Mankind Pharma set to tap core drugs market
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Mankind Pharma is set for a major turnaround over the next two to three years. The Rs 2,000-crore company, best known for its consumer brands like Prega News, Manforce, Unwanted-72 and Kaloree-1, is now eyeing the market for diabetes and cardiovascular drugs to record growth in both turnover and profit.
Mankind Pharma, India’s seventh-largest drug maker, aims to rise to the second or third position over three to four years, says chief executive and Chairman R C Juneja. “We are planning to launch 15-16 products in the chronic therapy segment this financial year. Currently, our profit margins are very low compared to the industry, primarily because most of our products are in the low-margin segments, and these are priced low. Introducing drugs in the chronic segment would not only contribute to the turnover, but also boost profit,” he told Business Standard.
The acute segment includes diseases that usually last for a short duration and require therapies like anti-infectives, pain-killers or analgesics. The chronic segment includes diseases that are recurring in nature and include lifestyle diseases. It includes therapies anti-diabetics, cardiovascular, cancer etc.
To get into chronic therapy segment, which deals with diseases such as diabetes and cardio vascular diseases
To launch 15-16 products in the chronic segment in FY13
May divest its personal care business that has brands Don’t Worry and Addiction
Eyes a growth rate of 28-30% in turnover in FY13
Aims to add 700 people to its sales force in FY13
The company is targeting a growth of 28-30 per cent this financial year, which would raise its turnover to about Rs 2,500 crore, Juneja said. Driven by robust growth in the consumer brand segment, the company’s pharmaceutical business has been growing about 18 per cent annually, compared with the industry average of 13-14 per cent. However, the company’s net profit margins, growing at 12-13 per cent, are slightly below the industry average of about 20 per cent. The chronic segment foray would help boost this, Juneja adds.
Ashish Mehra, managing director, Strategic Decisions Group, says Mankind’s entry into chronic therapy is essential for it to expand beyond small town to big cities. “It started with acute therapy in rural areas, and then moved to towns. Now, when it wishes to enter big cities, there are big players dominating the market. These companies are already strong in the acute segment. So, to compete with these, Mankind needs to tap the chronic segment,” he said.
A source close to the company said Mankind also planned to divest stake in its personal care business, which primarily comprises products like ‘Adiction’ deodorant and ‘Don’t Worry’ sanitary napkins. The move would help the company concentrate on the pharmaceuticals and the over-the-counter (OTC) businesses, he said.
Juneja, however, said this was a “tentative plan”. “We have decided to watch for a year and then take a final call,” he added. For now, the company is not adding any product to the segment.
Analysts say the personal care business could be a roadblock to the company’s ambitious plans and this could be a reason why it is considering selling the business.
Sanjiv D Kaul, Managing Director, ChrysCapital, which holds 11 per cent stake in the company, agrees. “After pharmaceuticals and OTC, personal care was an obvious move. This was also complemented by the company’s huge sales network. However, it does not want to be diverted from its aim of becoming a leading pharmaceutical company. So, at some point it may divest the personal care business,” he says.
Currently, Mankind has a sales force of about 7,000, and the company is steadily increasing this number. “We would hire about 700 people by March,” says Juneja. “We would record growth only by introducing new products and strengthening sales and marketing,” he adds.
Juneja started his career in 1975 as a medical representative with Lupin. In 1984, he, along with two of his brothers, decided to start a formulation business called Bestochem. In 1995, Juneja and his brother, Rajeev, set up Mankind Pharma. Rajeev Juneja now looks after the company’s marketing division.
“I started the company with merely Rs 5,00,000 and no loan,” says Juneja. His son, Arjun Juneja, has now joined the company’s operations team.
Unlike its counterparts, Mankind started by focusing on rural areas, tier-II and tier-III cities. “They understood the DNA of the Indian pharmaceutical market very well. That is why their business model is very unique. At a time when no pharmaceutical company saw value at the bottom of the pyramid, Mankind started from the outskirts, and gradually moved to the centre. They created the market there and later, others joined the bandwagon,” says Kaul.
However, some feel the transition to selling products in the chronic segment in big cities may not be easy, and the company may have to put in place a stronger and more effective strategy. “So far, Mankind has opted for a price-penetration strategy. They launched most of their products with very low prices compared to others, acquiring a significant market share. But gradually, they increased prices. However, this strategy may not work for essential products in the chronic segment,” said a sector analyst. He added the company would have to develop innovative therapies, backed with science and quality, to capture the chronic market.
While the company has received offers from major multinational companies for its pharmaceutical business, Juneja asserts there was absolutely no reason or plan to sell, even if the valuation was huge. “I do not want to leave money for my kids. I would like to leave an asset which they can run and serve the country with,” he says.
The company has 10 manufacturing plants in the country. Recently, it built a research and development centre in Manesar.
Read More :http://www.business-standard.com/article/companies/mankind-pharma-set-to-tap-core-drugs-market-112071900076_1.html