We are not looking at inorganic growth in India
The Rs 2,500-crore Strides Arcolab was one of the few Indian pharma companies that first made its fortunes abroad and later turned to the domestic market. In an interview to Business Line, the company’s CEO and Founder, Mr Arun Kumar, explains the rationale behind going global first as well as the listed entity’s plans.
How is the sterile injectables ecosystem faring today?
The business is currently facing significant shortages and there are capacity challenges because manufacturing is complex and there is no fungibility for processes. Most plants are old, companies are finding it hard to upgrade, and this has affected several players.
How tough are the FDA regulations now?
The FDA has moved from norms of good manufacturing practices to quality by design. That requires new behaviours in manufacturing not just in plant design but in operations. Several facilities have not been able to migrate to this and require new capabilities.
How are companies dealing with FDA changes?
Big pharma companies worldwide are encountering a lot of challenges with their portfolio. They are partnering with generic companies. Also, affordability in medicines is a key element and emerging countries are pushing cost of healthcare. Growth is happening in these markets. Emerging markets are growing at something like 30 per cent compared with developed markets growing at 3 per cent.
How is it for Strides Arcolab?
Strides invested fresh and our plants are built to those requirements. That is why we are different; our timing was good. We are a busy company these days. We have a strong R&D capability which many other companies don’t have, and this gives us a leverage in manufacturing services as well. The coming three-four years will be very strong growth years for strides as we have a lot of portfolio products. Also, with capex behind us, we are in the operations phase and free cash flows will start improving.
You are a fringe player in India now. Going forward, what plans does the company have for the domestic market?
We took a different approach of becoming a large player in other markets and use that to move to other countries. If I had initially started with India, I would not have had a robust global business as the market in India then was about $2 billion while it was around $8 billion in Brazil. Now we are adding markets such as India and Russia because we have the ability to stay invested in these markets for long and make sure it won’t impact the business. However, we are not looking at inorganic growth in India since it is too expensive here.
Any new areas you are looking at in India?
The final frontier for Strides is our biotech business which we recently started. That will be an emerging market focused business, but the manufacturing will be based in Malaysia. Biotech sits on injectables and because we have a global injectables market, we will have an advantage.
A few years from now, how large do you expect it to be?
We have a CAGR of 30 per cent and we don’t see that changing dramatically. Even with a large base we will have that CAGR.