The Hindu Business Line : ‘We have a strong international growth strategy in place’

Elder Pharmaceuticals has charted out an aggressive scheme of acquisitions, in-licensing of products and selective forays into niche therapeutic areas such as woundcare, women’s healthcare and nutraceuticals. The mid-sized pharma compa ny recently came into the spotlight after acquiring Biomeda in Bulgaria and a significant stake in Neutralhealth in the UK. For a company that derives over 95 per cent of revenues from India, it was as much a leap of strategy as faith.

“We envision being a Rs 1,000-crore company by 2010. Organic growth alone cannot deliver these numbers. Inorganic growth will contribute to nearly 20-30 per cent of our turnover by 2010,” said Mr Alok Saxena, Director, International Operations, Elder Pharmaceuticals.

Mr Saxena is currently responsible for all international operations of the Elder Group and leads a staff of more than 650 employees. In an exclusive interview with Business Line, he shares plans to integrate acquisitions, foray into the US market and his vision for the company.

Excerpts from the interview:

What are the top brands for the company? What is their share in the company’s revenues?

Sixty-five per cent of our turnover comes from 10-12 brands. To list a few: calcium supplement Shelcal, wound healing product Chymoral, vitamin supplement Eldervit, cerebral disorder product Somazina, antihypertensive Amifru, Shelcal (All line extensions and associated brands) alone contribute to about 30 per cent of the turnover while others average 5-8 per cent.

Elder is planning some new product launches which have been in the pipeline for some time…

We are a pain management company and osteoarthirits and osteoporosis are the major thrust areas today. Hormones in the Indian diaspora have huge potential. As we have already said woundcare, women’s healthcare and nutraceuticals are the key therapeutic areas for the company. In short, our new products will cover these therapeutic areas.

Indian pharma companies don’t have a good experience with foreign acquisitions How do you plan to integrate Bulgaria’s Biomeda, which you acquired recently?

We have a strong international growth strategy in place. We call it the Global Girdle Strategy. We have carefully studied the European market and strategically realigned our current business model to the industry demands of that region. This realignment gives us sufficient leverage in terms of integration of common resources and skill sets. We have earmarked a two-year payback period for Biomeda acquisition.

Any other plans for the European market?

With the acquisition of Biomeda and a strategic stake in Neutralhealth, Elder has gained a strong foothold in the EU. Our endeavour would be to strengthen our presence in other major markets, namely, Spain, Germany, Italy and France.

Does Elder Pharma follow different strategies for regulated markets and semi-regulated markets?

The word semi-regulated has ceased to exist in pharmaceutical parlance. They are today better known as emerging markets. With the high degree of regulation setting in the pharmaceutical industry, most companies, including Elder, have now set forth a similar strategy for both emerging as well as regulated markets.

Nutraceuticals have emerged as a sought-after sector in pharmaceuticals. How different is this business?

The nutraceuticals business is very different from the prescription business in the EU. Registration time is very less, documentation is less and the OTC route can distribute the product.

How do you plan to capitalise on NeutraHealth’s products?

Nutraceuticals is a very sought-after sector today. Elder would be able to distribute NeutraHealth’s products in all the countries we are present in. We will also be manufacturing the same for NeutraHealth at cost-effective prices from our plants.

Elder has been largely missing out on the US market. Why is the company not focusing on the largest and easily the most lucrative pharma market?

The US is an overcrowded market. We have different plans for entering it. It is a step-by-step approach. After gaining a strong foothold in the regulated markets of Europe we willfocus on the US. Till such time we are looking at a lot of possibilities in allied businesses, such as clinical trial outsourcing, contract manufacturing, NCE (New Chemical Entities) research, technological tie-ups, etc. As of now, we are working on a few APIs (Active Pharmaceutical Ingredients) and are trying to register their DMFs (Drug Master files) in the US.

The Japanese pharmaceuticals market is considered to be the second largest market. What are your strategies for that country?

Japanese pharma companies have some excellent and niche products. We would like to get involved in In-licensing deals with major companies from Japan.

In-licensing has been pursued by a lot of Indian companies, including you. Has Elder adopted a collaborative strategy for a particular therapeutic area or class of products?

Yes, we have adopted a collaborative strategy with major focus on our thrust areas such as dermatology, pain, cardiovascular and lifestyle diseases. We have similar deals in the pipeline. We can expect them to materialise in FY 08-09.

You also operate in the Fast Moving Health Goods business. What are the key products in that division and what is their revenue contribution in terms of value?

The key thrust areas that we have focused on in the FMHG business are fairness, pain and oral hygiene. Fairone today is amongst the top brands in this category, Tiger Balm is a natural reliever of pain, aches and other associated pain disorders. AMPM is a mouthwash. They together contribute to about 10 per cent to Elder’s turnover.

Your take on the trend of pharma companies de-merging their R&D business.

Every business decision is debatable. Though our innovative R&D business is quite small, we have no such plans in the near future. It is a good decision for multinationals and those companies who have a huge R&D budget as it helps in maintaining the balance sheet in good standing.

Taking into account the global bulk drugs pricing environment and stiff competition from Chinese suppliers, how does Elder plan to draw synergy and at the same time remain profitable?

There is a sufficient level of balancing act that we need to exercise. Where the volumes are huge, we use it for our captive consumption. We are also indigenously developing niche APIs for export purposes that gives us the much-needed margins.

Any plans to focus on the Contract Research and Manufacturing Services (CRAMS) segment?

Yes, we do have a strong focus on CRAMS as a possible growth strategy. Our plants up North have the required additional capacity with the regulatory compliance.

What is your take on the Fixed Dosage Combination issue that has been brewing for sometime? What can be the possible implications of such drugs when taken off the shelf for you?

Combinations have never been the main growth driver for any major pharmaceutical company. Yes, we had a drug or two in the list of 294 drugs but by withdrawal the same has not impacted our business.

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