Bilcare Ltd Management Discussions

Industry Outlook

India holds the top position as the largest supplier of generic medications globally, recognized for its cost-effective vaccines and generic drugs. The Indian pharmaceutical sector has evolved into a dynamic industry, currently ranking third worldwide in pharmaceutical production by volume. Over the past nine years, it has grown at a CAGR of 9.43%. Key segments include generic medicines, over-the-counter products, bulk drugs, vaccines, contract research and manufacturing, biosimilars, and biologics. India is home to the highest number of USFDA-compliant pharmaceutical manufacturing facilities and approximately 500 API producers, accounting for about 8% of the global API market.

The Indian pharmaceutical industry fulfills over 50% of global vaccine demand, 40% of generic drug demand in the U.S., and supplies 25% of all medicines in the U.K. Domestically, the industry is supported by around 3,000 drug companies and approximately 10,500 manufacturing units. India plays a crucial role in the global pharmaceutical landscape.

The global clinical trial supplies market is expected to grow at a compound annual growth rate of 6.5% from 2023 to 2030 to reach USD 3.40 billion by 2030. The clinical trial supplies sector is divided into manufacturing, packaging and labelling, and storage and distribution based on product/services.

Opportunities, Threats & Outlook

Leading contract manufacturers in India are prioritizing innovative products and sustainable practices. Many are adopting eco-friendly and innovative packaging solutions, which are essential in the pharmaceutical industry. Beyond branding and protecting products throughout their shelf life, packaging now plays a crucial role in ensuring patient safety by providing key product information, tamper-evidence, and product traceability. The growth of the pharmaceutical packaging industry is driven by factors such as an increasing population, rising health awareness, and higher life expectancy.

Comparator Sourcing is an expanding field within clinical trials, having doubled in size over the past three years. According to a report by the Institute for Healthcare Informatics, the innovation in cancer drugs is expected to continue growing over the next five years, with oncology currently accounting for 25% of the global late-stage pipeline. As most drug candidates are being tested against the standard of care, the demand for secure and transparent sourcing of comparator drugs and non-investigational medicinal products (NIMPs) is likely to rise significantly. Sourcing optimization is increasingly being achieved through a shift from centralized to local comparator suppliers. Global sourcing companies are beginning to evaluate local market capabilities for quality certificates and actively export drugs for QP release.

Business Performance

This year, Bilcare focused on primary and secondary packaging with various innovative blinding techniques, IWRS, storage at variable temperatures, and global distribution through depots/ sites with capabilities to manage storage, distribution, returns, and destruction.

Services related to IMPs (Investigational Medicinal Products) include:

- Comparator Procurement

- Primary and Secondary Packaging

- Storage at Ambient and Controlled Temperatures

- Logistics

- -Analytical & Regulatory

- -Manufacturing

- -IVRS and IWRS

In response to the increasing demand in the CTMS market, Bilcare GCS has strategically aligned its resources. Key achievements for the year include supporting pharmaceutical companies and CROs during USFDA audits, attending Investigator Meetings, and expanding global depot partnerships to cover most locations worldwide. These efforts position Bilcare GCS to regain market share and maximize profits by offering innovative, compliant, and efficient services to clients.

The Comparator Sourcing sector within clinical trials has grown rapidly, doubling in size over the past three years. Bilcare is becoming a formidable player in this market as global sourcing companies assess local capabilities for quality certification and actively export drugs for QP release.

Bilcare has established robust Standard Operating Procedures (SOPs) and strong internal checks and controls, ensuring best practices are followed globally. This is evidenced by the company successfully completing all major customer/client audits without any critical observations. The company plans to expand its services with its own manufacturing setup to cater to the clinical trial industry, offering comprehensive solutions under one umbrella.

Internal Control System and Adequacy

Bilcare has implemented an effective Internal Financial Control system, ensuring that all transactions are properly authorized, recorded, and reported in compliance with the companys policies and SOPs. Internal auditors independently evaluate the adequacy of these controls and report significant deviations to the Audit Committee.

Financial Performance

The company has undergone restructuring in recent years. As of March 27, 2023, Bilcare sold its PPI division to its subsidiary Caprihans India Limited through a slump sale. Therefore, the financial performance reported pertains solely to the GCS business vertical. The business is projected to grow based on positive forecasts and management estimates for the coming years, with a focused approach on improving margins and efficiency. Compared to the previous year, there has been an increase in sales and EBITDA margins.

Key Financial Ratio Changes

Following the slump sale, key financial ratios now pertain to the GCS business vertical, showing improvements, although some ratios are not comparable to the previous year. Positive variances are evident, with improved debtor turnover ratio (3.6 times) and inventory turnover ratio (34.6 times), driven by better collections and lower inventory levels. Operating margins have increased to 67% this year. However, the net profit ratio has decreased to 0.30% due to a one-time exceptional gain in the previous year. Since there is no debt, related ratios are not applicable.

Risks and Concerns

The company faces currency fluctuation risks, but these are naturally hedged due to exports. It also encounters credit and liquidity risks, mitigated by creditworthiness and rolling forecasts.

Cautionary Statement

The Management Discussion and Analysis includes forwardlooking statements about the companys objectives, projections, estimates, and expectations. Actual outcomes may differ significantly due to factors such as changes in political and economic conditions, legal developments, litigation, labor relations, exchange rate fluctuations, and other costs.