Mr.Ashok Shinkar

Excerpts.

Brief us about the strategic positioning of Wanbury in various therapeutic areas and how well it is placed vis-à-vis it’s competitors.
Wanbury’s business significantly comprises of bulk drug and domestic formulations. In regards to bulk drug, the company is mainly into Metformin, an anti-diabetic product, and it is the largest manufacturer of metformin in the world, followed by US Vitamins ltd. It has tied up with few leading generic companies in the advanced countries like Europe and US for supplying the bulk Metformin, which placed the company at the leading position for the particular bulk drug of metformin. In fact, the said API market is growing at a rate of 20% per annum and the company is able capture the entire growth in its operation. As a result it has attained the No-1 position in the current financial year exceeding the production of earlier market leader - US Vitamins ltd.

The leading customers of the Metformin bulk drug in the overseas market are – Bristol Mayers Squib, Teva, Apotex, Tor, Mylan, Brarr etc. Also, in the domestic market, most of the metformin formulation exporters like – Ranbaxy, Sun Pharma, Strides etc procure the bulk drug from Wanbury.

Further, the company has expanded its existing Patalganga plant and is in the process of acquiring two bulk drug units, which would strengthen the manufacturing base of the company. Moreover, the company, in order to strengthen its API base, has also set up a R&D centre in Navi Mumbai. As a result it could recently file 4 DMFs with USFDA in the field of Cardiovascular, Central Nervous System, Anti-inflammatory segment etc and hopes for filing 4 more DMFs in current calender year. All these developments would place the company in more comfortable position vis-à-vis it’s competitors in the API business.

So far as formulation business is concerned, the company does not possess any leadership position, rather it is the continuation of the existing business of Sandoz (India) that had been acquired by the erstwhile Wander Ltd. The product profile is comprised of Gynecology, Orthopedic Pediatrics etc. However, the company has strong presence in the entire domestic market with a large field force including distributors, C&Fs etc.

Share with us the synergies behind the merger of Wander and Pearl Organics, as both were operating in different therapeutic segments.
So far as synergies behind the merger of Wander and Pearl Organics is concerned, the company has added the skill set of formulation business to it's existing base of APIs business. Leveraging the formulation skill set, the company may stretch forward its APIs strength and establish a strong formulation product profile in future. The company has a strong foot print in 40 countries by supplying APIs and in the domestic market it has considerable presence for formulation, which the company is likely to leverage for building new formulations portfolio in the foreseeable future. In addition, the company is foreseeing acquisition of formulation business oversea and formulation brands in the domestic market by utilising its competitive presence in the APIs business.

Explain us the arrangements with Pharmaceutical Products India (PPIL) and what is the strategic advantage of the deal for Wanbury?
Pharmaceutical Products India (PPIL) is a bulk manufacturing company, with two manufacturing facilities at Patalganga and Tarapur. As of now, the company has been assigned to Board for Industrial and Financial Reconstruction (BIFR). Currently, Wanbury is in the process of acquiring and merging the company with itself. As PPIL is under BIFR, Wanbury is currently doing a scheme of arrangement with the lenders at PPIL, whereby it will get the approvals of the banks and financial institutions and subsequently it would take up the matter with other associated parties. However, the company expects to complete the acquisition process by the end of 2005 and upgrade the unit by the second half of 2006 for commercial operation. The company has earmarked Rs 45 crore both for acquisition and capital expenditure.

So far as advantage of PPIL is concerned, the PPIL's Patalganga facility is around five times bigger than Wanbury's existing unit at the same place (i.e. Patalganga). The said PPIL facility is the semi finished unit, which would be completed and upgraded by Wanbury at par with the USFDA standards for the approval by the advanced market regulated authorities. Also, PPIL has another plant at Tarapur, which is being used by Wanbury. Wanbury has intended to manufacture certain new products from the second unit soon and use that for contract manufacturing services (CRAMS) business. One of the strategic advantages of acquiring PPIL is that both the manufacturing units are closer to the Wanbury's facility at Patalganga.

The company is collaborating with Doctor Organic Chemicals (DOCL). Elaborate on the details of DOCL and about the tie up. What would be the synergy of the collaboration among two establishments?
Wanbury has entered into a strategic association with Doctors Organic Chemicals (DOCL), a bulk manufacturing company situated in Andhra Pradesh, whereby it would strengthen its API business both in terms of higher number of products and increasing share of business from advanced markets like US and Europe. As per the collaboration agreement, it would be marketing and manufacturing products of DOCL by leveraging on its network, technical expertise and customer base. Further, the company has also intended to acquire a significant stake in DOCL on a future date.

DOCL has already got a USFDA approved facility for manufacturing of non sterile APIs and presently manufactures lbuprofen, Mcfenamic Acid, Glucosamine and Gabapentene among other products. Hence, this collaboration would allow Wanbury to immediately increase its product portfolio in the regulated markets of Europe and US. With this association, Wanbury would expand to over 14 products before the end of 2005 from the level of 8 API products in FY04. In fact, the association would immediately enable Wanbury to sell products, including Glucosamine, Mefenamic Acid, lbuprofen in the regulated markets. In addition, DOCL has a large facility spanning over 18 acres with over 268-KL capacity and has a large expansion potential.

In addition, DOCL has been approved by Pfizer for contract manufacturing and has been selling Gabapentene intermediate and Mefenamic acid to Pfizer. Thus, DOCL offers an excellent platform to Wanbury to build up its CRAMS business as it has already been into CRAMS.

So far as the contribution of Wanbury is concerned, it has already undertaken plant upgradation at DOCL to improve the product mix and reduce the cost of production of the existing products. Also, it has assisted DOCL in enhancing its capacity for existing products by close to doubling its Ibuprofen capacity. It would be revamping an idle plant at DOCL to add over 5 new products to the DOCL basket. Wanbury would also assist DOCL in completing some unfinished blocks at the facilities for contract manufacturing.

What is the GDR/FCCB plan of the company?
In order to scale up the long term growth strategy of the company, Wanbury has planned to mobilise fund worth Rs 55-60 crore through GDR route, which would be completed in next couple of months.

Kindly, share about the promoters of the company and their basic business operation.
As of 31st March 2005, the two major promoters of the company are - Kingsbury Investment INC (an foreign entity) with share holding of 31.88% and Expert Chemicals India Pvt Ltd (a domestic entity) with stake of 29.81%. Both these units are simply holding companies and have no other operations.

What is the marketing strategy of the company in general, and for the domestic market in particular? What is the field force of the company?
The basic focus of Wanbury in formulation is brand building and it is concentrating more on its existing line of therapeutic segments like - Gynecology, Orthopedic Pediatrics etc. As its strategy, the company is continuously improving the skill sets within the organisation to strengthen credibility with the doctors. Again, the company is waiting to capitalise from the expected consolidation in the pharma industry by acquiring various brands from the small pharma companies in the competitive post product patent era. Further, as a strategy for consistent future growth, the company is looking for establishing a life-style segment and also evaluating the proposal for converting the own manufactured bulk drug (including Metformin) to formulations. In addition, the company has recently recruited a marketing head with relevant experience/back ground from Pfizer, which would further scale up the marketing operation in future. The company has a specialized field force of 450 representatives.

Please, share the R&D achievements, strategy and initiatives of Wanbury. What is the filling (i.e. DMF/ANDA/COS) targets of the company in near future? Also, give us the details of registrations and fillings, you hold in various countries.
In the R&D field, the major achievement of the Wanbury is the DMF filed for Metformin in 1999, which now contributes more than 80% exports to the regulated market. Recently, the company has filed 4 DMFs in US, namely - Amytriptallin, Tramadol and Promethazine and Metformin Hydrochloride. Also, it has recently filed two Certificate of Suitability (COSs) with European authority. In order to propel the filling activities, the company has established a R&D centre in Navi Mumbai in Jan 2005 in order to scale up the R&D skills both in the bulk drug and formulations. Currently, the company is expediting on chemical research particularly for DMFs and subsequently it is expecting to graduate the R&D activity for formulations. Basing on its improving research initiatives the company is confident of filing 4 more DMFs by December 2005.

Kindly share the geographical focus of the company in respect of exports. In particular, what is the strategy of the company, in respect to advanced markets like – Europe and US?
In the global coverage point of view, the company covers 40 countries both - regulated and unregulated markets.

The focus of the export strategy of the company is regulated markets. It has strong presence in North America, Latin America and Europe. The composite revenue from Europe and US accounts for around 35% of the total exports of the company. But considering the increasing DMF fillings in advanced markets and increasing capacities and acquisitions, the company is confident of boosting the exports contribution by advanced markets to 70-75% in FY06. With this Wanbury expects over 100% growth in exports revenue, which would eventually double the overall revenue of the company in FY06.

'We are confident of doubling the overall revenue on the back of over 100% growth in APIs business'

With India's adoption of Product Patent, many global players are eyeing domestic manufacturers for contract manufacturing. So, how is the company preparing itself to capitalise on the emerging trends in contract manufacturing?
The company has recently collaborated with Doctors Organic Chemicals (DOCL) and likely to acquire controlling stake in near future. Incidentally, DOCL (having a USFDA facility) has already got its presence in the contract manufacturing business. It has been approved by Pfizer for contract manufacturing and has been selling Gabapentene intermediate and Mefenamic acid to them. This offers an excellent platform to Wanbury to build up its CRAMS business.

Further, the company is planing to upgrade the facility of Pharmaceutical Products India (PPIL) at par with the USFDA standards for the approval by advanced markets, which will be partly used for contract manufacturing.

Hence, leveraging its global network in API business and having USFDA standard facilities, the company expects sound growth in CRAMS business by FY07, if not in FY06.

Currently, all pharma majors are identifying their strategic model for the product patent era; Viz. Ranbaxy is considering generics and collaborative basic research while Nicholas is adopting in-licensing. So, what would be the core strategy of your company for tackling the post product patent competitive regime?
The basic business model of the company is generics but more particularly APIs, as the company expects to maintain the growth in this business model, despite competition. Further, considering the concern of the price erosion in bulk drug business, the company plans to tackle that by improving production process and cost optimisation. Alongside, in the formulation segment, the company hopes to maintain growth by building and acquiring brands in a continuous manner.

What are the new products and the respective therapeutic areas, in the pipeline, to be launched by the company in near future?
In the formulation segment, Wanbury is entering into Anti-diabetics, CNS, CVS, anti-histamine and anti-inflammation. The company is looking for formulating products using its own metformin bulk. Thus, the company is setting up a life-style division for focusing on the high margin formulation. Also, it is contemplating to set up a formulation unit in future. Again the company is looking for a strategic acquisition of Formulation Company in Europe, which would take the domestic formulation business to global arena. In a long-term period, the company has an intention of exporting it formulations to advanced markets.

So far as new product launches are concerned, the company has recently (in April 2005) launched an umbrella products of CORIMINIC brand and expects revenue of Rs 7-8 crore by FY07. Further, it plans for introducing 3-4 more products in FY 2005-06.

What are the new areas the company is focusing into?
The new area of focus for the company is entering into formulation manufacturing either by establishing formulation unit or acquiring one. The company is also focusing on acquiring a formulation company (with or without manufacturing facility) in Europe to globalise its formulation business. In fact, the company is contemplating to create its own generic set up in Europe in order to exploit the generic opportunity in future.

Alongside, with the collaboration with DOCL (which already have presence in CRAMS), the second focus of the company is CRAMS business (both in formulation and APIs), which will be dedicated for international business

Any further acquisition plans especially brands?
The company is eagerly looking for suitable opportunities for acquiring brands in the domestic market by utilising the expected consolidation in the pharma industry consequent to the product patent implementation.

Kindly share your outlook on the margin of the company, as the bulk business continues to be under the pricing pressure?
Despite the pricing concerns for the bulk business, the company is confident of widening the operating margins driven by its thriving initiatives of expansion and acquisitions.

In fact, Wanbury has expanded its product portfolio and added a number of promising APIs in its portfolio. As planned, Wanbury has filed DMFs for Amytriptallin, Tramadol and Promethazine in US. It has also contracted sales for these products with some of its customers in US. DMFs filings for 5 additional products are in various stages of completion.

In addition, the Company has recently completed its first phase of expansion with a earmarked investment of Rs 10 crore (approx.), whereby it has expanded its Metformin capacity to around 3000 tonne from the level of 2100 tonne in FY05. This will scale up the metformin business, wherein the company is the largest producer in the world, and would provide economies of scale. Also, the company is under going the second phase of expansion, whereby it will set up a multi product line at its Patalganga unit for manufacturing certain new API products. The multi product line is expected to start commercial operation by September 2005.

Furthermore, the company has collaborated with Doctors Organic Chemicals (DOCL), which would enable Wanbury to expand its product portfolio and particularly in high margin advanced markets. Hence, considering the collaboration and progressive growth in DMF fillings, the company foresees to widen the product range from 8 APIs in FY05 to 14 APIs in FY06 and over 24 APIs by FY07.

Hence, given the economics of scale from capacity expansions and increasing the share of revenue from high margin advanced markets, Wanbury is confident of improving the operating margin by around 5% in FY06.