dedicated focus and expertise. However, once a company can develop this expertise and base for the injectables and critical care products, which is very difficult considering the challenges on the manufacturing, regulatory and market front, it can be really sizeable market internationally ranging anywhere between US$12-15bn in the Generic space and growing.

Claris has been systematically working to create its base to achieve the critical mass in terms of countries, products, technologies and sales. We believe our strategy of going to the Emerging Markets in a big way right from the inception of our international foray has paid rich dividends in shortening the learning curve and also develop the critical mass. The current wave of large companies focusing on the Emerging markets clearly vindicates our strategy which we envisaged during our early years.

We plan to ensure that we fully capitalize on the sales, marketing and distribution network which we have been able to create in last 5-7 years in emerging as well as the in the regulated markets by pumping more and more products from existing and newer technologies. This will be supported by significantly strengthening our front end presence in key markets.

The rationale was simple- we wanted to carve out our niche and still be large player. We saw this opportunity in the Injectables and Critical Care area and decided to pursue that aggressively. As of now we do not plan to diversify other segments. We strongly believe that there is still lot can be done in the current segment itself and therefore we plan to still focus on this segment for coming years and enhance our presence in the untouched areas in this segment only.

How much of your turnover comes from global markets? Will you remain focused on the overseas markets or do you plan to get aggressive in India too?

We have always been an internationally oriented company. Our international turnover is approx. 50% of our overall turnover. We have been focusing equally in India and Internationally. We have been one of the market leaders in India in almost all major products segments and we plan to maintain our leadership position. At the same time, we are significantly enhancing our international presence as well in terms of countries and also in terms of product portfolio. By sheer number of countries and products being added, we are having lesser dependence on India sale. However, India is and will remain the most important market for us contributing significant sales to us.

Could you provide us with a break up of revenue in terms of the four divisions?

We are mainly evaluating our performance in terms of India and International. And as mentioned above as of now we are having almost 50% each coming from both. We expect this to slightly change in coming years with International accounting to approx. 60% of the total sales.

What is your marketing strategy considering you are at the higher end of the market?

Our customer segment is highly specialized doctors and hospitals. Also the kinds of products we are dealing are life saving products used in the hospital set up. Therefore the main focus is to provide the latest products to our customers as per the world class quality. Quality becomes the main focus area and we try to provide highest comfort to all our customers for our products quality and service. This is reflected in everything we do i.e. right from the manufacturing facility to product quality to sources of technology and materials. Apart from this, we put lot of emphasis on building large product portfolio to cater to the complete need of the doctors and hospitals.

What will be the growth drivers for Claris over the next five years?
Our major growth drivers would be the enhancement of our product pipeline in newer technologies across all geographies where Claris is present. This will be supplemented by significantly strengthening of our front end sales, marketing and distribution network.

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