With calculated steps such as expansion of capacities, adoption of advanced technology, tie-ups with international giants and aggressive entry into highly regulated and new emerging markets, the Andhra Pradesh based drug makers are on their way to emerge as a countable force in the global pharma market.
In another move to cement its growth, the Andhra pharma has established strong presence in international as well as domestic markets during the last decade with huge investments in research and development (R&D) front. Besides, the merger and acquisitions by leading companies abroad and the Andhra drug makers' strategy of setting up subsidiaries in highly regulated markets have all worked out positively to register their presence in the global market in a big way.
The investment in R&D has helped the Andhra Pradesh based pharma players to bag higher number of abbreviated new drug applications (ANDAs) and drug master files (DMFs) approvals from the world regulatory bodies. Contract research and pharmaceutical outsourcing are the new business avenues here that are growing at a very fast pace. The Andhra pharma players are enjoying the confidence of multinational hoses and accumulating huge revenues from contract research and manufacturing (CRAMS) activities. Similarly, clinical research outsourcing segment is also showing positive growth and several multinational companies (MNCs) are developing business operations with Andhra drug makers.
"Well-developed infrastructure, positive attitude of the state government, easy availability of cost-effective technical experts and a vibrant financial market have assisted the growth of pharmaceutical segment in Andhra Pradesh. Besides, of late the state has attracted new entrants to the market, thanks to its better raw material supply chain," according to the sources.
MAJOR PLAYERS The pharma industry in Andhra Pradesh is dominated by listed companies like Dr Reddy's Laboratories (DRL), Aurobindo Pharma, Matrix Laboratories and Divi's Laboratories with net sales of over Rs 1,000 crore during the year ended March 2008.
Recently Matrix Laboratories has become a subsidiary of Mylan Inc, USA as Mylan acquired nearly 72 per cent holding. Considering the economic slowdown and rupee depreciation, these companies managed their business well and are set to grab future opportunities emerging from the expiration of patents and new avenues of business streams.
The state also has several mid-cap companies like Natco Pharma, Neuland Laboratories, SMS Pharmaceuticals, Granules India, Anu's Laboratories, Suven Life Sciences, Vimta Labs, Avon Organics and Celestial Labs. We have included Jupiter Bioscience and Vivimed Labs in the list, as both the companies have set up facilities in Andhra Pradesh, though their registered offices are located in Karnataka.
EXPANSION PLANS
The Andhra based companies are expanding their operations by investing in expansion programmes and entering into major therapies like cardiovascular, neuroscience, anti-retroviral, gastro-intestinal, anti-infective pain management, osteoporosis, etc.
Divi's Laboratories has invested Rs 177 crore on capital expenditure towards enhancing production capacities. The company has set up new production as well as utility facilities in SEZ and EOU units. DRL has spent Rs 629 crore on expansion during 2007-08 and is consolidating its position.
Aurobindo's capital work-in-progress amounted to Rs 125 crore and that of Matrix reached at Rs 115 crore. It is setting up a project in special economic zone at Jedcherla in Andhra Pradesh.
Relatively small companies like Granule India, Natco Pharma and SMS Pharma are also investing in expansion programmes. Granules India has invested in scale across the entire pharmaceutical value chain and its capital work in progress including advances went up to Rs 92.67 crore during 2007-08. It has invested in finished dosages facility and the benefits are likely to start accruing from the current year. The real stream will be fully visible from 2009-10.
Natco Pharma, an Rs 360 crore plus pharma company, has set up specialty peptide API plant and hormone block for finished dosage formulations plant. The company is now establishing cyto-toxic production block and is expected to commence commercial production shortly. Further, setting up of a parenterals block, capable of manufacturing injectables, tablets, capsules vials, ampoules, catridges, etc is going ahead smoothly. SMS Pharma has commissioned oncology facility at JNPC, Parawada in Andhra Pradesh and is now setting up project at Kandivalasa.
R&D INVESTMENTS
The R&D investments by DRL, Aurobinndo and Matrix assisted well to establish strong presence in the regulated markets. DRL's R&D expenditure went up by 23 per cent to Rs 302 crore during the first nine months of 2008-09. The company launched three new products in Q3. It filed 5 ANDAs taking the total fillings to 133. A total of 69 ANDAs are pending with the US FDA.
Aurobindo filed 19 ANDAs in USA and its cumulative ANDA filings reached 147 at the end of March 2009. It received US FDA approval for 95 ANDAs, including 27 tentative approvals. The company so far launched 48 products in the US market. Further, it filled 133 DMFs with US FDA. At present more than 700 scientists are taking part in its R&D activities.
Matrix Labs' R&D expenditure for the nine months ended December 2008 reached at Rs 162.02 crore as against Rs 98.15 crore in the previous year. The company filed 28 ANDAs and 22 US DMFs, and 18 EU DMFs during 2007-08.
Suven Life Sciences is a pioneer in CRAMS since 1995 in its endeavor to become a collaborative research partner for global companies. Its focal point of R&D remains on central nervous system disorders through novel mechanisms with R&D spend of Rs 30 crore. The company has two collaborative research partnerships with Eli Lilly.
Natco Pharma is setting up a new biotechnology production block at Mekaguda and it is adding the cell biology lab, lab for formulations and animal house at Natco Research Centre. The company received US FDA approval for Citalopram tablets. It also has commissioned shipments of Ondansetron tablets to US. The company has consciously followed a de-risking strategy with regard to the costs of filing ANDAs and it has entered supply agreement with Akorn Inc and Myllan Inc. It is exploring more such tie-ups. Natco has made satisfactory progress in the development of new molecules for the treatment of pancreatic and lung cancer. The company's new molecules - NRC 2694, NRC 1005 and NRC 1008 are undergoing toxicology studies.
PRESENCE IN REGULATED MARKETS
Every pharma player in Andhra Pradesh is focusing on highly regulated markets as well as emerging markets. They have entered into marketing tie-ups with foreign companies, set up wholly owned subsidiaries or joint ventures and acquired foreign companies during the last couple of years. For instance, Aurobindo has invested in 30 subsidiaries located in countries like China, Japan, Netherlands, UK, USA, Australia, Canada, South Africa, Hungary, Russia, Brazil, Nigeria Thailand, Malta, Italy and Spain. The company's US sales went up by 136 per cent to Rs 558 crore during the year ended March 2009 from Rs 236 crore.
In short, the Andhra Pradesh based pharma companies are strengthening their position in domestic as well as international market with investments in R&D, expansion and marketing. They are launching new products aggressively in the regulated markets and entering into new markets. Despite difficult conditions in market and volatile foreign exchange rates, Andhra Pradesh based companies are looking forward and taking investor's care by announcing better rewards.