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Mankind Pharma gearing up to enter US, may start product filings in FY18

LiveMint logoLiveMint 21-09-2017 Isha Trivedi

Mumbai: India’s fourth largest drug maker Mankind Pharma Ltd is working to make inroads in the lucrative US market and plans to file its first set of generic products with the regulator in 2018 even as India remains a priority market.

The company has created a subsidiary to cater to the US market. It already has a front-end office and is setting up a manufacturing plant in New Jersey.

“We will develop innovative products for the US market. We are setting up a manufacturing plant in the US with a total investment of $30 million. We are establishing this US manufacturing organically. The building setup is ready; however, equipment and utilities are under commissioning,” Rajeev Juneja, chief executive officer of Mankind Pharma said.

He added that the company is also in the process of getting some of its units in India approved by the US Food and Drug Administration (FDA).

Mankind Pharma has 18 manufacturing units at Paonta Sahib in Himachal Pradesh and commissioned a new plant in Sikkim earlier this year.

While the New Delhi-based company has been successful in the domestic market, which accounts for nearly 90% of its revenue, analysts believe that tapping the US market will be challenging as the company is a late entrant compared to its Indian peers and current market conditions in the US are difficult.

The US is the world’s largest pharmaceutical market and also a place where drug prices are among the highest. With the government trying to bring down drug costs and given factors such as increasing competition and consolidation among distributors of generic medicines, growth rates and margins of Indian companies with exposure to the US have declined.

“Mankind is pretty late in entering the US. Currently, even established generic players are suffering and they are moving to differentiated and complex products to improve growth rates. Plus, the company is growing there organically which will strain the balance sheet,” an analyst with a Mumbai-based broking firm said on condition of anonymity.

“Winning in the US will require new capabilities. This will require deep thought given the timing of their entry as the market continues to consolidate making it challenging for new entrants unless they have a compelling differentiation strategy,” a consultant for the pharmaceutical sector, who did not wish to be named, said.

In financial year 2016-17, Mankind Pharma clocked a revenue of around Rs4,400 crore, up 13% from a year ago. Currently, international business, which includes markets of Africa and Asia, contribute just Rs100 crore. The company’s operating margin is about 21%, Juneja said.

He added that the company’s revenue is likely to grow by 17-18% in the current financial year.

Although the company is looking to increase its international presence, the Indian market will be its key focus and it aims to be among the top three players in the country.

In the domestic business, Mankind Pharma plans to widen its drug portfolio for chronic ailments and expand its over-the-counter (OTC) products segment, Juneja said.

Currently, the chronic drugs portfolio accounts for about 28-32% of the India business revenue and the company plans to increase its share to 50% in the next few years. This will be done through launch of new products, especially in the cardiovascular, diabetes and dermatology space, he said.

“We are also looking at newer segments like neuropsychiatry where we do not have much presence, and we are open to in-licensing of products from other companies. Earlier we didn’t have that kind of mindset for in-licensing but now things are different. Whatever matches our portfolio, resources, mindset, we will go for that,” Juneja said.

The major reason for Mankind’s success in India is the approach it took to tap tier-II, tier-III cities and rural markets, when most other pharma companies focused on urban areas. Lower prices and strong on-field sales force have been its strength.

“When we started we didn’t have that many resources. We wanted to provide quality products at economical pricing, so we tapped towns and rural markets. But, now we have resources and we are expanding to big cities. We can have an edge because of our pricing. For chronic ailments, patient has to take medicines daily and for a long period, so the preference will be for lower-priced products,” Juneja said.

The company’s OTC franchise, consisting of well-known products such as Manforce condoms, Preganews, Acnestar and Unwanted-72, will be another focus area as it is growing at 23% currently, as against the industry average of 16%.

In the OTC segment, the company plans to launch two new products over the next one to two years, he said.

Sanjiv Kaul, managing director and partner at private equity firm ChrysCapital, who has worked closely with the Juneja family, said Mankind Pharma has succeeded because it changed the rules of the game.

ChrysCapital picked up a 11% stake in Mankind in 2007 and exited the firm in 2015 after selling its entire stake to Capital International Private Equity Funds.

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