For the Hyderabad-based fully integrated pharmaceutical company, Celon Laboratories Ltd. (Celon), the fiscal 2011 was a benchmark year when its turnover crossed the Rs. 100 crore mark, a 100 per cent growth over the previous fiscal. The company also maintained an average 18 per cent in profit margin over the years. This growth has been possible due to the higher number of drugs in its focus areas, expanding market base across the country and in the emerging markets and a strong distribution network. Celon focuses on developing generic products for niche areas such as cancer treatment, gynaecology and critical care cardiology that include injectable drugs, tablets and inhalations. “Our cancer drugs constitute the largest share of our revenues and have helped establish our identity, while critical care segment is slowly seeing good growth in the Indian market,” says the founder and CEO of Celon Laboratories, K.V. Ravindra.

We are looking at technology-driven products. Our cancer drugs constitute the largest share of our revenues and have helped establish our identity.

Ravindra was clear that his business should be a scalable one and hence, entered the niche therapy segment where players and the target audience are minimal. He was certain that oncology, with its smaller network of doctors, was the area that would give him a level-playing field with already existing players.  The company started off with cancer drugs and later expanded into various cancer-related specialisations like haematology and bone marrow transplantation. It currently has 150 registered drugs with about 43 drugs in cancer, 35 brands in critical care, 18 in gynaecology and 10 in nephrology and urology, with a presence in 52 countries focusing on Africa, Asia Pacific, Latin America and CIS (Commonwealth of Independent States) and its facilities approved by many respective Ministries of Health including Invima, Columbia. It is targeting at registering 400 more by the end of March 2012. Establishing the company’s network among hospitals was not an easy task but eventually the drugs found acceptance.  It has tied up with about 400 hospitals in the oncology sector and 7,000 hospitals for critical care, and hopes to further expand its network.

For the current fiscal, Celon is targeting a turnover of Rs. 140 – 170 crore with 50 per cent growth rate.  And for this it is entering newer avenues of products that are technology-driven. In fact, its nanotechnology-based drugs will be available from October this year. The company will also have a presence in the super generics segment. “We had initiated the required process for producing super generic drugs in 2007 and it will take another four years time to hit the market, since it involves a lot of R&D,” states Ravindra. And by 2015 when this happens, the company aims to be a Rs. 700 crore company.

The beginning

A pharmaceutical graduate, Ravindra worked in some of the top companies in the industry with a specialisation in marketing and later, helped set up complete operations in different geographies. It gave him an insight into the Indian pharmaceutical industry and its growth opportunities. He later joined Zenotech Laboratories Ltd. and worked closely with the founder. In 2007, he decided to start a venture by himself and founded Celon Life sciences. Later that year, he acquired Galen Labs, which had a manufacturing unit, and changed it to Celon Laboratories. He took to the inorganic growth route with acquisition of two more small labs. “For one of the labs, it took us about a year to reorganise and upgrade it. Had we decided to set up a unit by ourselves, it would have taken us a year longer and about four per cent more in investment. Thus, acquiring other labs was beneficial for us,” reveals Ravindra. (Two of Celon plants in Hyderabad each has the capacity to produce 100 million tablets/year, and with one producing 150 million capsules/year and the other 50 million capsules/ year, besides other drug forms.) The initial investment came through a loan from State Bank of India of Rs. 3.5 crore, which was used for upgrading the existing plants.

Celon currently has three manufacturing plants in Hyderabad and Vijayawada, and is in the process of setting up a third one. Based in Kolthur village, Genome Valley, a biopharmaceutical zone in Hyderabad, the Rs. 120 crore plant is spread over 12 acres and will have its own hormonal block, a cancer block, a block for general injectable drugs, a high-end research & development (R&D) centre and space for expansion of biotechnology centre later. The hormonal block is expected to function by January next year. Much of the funding for this expansion comes from Sequoia Capital India’s (Sequoia) equity investment of Rs. 70 crore in 2010 – 11. “We believe that branded pharmaceuticals is an interesting investment opportunity for Sequoia and we are delighted that Mr. Ravindra chose us to be business partners,” says managing director of Sequoia, V.T.Bharadwaj, adding that the firm was also convinced by his ambition, vision and track record in articulating and building a specialty – branded generic company with a sharp focus on India and emerging markets. Bharadwaj appreciates the bootstrapped manner in which the company has been built so far and backs Ravindra’s ambition to build a very large company.

The company has the necessary approvals for its manufacturing units and has its own in-house quality control management system, designed specifically for Celon, to make sure the standards are adhered to. Its internal R&D facility has also received recognition from the Department of Scientific and Industrial Research (DSIR). “Initially, we had invested Rs. 2.5 crore for just the R&D unit. Last year, we partitioned the R&D department as a separate strategic business unit. Now, about 15 per cent of our investment goes into R&D, while 70 – 80 per cent is spent on manufacturing and setting up the necessary technology,” says Ravindra. The company began drug development in 2007 and some of these drugs took almost two to three years to enter the market. And with a dedicated sales team present in its network of cities, Ravindra believes this has helped differentiate the company. “In Philippines and Sri Lanka, we are one of the largest companies to supply generic oncology products,” he adds.

Growing specialties

The specialty segment, in which Celon operates, has grown well in the last five to six years. In fact, Bharadwaj says the Indian pharmaceutical industry’s growth rate has been 12 – 15 per cent in 2006 – 2010, with specialty segments growing faster at 20 – 25 per cent. Dr. Ajaykumar Sharma, Industry Manager, Pharmaceutical and Biotech Practice, Frost & Sullivan, India, says that the industry is estimated to be between US $ 11.5 – 12.5 billion, with about 315 – 415 well-sized companies holding up to 75 per cent of the market share and the rest being mushrooming companies. In 2000, the sector was marked at US $ 2.5 billion. “In mergers and acquisitions alone, Indian firms have invested about US $ 4.5 billion in the last decade. While the growth for companies producing more generic drugs such as cough and cold has already stagnated, the same is not true for niche generics. However, it does require a lot of processes, manpower and R&D,” states Sharma.

With its strategies in place, Celon is all set to capitalise on this growing market. By 2013, it aims to get approval for 1,200 products globally and 30 molecules/drugs in India. And it hopes to expand its team of 1,000 employees. The company plans to further develop its facility in Vijayawada that specialises in API (active pharmaceutical ingredients) formulations. “We will continue to focus on cancer treatment and critical care, and bring biotechnology into the portfolio. We want to make sure we leverage all technology platforms,” says Ravindra. But, for him, it’s not just about establishing a scalable business but one that also touches people’s lives.