‘Pharma outsourcing is a growing business’
Piramal Healthcare has managed to make its unique formula of spreading across various models work. Its quarterly profits have moved up by more than half. The company’s business spreads into contract manufacturing, generics and drugs sold under in-licensing deals, while the innovative R&D has been spun-off into a separate company. Ajay Piramal, chairman of Piramal Healthcare, spoke to ET about the company’s plans.
You have managed to straddle different models. How has this worked in your favour?
It has worked pretty well for us. We have been one of the early players to consider opportunities in in-licensing and contract manufacturing. Besides, our strength lies in marketing, sales and distribution and we have a field force of over 3,800, the largest in the country.
You have in-licensing deals with MNC pharma companies. How have you managed to keep it from clashing with your product basket?
We have different divisions taking care of different things. We market 350 compounds and have good relations with MNCs. Also, we have the advantage of being the first to tie-up with them.
You have been very bullish on contract manufacturing. Any reasons?
There is big pressure on global companies on the cost front. They have realised that good quality work can happen in India at low costs. We incur less costs on labour and technology, hence despite high inflation, the low cost advantage will remain.
How big is outsourcing in the pharma sector? Is it going to go the IT way?
Although it may not turn out to be as big as in IT, outsourcing in the pharma sector is a growing business. However, the lead time in pharma is longer than in IT. Unlike in IT, the process to get regulations is longer and it takes time to shift manufacturing to another location. The low cost advantage will remain. Technology costs in manufacturing are also low and so the gain will come there. Yields will be better.
Do you intend to diversify into related businesses like hospitals or retail pharmacies?
No. We don’t have any plans for getting into the hospital or retail pharmacy business for the moment. Both require different business models. Our integration will be on the existing parameters. We are investing in custom manufacturing and in the domestic market where we have a strong presence.
You have hived off your R&D centre. When do you expect returns from that?
We expect the Life Sciences business to generate returns by 2010-11. We have the richest products in the pipeline, even better than Sun pharma. The further you take research, the higher are the returns that you get. We are looking at innovations in areas of anti-cancer, metabolic disorders, inflammation and anti-infectives.
Are you focusing on acute or chronic illnesses?
While we are present in 85% of the therapeutic areas; 65% of our concentration is on acute illnesses while the remaining is on chronic. We have fair amount of emphasis on chronic illnesses, but we find that acute picks up faster in tier-2 and tier-3 cities. We are currently innovating in the areas of anti-cancer, metabolic disorders, inflammation and anti-infectives. We have the worldwide rights for ‘hemaxil’ which is a niche product for hospitals.
You also have a significant presence in the diagnostics market…
Yes. The diagnostics market is going to grow. In Europe we have big alliances in this segment. We also have collaboration with Arkray, a Japanese company, to market their diabetes glucose meters in India.
What are the challenges you think the industry faces?
Infrastructure is the biggest problem. Despite medicines in India being among the cheapest in the world, their penetration is not very high as there are not enough doctors for the entire population. The government has to invest more in healthcare. The public-private partnership in healthcare has to become successful.
Drug prices are controlled despite rising costs of raw materials. Is the government doing enough for the pharma industry?
The government policy is definitely a challenge. The government is not supportive enough of the industry. The need is to realise that the government has to invest more in healthcare. We need a more liberal policy. Competition will anyway keep prices in check. The government needs to realise that the pharma industry is helping to improve the health of the nation.
How are Indian pharma companies currently placed against MNCs?
Indian companies are willing to make more investments than MNCs right now. They are able to attract better talent because they can pay better. MNCs are not very aggressive right now. Indian companies are growing between 10-15% while MNCs are growing at less than 10%.
What does the future hold for the Indian pharma industry?
The perception of the industry will change internationally once one of the Indian pharma companies launches a drug on its own, without copying someone else. However, I don’t see this happening until 2010. Other than that, consolidation is going to continue. Some companies will go the Ranbaxy way while some others may be bought by Indian companies. Nevertheless, the industry will be the fastest growing one.
Source : http://economictimes.indiatimes.com/
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