The Hindu Business Line : Jubilant eyeing pharma acquisition in US

If there is a company or business available that has a strategic fit with our business and has good quality management that would support the future growth, we could consider it for acquisition.

New Delhi , Aug. 15

JUBILANT Organosys Ltd (formerly Vam Organics) has had a long journey of more than a quarter century. During these long years it has transformed itself from a small unit manufacturing industrial chemicals into an over Rs 1,000 crore company with global operations and a diversified product range.

To grow even further, it is in the process of reorienting itself to turn into a major international player in the field of life science products. Chairman and Managing Director, Mr Shyam S. Bhartia, shares the company's future plan and the growth path he envisions for it. Excerpts:

Your company appears to be fast transforming itself into a pharmaceutical company. What necessitated such a move?

I would like to give a historical perspective to our growth and our journey towards becoming a composite pharmaceutical player.

We started in 1978 with the objective of producing industrial chemicals and moved up the value chain to enter speciality chemicals and then graduated into a leading player in custom research and manufacturing services (CRAMS) business. We were supplying advance intermediates and fine chemicals to pharmaceuticals and life sciences companies and the logical extension for us was to enter into Active Pharmaceutical Ingredients (API).

We entered the API business in 2002 and with the recent acquisition of two pharmaceutical companies in Belgium in May 2004, we have entered into formulations and regulatory affairs business.

In 2002, we also incorporated Jubilant Biosys Ltd, a bio and chemo informatics company offering drug discovery services to pharma and biotechnology companies.

What are your plans with these Belgian acquisitions?

The move is mainly aimed to cater to the European market. We have acquired two pharmaceutical companies in Belgium — PSI N.V. and PSI Supply N.V., which together had sales worth Euro 10.6 million. PSI provides regulatory affairs services to generic pharmaceutical companies. Whereas PSI Supply manages supply of finished dosage forms based on the dossiers developed by PSI.

We were already supplying advance intermediates, fine chemicals and APIs to generic pharmaceutical companies and entry into regulatory affairs and formulations was the logical extension. This will enable us to offer value added services to our existing customers.

So, you are in acquisition mode. What next?

As part of our growth strategy, we weigh both the options of organic growth through setting up of new plants and by way of acquisitions that synergise with our business and help increase shareholder value. We are now looking at possible acquisitions in the US and South America for the US market.

What sort of acquisition? How big a company are you looking at in terms of size?

I would not be able to reveal further details due to regulatory rules, but we do not have any particular size in mind. What is more important than size is whether the company fits into our existing businesses and the quality of the local management. If there is a company or business available that has a strategic fit with our business and has good quality management that would support the future growth, we could consider it.

Your company seems to be banking substantially on the CRAMS business. But it appears that your CRAMS business is heavily dependent on pyridine and its derivatives, which is a high-risk strategy? Doesn't this expose the company to higher uncertainties?

You are right in saying the most of our CRAMS revenue at present comes from pyridine and its derivatives. However, we do not feel this is a high-risk strategy because the pyridine chemistry is very versatile and there are a large number of products where pyridine is the basic building block or solvent. This diversifies the risk. To give you some numbers, 229 APIs use pyridine and its derivatives as basic building blocks. Of these 187 APIs have already gone off patent and rest 42 will go off patent by 2010. Our pipeline of 31 products could be used in 65 end use products. This should explain the kind of opportunity these products have.

Otherwise also, we are developing novel platforms with similar potentials such as bioconversion and chiral chemistry.

Your bio-informatics company, Jubilant Biosys, is still in its infancy, though the industry is growing at great pace. What business model do you plan to adopt for this company?

Jubilant Biosys started commercial activities only in November 2003 and already has a client list of over 30 global pharmaceutical and biotech companies. In last nine months the business has scaled up significantly with only 75 scientists initially to over 300 scientists at present. The bio- informatics business has large growth potential and as per an independent survey Indian bioinformatics business is expected to grow to $3 billion by 2010.

How do you plan to move ahead in the chemistry services business, another new area that you are venturing?

We have recently entered the chemistry services business. We will outsource our teams of scientists and researchers to global drug discovery companies to conduct R&D as per the directions of the customers. These teams of scientists will be based at the Jubilant R&D lab set up in 75,000 sq. ft. area in Noida. We would also offer custom synthesis facility to our customers on molecule basis.

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