The US House of Representatives has approved the Senate version of the healthcare bill. The Obama administration is attempting to reduce healthcare costs and extend insurance coverage for Americans. The bill is seen to be beneficial to formulation companies.
In an interview with CNBC-TV18, AK Jain, ED, IPCA Laboratories, spoke about the benefits of the healthcare bill for formulation companies, and the company's business going forward.
Q: Can you start by telling us post that historic healthcare bill getting passed on Sunday, what kind of long-term revenues if any do you expect for domestic formulation businesses like yourself?
A: Overall this is very positive for the industry and for the Indian generic industry because generics are definitely going to get much better preferences there because ultimately the Obama administration is looking at wider coverage for people who cannot afford healthcare. And probably that will definitely help the overall generic industry.
As far as the domestic pharmaceutical industry is concerned, the industry has been growing by almost around 13-14% annually and we are looking for a growth of more than 20% in the current financial year. Also we have a similar kind of growth and we look for that kind of growth in the next financial year also.
Q: You were also putting up a formulation facility at Sikkim when we last spoke with you, could you give us an update if the commencement has already taken place and what sort of revenue flow are you expecting from that facility?
A: In Sikkim we are investing around Rs 80 crore and at this facility construction work is in full flow and hopefully before December, this facility should be ready. We are largely putting this facility to take tax advantage long-term, which the company will get in terms of the 10-year tax holiday and 10-year excise holiday.
So it is a long period of advantage and at full capacity utilization that unit will also give around Rs 300 crore kind of turnover and largely the products produced from that particular front are either for the developing markets or for the Indian domestic market.
So the products will be produced for both these markets because we have both the US productions and European production coming from some other plant. So this plant will be purely dedicated for domestic as well as for the emerging markets.
Q: Could you outline which geographies as well you just mentioned emerging markets?
A: Emerging markets are by and large let's say African markets and Asian markets.
Q: A big chunk of your revenues comes from the US business as well, on account of that plant shutdown that had taken place for one month. Do you see any kind of revenue damage on your US business and what kind of numbers can we expect for the next quarter from your export business particularly?
A: The US business doesn't currently contribute a very large amount of business to the overall turnover of the company. It is Europe which contributes majorly to the company. In the last two years we have been working on to build The US business and currently the US formulation business in this financial year is going to be around Rs 60 crore. Our initial target for the current year was around Rs 50 crore.
Q: For the entire exports business then?
A: Overall export business is over Rs 800 crore but the US business is currently very small.
Q: What kind of traction are you expecting in the overall export business currently at about Rs 800 crore. How much do you expect that to go up?
A: Overall our businesses - both domestic and exports - are growing by more than 20% and both will continue to do the same even for the next financial year '10-'11. Also our guidance will be 20% overall turnover growth in spite of rupee appreciation.
Q: Can you give us an update on that approval that you got from WHO for that anti-malarial formulation, do you have any chances? Do you think any progress on winning on the tender and where it is currently at?
A: The scope is around USD 300 million because that is what the funding takes place from all multilateral agencies like global funds and US aids and various donors. Give that kind of grants to the various African markets UNICEF or WHO they procure this kind of material for giving to the African markets.
We have applied for the first country tender very recently and hopefully maybe in the next 10-15 days we will know and hope to get around Rs 20-25 crore of business maybe to start with in the first quarter itself on that.
Source: MoneyControl
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