The value game

The value game

“The paradigm shift among leading Indian pharmaceutical companies to target high volume and blockbuster products for regulated markets has been one of the reasons for setting up Enaltec Labs Pvt. Ltd. (Enaltec) (to address the small volume market),” says Anand Shah, managing director and CEO. Most of the pharmaceutical companies in India are vertically integrated, which was a threat to other generic companies around the globe as they had to buy the active pharmaceutical ingredients (APIs) from them and also be their competitor in the global market. “This gave rise to a need for a neutral API manufacturer, who can support the generic industry and fight the onslaught of this competition,” says Shah. Incorporated in the year 2006, Enaltec was set up by Anand Shah, Dr. B.V. Sivakumar and Susheel Koul with a total investment of Rs. 8.5 crore (Rs. 4.5 crore from the promoters and Rs. 4 crore from banks). Its main objective is to develop and produce complex, small volume, technology-driven products at competitive prices to provide the critical advantage to generic formulators across the world.

Our USP is that we that we have not concentrated on large volume or ‘me too’ APIs. Our focus is in small volume and high value APIs.

“We are not interested in large volume products, as mostly they have relatively easier chemistry. But the critical factor for them is engineering and infrastructure. Our infrastructure is based on small-volume, high value and complex or larger manufacturing process APIs,” shares Shah. This apart, many big pharmaceutical companies have already built up large capacity plants and infrastructure. So, if there is an opportunity in small volume products, it does not create enough economies of scale for them to develop such products. “Pharmaceutical companies would like to focus their resources in terms of time, man power and infrastructure for larger blockbuster products, which can directly contribute to their top line,” says Shah. However, their generic divisions do not want to miss the smaller molecules and for such small molecules they prefer to outsource.

The modus operandi

A lot of work is involved in developing and synthesising APIs (a substance used in the manufacture of a drug that becomes the active ingredient of the drug). It involves creating one’s own patent and value for that product. For Enaltec, it is critical to develop new products (even before people evaluate it) based on their various focus markets. “We develop and manufacture a product, which can be just for one market like Turkey,” says Shah. And in countries where these products are not known, the company educates their clients with production information, its advantages with a previous molecule in same category and formulation know-how.

Enaltec’s customers include almost all generic companies from across the globe. It targets three regions – fast and easy entry markets like India, Pakistan, Bangladesh etc.; semi-regulated markets with a two to three years gestation period like Argentina, Brazil, Turkey, South Korea, Iran etc.; regulated markets with a gestation period of three to five years and plant inspection markets like the EU and the U.S.

Enaltec focuses on small volume APIs, which is of no commercial interest for large API manufacturing companies as their plant scale will not make it economically feasible to manufacture such small volume products (anti-histamines like Olopatadine hydrochloride, non-steroidal anti-inflammatory like Bromefenac and Nepafenac) at competitive prices. It also develops APIs where there are no active DMFs (drug master file) operating in the U.S. or EU like Lymecycline (a tetracycline broad-spectrum antibiotic). The marketing of drugs requires the submission of product details in a document called ‘Drug Master File’ (DMF) to the regulatory body in the respective countries. These DMFs are reviewed by the regulatory agencies prior to giving the marketing approval for that country. Enaltec has filed around 385 (as of October 2011) DMFs in Brazil, Argentina, Turkey, U.S. and Europe.

Product development

The company’s focus is to emerge as a technology leader in its product portfolio and it invests about 8 per cent of its turnover in research and development (R&D) of new products and processes. When a brand get approved after various phases of clinical trials, Enaltec starts working on these products and creates intellectual property (IP) rights on these products, even if some of them are still in phase three or four of clinical trials. Enaltec then becomes the lone supplier initially to work at the R&D stage with generic companies. This enables Enaltec to be a premium supplier of new products, helping them build a relationship with generic pharmaceutical companies.

It also develops IP strategy for molecules, which are yet to be approved, and file process patents (patent to protect manufacturing process) and polymorph patents (various forms of the same molecule) encompassing the product, which would provide a unique platform for the company to partner with generic companies. For example, Safinamide (candidate drug against Parkinson’s disease) is just under approval by the U.S. Food and Drug Administration.

So far, Enaltec has developed and commercialised more than 50 products in various therapeutic segments like ophthalmology, cardiovascular disease, dermatology and CNS (central nervous system). It has a research laboratory and manufacturing facilities in Ambernath, Maharashtra. Apart from serving the domestic market, Enaltec now caters to more than 30 countries across the globe. And Shah, with his experience in international marketing, contributes directly to Enaltec’s export business in both regulated and semi-regulated markets. Almost 80 percent of its turnover is from the export market like South America, Middle East, Asia Pacific and Europe.

Despite the ground it has covered, Enaltec’s early days were not without challenges. “Our major challenges were to build a team, convincing the team and other customers on our business model, and our seriousness in getting into the business and to be successful in our journey to achieve our vision,” recalls Shah. Today, it has grown into a company with a turnover of Rs. 61.4 crore in 2010–11 from Rs. 8.5 crore in 2007–08.

Growth plans

Enaltec is currently well-funded and supported by the bank and its investment partners. “Going forward, we may raise capital through private equity,” shares Shah. The company wants to step up its pace of growth and is targeting a turnover of Rs. 300 crore to Rs. 400 crore by 2016. “For the next two years, we are working towards a growth of 30 per cent and 50 per cent respectively,” shares Shah.Enaltec is also looking at creating IP for its various new products, which are still in its phase two and phase three stages of clinical trial. It plans to continue its contribution in innovation through a cost effective process. “Our growth will be from the entry of new products into our existing markets and the sales of existing products from newer markets (regulated countries),” shares Shah. “We are also looking at collaborating with finished dosage form companies to develop products up to the final stage. We want to be their marketing partner in select countries to market the product under their label as well,” concludes Shah.


WHAT NEXT?

To reach Rs. 300 crore to Rs. 400 crore turnover before the fiscal 2016

Creating intellectual property in various new products, which are still in phase two and phase three stages

Collaborate with finished dosage form companies to develop products up to the final stage. It also wants to be their marketing partner in select countries to market the products under their label.


Poornima Kavlekar has been associated with The Smart CEO since the time of launch and is the Consulting Editor of the magazine. She has been writing for almost 20 years on a cross section of topics including stocks and personal finance and now, on entrepreneurship and growth enterprises. She is a trained Yoga Teacher, an avid endurance Cyclist and a Veena player.