One of India’s many success stories, the pharmaceutical industry is ensuring that essential drugs of good quality are made available at affordable prices to the vast population of the country while competing with some of the best names in global markets. Leading the pack is Hyderabad-based active pharmaceutical ingredient (API) manufacturer Aurobindo Pharma Ltd.

The company was promoted in 1986 by Nityananda Reddy and a small, highly committed group of professionals. It became a public venture in 1992 and commenced operations in the year 1988-89 with only a single unit manufacturing semi-synthetic penicillins (SSPs) at Pondicherry.

Aurobindo Pharma went public in 1995 by listing its shares in various stock exchanges in the country. The company is the market leader in semi-synthetic penicillin drugs. It has a presence in key therapeutic segments like SSPs, cephalosporins, antivirals, CNS, cardio-vascular and gastroenterology. The company has an addressable market estimated at US $209 billion for its product basket. This buoyant trend for generics is expected to continue and Aurobindo will seek to ride the trend. Company chairman PV Ramprasad Reddy says, “We will be the best partner for all our stakeholders. I have a dream for Aurobindo as well as courage and stamina to transform ourselves into one of the top three pharmaceutical companies in the country aided by our dedicated team of over 6,900 people. We shall continue to shape our organization for the future and promote the interests of all our stakeholders.”

He says, “Members will appreciate our successful track record in converting opportunities throughout the product chain has demonstrated the depth of our skills and expertise. We are confident that we can continue to deliver on our promises underpinning these competencies. Our performance culture will remain the hallmark of our success and an assurance for all our stakeholders. Our company’s essential strategy and direction continue to remain unchanged.”

Reddy adds, “We shall pursue strong growth and solid returns from an integrated and internationally spread pharmaceutical business. The emphasis will continue to be on increasing the formulations business, adding to the product pipeline and gaining meaningful presence in premium as well as emerging markets.”

NOTHING CAN HAPPEN WITHOUT BASE

Aurobindo Pharma has the ability to execute its formulation activity through 15 different manufacturing facilities. It has 11 manufacturing facilities in India, two in US, one each in Brazil and China. All its facilities are intergraded with leading regulatory approvals like US FDA, UK MHRA, Brazil ANVISA.

The company is engaged in manufacturing and marketing of oral and sterile pharmaceutical bulk actives of semi-synthetic penicillins, semi-synthetic cephalosporins, oral bulk actives of antibacterial, antiematic, antihistamines, antiulcerants, antiviral, fluroquinones, macrolides and peristaltic stimulant, organic intermediates and finished formulations.

The plants at Bolaram and Pondicherry are engaged in the manufacture of semi synthetic penicillins, while units at Pashamylaram and Kukatpally manufacture drug intermediates as well as Quinolones and Formulation respectively. The Pondicherry unit was later shut down. The units at Chitkul are engaged in the manufacture of sterile cephalosporin, while the unit at Pashamylaram manufactures cephalosporins.

In bulk actives, the company manufactures and exports a wide range of semi-synthetic penicillin antibiotics, both oral and sterile, while in drug intermediates, the company manufactures and exports CMIC chloride and various 4-methyl peperidone derivatives. In formulations, the company has also launched its own brand of tablets, capsules, dry syrup and injectables. The company also manufactures a wide range of sterile bulk drugs (lyophilised and crystalline).

The company is a knowledge-led entity with focus on customer needs. The strength of Aurobindo comes from its research centre where products and processes are created which meet regulatory standards and address the needs of the consumer. The R&D centre continues to file Abbreviated New Drug Applications (ANDAs) on an ongoing basis and strives for the first-to-file status. It has a technically competent team, which ensures that all process controls and compliances are met. Aurobindo has a talent pool of scientists who have considerable experience in handling complex chemistry as well as filing applications with regulatory authorities. The in-house team has applied for over 1,068 approvals for ANDAs out of which 160 are with the US FDA.

It has received 109 approvals from the US Food and Drug Administration (FDA). Similarly, the team has filed over 1,461 DMFs including 143 with US FDA. As many as 404 patent and design applications have been filed with various authorities.

Aurobindo has a total of 110 ANDA approvals out of which 82 are final approvals and 28 are tentative approvals from US FDA. Its latest final approval was for Cetirizine hydrochloride syrup from the US FDA. This approval is under the prescription drug product category.

With its research-based chemistry capabilities and expertise in developing various dosage forms, the company has product offers in six key therapeutic segments that have demand pull.

GROWING INORGANICALLY

During the current financial year, the company acquired 100% equity stake in Trident Life Sciences Ltd at its book value as on 30th Jun ’09. The total cash-flow for this acquisition was Rs 388.4 million. The acquisition will give the company to fill a critical gap in its manufacturing capabilities and an opportunity to enter highgrowth injectable business and further enhance its capabilities in providing comprehensive pharma manufacturing, distribution, services and solutions to its customers. It has also proposed a merger of Trident with the company subject to the requisite approval of the shareholders, creditors and the Stock Exchange as well as sanction by the High Court of Judicature at Hyderabad, Andhra Pradesh.

Trident is building a liquid injectables facility in Medak district, Andhra Pradesh which would be made regulatory compliant to supply regulated markets and is set to commence operations in early 2011. The facility being set up on 30.38 acres will manufacture general injectable range of formulation products, including glass vials for lyophilized sterile powder and liquids, ampoules, prefilled syringes and blow-filled seals.

Aurobindo Pharma entered into a partnership with Pfizer Inc, a global leader in pharmaceuticals and executed a licensing and supply agreement for several solid dosage and sterile products. The agreement allows access to Pfizer to exploit the sales potential of these products through its global commercial presence. It has a large manufacturing base approved by several regulatory authorities with strong product portfolio for the manufacture of formulations. Hence, the partnership alliance is mutually beneficial.

The partnership has been initiated with a few products and their execution agreements will pave the way for further strengthening the relationship and accelerate the mutually beneficial strategy for expanding the products portfolio of solids, steriles and product reformulations. This gives promising opportunity to the company and facilitates stability in earnings and accelerates its growth plans. The current agreements are targeted at the US and European markets and both parties will continue to explore ways to further extend this partnership.

SET TO GROW

The business plan is to convert product approvals into invoices as early as possible. Aggressive steps are now being taken to participate in the emerging markets such as Brazil, Mexico, South Africa, Nigeria, Malaysia, Korea, Middle East and a few others. A focussed approach is now being taken to gain a foothold in about 60 markets, increase volume and revenue growth and enhance market share wherever launches have been made successfully.

Several products that were launched have received encouraging response and given the success rate, augmenting the product pipeline is the mainstay of this business. Continuous effort is being made to add to the pipeline, file dossiers, seek regulatory approvals for an increasing number of products and strengthen the company’s marketing muscle. The company will strive to market an increasing number of affordable drugs and is shifting its base from lesser regulated market to higher regulated market.

FIGURE SPEAKS

When figures are in place with a healthy sign, then nothing requires explanation. Similar facts have been observed in Aurobindo Pharma’s case. It has been a year of new highs in volume sales and revenue for the company, while profits were shaded by exchange fluctuation loss of Rs 227.82 crore. Marketing efforts were made to enlarge the geographical spread as well as strengthen relationships with existing customers.

The company has a larger product portfolio and is closer to the customers resulting in better formulation sales. It had reported highest ever revenues at Rs 2,885.25 crore as against Rs 2,409.28 crore in the previous year. Exports as a percentage of total sales were 63.2%, an improvement from 58% in 2007-08. Formulation sales were Rs 1,203.53 crore in year ended March ’09 as against Rs 848.56 crore in the year before that.

The company’s raw material consumption as a percentage of sale of goods stood at 58.49% as compared to 58.50% in 2007-08. During 2008-09, China operations were streamlined and there was improvement in yields and quality of strains, while Pen-G prices remained volatile. Presently steps are being taken to improve business prospects. In the last four years, its international sales grew by 60% year-on-year (y-o-y) whereas it has maintained its domestic sales.

IT MEASURE

To enhance its capability further, the company has implemented Oracle-based ERP which has not only added to the controls, but also led to faster information, analysis and improved decision making.

Aurobindo has a well-defined and adequately monitored internal control system. Checks and balances as well as control systems have been established to ensure that assets are safeguarded, utilized under proper authorization and recorded in the books of account.

ORGANICALLY GROWING

To further enhance the domestic business, it recently inaugurated its formulations manufacturing facility (unit VII) in Hyderabad. The company has invested approximately Rs 150 crore in setting up a large manufacturing plant that is constructed within a secure area of 30 hectares of land, which will support the growing demand for generic pharmaceutical products from supply contracts and exports globally.

The facility situated at APIIC Green Industrial Park, Jadcherla near Hyderabad is Aurobindo's fifteenth manufacturing facility globally. This facility would cater to high value non-beta-lactum products for regulated markets and will further enhance Aurobindo's capabilities in providing comprehensive pharma manufacturing, distribution, services and solutions to its customers, including global alliances. This facility currently employs 200 people and expects to significantly expand its workforce in India over a period of time. Commercial operations are scheduled to commence from April ’10.

LOOKING AHEAD

The investments made in research and development, product portfolio, manufacturing facilities, marketing infrastructure and skilled and competent human resources have started paying off. Aurobindo Pharma has been able to put them all together, expand product offerings and enhance the business volume. This trend will continue.

The company has also been building long-term relationships with customers and they, in turn, have reciprocated with large orders for Aurobindo's products and services. All such efforts are creating sustainable long-term growth and a more focused, more strategic and more profitable company of the future.

The commissioning of the SEZ Unit VII at Jedcherla, Andhra Pradesh will add to the manufacturing capacity and optimize manufacturing capabilities. Aurobindo Pharma Ltd is recognized by customers for its ability to deliver on the promises and commissioning of the new facility would improve the due date performance as well as add to the company’s ability to accept large batch order sizes. The manufacturing economics would be further augmented and the company’s products can be more competitive.

Aurobindo Pharma’s priority is to expand volumes, meet expectations of customers and associates and in the process become cash positive, reduce borrowings, improve cost of funds and make a significant impact on the overall results.

The company is conscious of its outstanding FCCBs and also believes that by improving fundamentals it will enhance shareholder value and the company's ability to service commitments with a strong balance sheet.

Reddy said the near term goals for 2009-10 are straight forward, “To continue with strong performance in all the company’s addressable markets, shorten the time between product approvals and launch of products, enhance the operating matrix at all the manufacturing facilities and improve cash flow.”