Piramal Healthcare Ltd is expanding its contract manufacturing services to early phase business, offering supplies of clinical trial quantities both in active pharmaceutical ingredient (API) and formulation segments. The company has set up two facilities, one each in Ahmedabad and Chennai, as part of this expansion plan at a cost of around Rs 100 crore.

The company, which is one of the major players in contract research and manufacturing services (CRAMS) in the country, has set up a facility in the special economic zone (SEZ) in Ahmedabad for formulations and another facility at Ennore, Chennai, for API manufacturing in order to initiate the business. The expansion will help the company to increase its client services and to grab the clients even at an early stage, said N Santhanam, chief operating officer, Piramal Healthcare.

"Early phase manufacturing services is a low volume, high margin business. This will increase our service offerings and has long term benefits as a strategy. We are in the process of talking with the potential clients to start the operations," said Santhanam. The company is expecting Rs 200 crore from this business in the first year of operation.

The Ahmedabad facility situated in around five acres premises with 35 staff and the Ennore facility in almost three acres adjoining its existing API manufacturing plant with 85 people have been set up with an investment of nearly Rs 50 crore each. The expansion will strategically benefit the company to add clients for contract manufacturing in an early stage, which would possibly sustain once the drug is approved for marketing.

The company expects its CRAMS business growth to be flat for the current financial year, as the recession has forced the global clients to cut down the volume and frequency of inventory intake. However, the Earnings Before Depreciation, Interest, Taxes and Amortization (EBDITA) margin for the business is expected to go up six to eight per cent. The outsourcing services has contributed Rs 1087 crore for the company in the last financial year, accounting to almost 40 to 45 per cent of its total business.

The CRAMS business in India, which is currently reported as Rs 5000 crore with 15 to 20 per cent, is poised to increase its presence in the global pharma market with its proven strength in chemistry, low cost service offerings, efficiency for on-time delivery and quality services, added Santhanam.

Piramal Healthcare, which has a wide range of activities in the pharmaceutical research, manufacturing and diagnostics and laboratory services business, is expected to maintain the growth of around 17 per cent in the current financial year to reach almost Rs 3800 crore turnover in the current financial year.