A Giant Leap For Mankind
Sitting in his spartan office in Delhi, Ramesh C Juneja seems content. He points at a graph charting the progress of Mankind Pharma, the company he founded in 1995. It has five bars, each taller than the previous one, starting from a low of Rs 3.8 crore in 1995 to a high of Rs 1,650 crore in 2010. “We wanted to achieve this, but we didn’t expect it to come so early,” says the unusually modest Mankind Pharma Chairman.
But Juneja has much to be proud about. In just over a decade, his company has emerged as a major player in the pharma industry. Today, Mankind is among the top 10 pharma companies in the country in terms of sales: a survey by pharma research firm IMS has rated it No. 1 in terms of prescriptions per doctor per month. The company has 13 plants and a workforce of 9,000 people. And all this was achieved largely by targeting non-urban markets, unlike other companies in the industry. Despite the stellar growth Juneja is not content. “We want to be No. 1 in India by 2015,” he declares.
The pharma veteran has some of the funding needed to drive that ambition. In 2007, ChrysCapital invested $24 million in Mankind. Sanjeev Kaul, MD, ChrysCapital, considers it a prized investment. “We will be more than happy to invest more if they ever need funds,” he says.
Juneja started out in the 1970s, crisscrossing the western UP hinterland as a medical representative (MR) with Lupin Pharma. He soon realised that given the low incomes in rural areas, it was essential for drugs to be affordable—a key reason why Mankind’s products are low-priced and, therefore, generate volumes. In 1983, along with brothers Rajeev and Girish, he set up a drug manufacturing company called Bestochem. Twelve years later, following some differences, Ramesh and Rajeev left Bestochem (a Rs 10 crore company then) and launched Mankind Pharma. The seed capital of Rs 50 lakh came out of their savings. In its first year, Mankind employed just three managers and 20 MRs. Manufacturing of the drugs (anti-infectives, anti-diarrhoeic, anti-allergic, vitamins, etc) was outsourced to factories, which were then sold under the Mankind brand. And the territory remained the same: tier-II and tier-III towns and villages in western UP, especially areas around Meerut.
In the late 90s, Mankind set up its first manufacturing plant in Paonta Sahib, HP; today it has 13 plants and one more, spread over 400,000 sq ft, is coming up at Paonta Sahib. Company officials claim this will allow it to manufacture as much as 95% of its drugs (85% now).
The decisive moment for Mankind came somewhere in the late 90s. “Selling at a low price and drastically reducing prices catalysed our ascent,” says Ramesh. For example, Zenflox, a drug Ranbaxy sold at Rs 26 per tablet, was introduced at a mere Rs 6 per tablet by Mankind (as Zenodin). This kind of low-price strategy forced even bigger players to drastically reduce their prices. “We believed in high volumes more than profits,” says Ramesh. With this belief as the guiding principle, growth shot up in the years that followed. Turnover jumped nearly 100-fold, from Rs 3.8 crore in 1995 to Rs 350 crore in 2005. It doubled again over the next three years (to Rs 700 crore in the 2008 fiscal) and has trebled since then (Rs 2,100 crore in the 2011 fiscal). (See More For Mankind).
Mankind continues to be a low-cost warrior. Moxikind CV (anti-infectant for flu) is the company’s most successful brand. It clocked sales of Rs 100 crore in the year to June 2011. The drug sells at a very affordable Rs 19 per tablet (similar formulations by Ranbaxy retail at Rs 40/ tablet; Cipla at Rs 40/ tablet; and Abbott at Rs 34/ tablet).
Mankind has the biggest sales team among pharma firms in India. Around 78% of its staff are medical representatives.
Rural pockets, tier-II and tier-III cities remained the sole battleground for many years—65% of revenues is still generated from these areas. Mankind entered tier-I cities only in 2006. Rajeev Juneja, Director and Co-founder, calls it a “bottom up approach”. The company has been, and continues to be, extremely aggressive in offering trade discounts and freebies. The industry standard of trade discounts is 2-3%, but Mankind, some analysts say, offers as much as 20%. A chemist from Sonepat in Haryana says “they offer freebies such as four strips free per box”.
Around 85% of Mankind’s sales come from the “acute” disease category (anti-infectives, gastro, gynae drugs, etc) and 15% from the “chronic” category. The acute category is considered a mature category (15% growth in FY11) while the chronic category is considered high growth (19.2% in FY11). “We will focus on opportunity, wherever it is: acute, chronic, or OTC (over the counter),” adds Ramesh. In terms of sales volume, Mankind’s brands are among the top five anti-infectives (market share 30%), anti-malarial, gastro and gynae treatments, and among the top 10 HIV treatments.
Mankind has the biggest sales team among pharma companies in India today. Around 7,000 people from its total headcount of 9,000 are medical representatives. In comparison, Cipla has 6,000 MRs; Ranbaxy: 4,500; and Cadila: 4,400. “They have an aggressive and top-class field force. Their MRs meet doctors very frequently,” agrees Monika Gangwani, Director, Synovate, a health consultancy.
Over the last two years, every company has increased its MR strength to penetrate deeper into rural markets. “We have been hiring 1,000-1,200 people every year for the last two or three years keeping growth targets in mind,” says Rajeev. Consequently, the workforce has doubled. There’s a reason for that. “They are predominantly into rural markets, which are extremely scattered, with competitive prices. So you need more people,” says Deepak Malik, Senior Pharma Analyst, Emkay Global.
Mankind’s MRs are paid well, with variable pay pretty high. Some take home Rs 6-8 lakh annually as incentives. Most other companies pay low incentives and a higher fixed salary. Naturally, this has meant a higher wage bill. Personnel expenses (including salaries, allowances, contribution to PF, gratuity etc.) went up from Rs 139 crore in FY10 to Rs 188 crore in FY11. During the same period, profit after tax (PAT) was at Rs 172 crore (FY10) and Rs 206 crore (FY11). Rajeev says the better wages have ensured Mankind has a low attrition rate of 8-10% (the industry standard is 15-20%).
Of course, this, combined with high pharmacy margins, eats into the margins. Against an industry standard of 20-30% (the exception is Sun Pharma, with 35-40%), Mankind’s margins were at around 13% (PAT of Rs 206 crore on Rs 1,650 crore turnover in FY11). Juneja says margins are deliberately low: “We are used to low profits. After all, we have been pursuing this policy (low margins, high volumes) since our inception.”
But unlike other companies, the company lacks a unique pipeline: Mankind is in its infancy when it comes to research and development (R&D) and has only just invested in a new facility.
Pill Boxes: Mankind has 13 plants and one more is coming up at Paonta Saheb in Himachal Pradesh.
Going OTC And Overseas
A couple of years ago, Mankind wasn’t as visible as it is today. That changed when the Junejas decided to enter the FMCG/ OTC segment. Products like Manforce (condoms), Prega-news (pregnancy detection kit), Unwanted-72 (emergency contraceptive pills) and Addiction deodorants have raised its visibility and built brand awareness. At roughly Rs 250 crore today, the OTC/ FMCG portfolio constitutes approximately 12% of its total turnover. “And it is growing at the rate of 100%. It doubles every year,” claims Rajeev. Mankind has invested Rs 80 crore on advertising over the last three years. However, OTC is still a loss-making line.
The Junejas feel that the company has to be agile and dynamic to survive in the current scenario of cut-throat competition and innovation. Each month, Mankind launches eight to 10 new products in the prescription and OTC sphere. It has a pipeline of new products ready, including facewashes, hair removers, anti-itch products, etc. But that may not be enough. “One needs really strong distribution muscle for FMCG products to succeed, as you need to get even deeper and talk to kiranas (not just chemists),” says Gangwani of Synovate. Thus far, Mankind has supplied its OTC products mainly to chemists. “They need to be aggressive to grow further,” she adds.
Apart from new products, the company is also exploring new markets, especially overseas. A year ago, it started exporting to Sri Lanka, the Philippines, and some African countries. The contribution of exports to total sales is still negligible but the long-term strategy is to target former CIS countries, South East Asia, Africa and Latin America. Adithya Bhat, MD, Protiviti, cautions against the CIS market: “There is lot of corruption in these countries and they are more risky.”
Often, in the Indian scenario, low-price products are perceived as being low on quality. Ramesh likes to believe Mankind has changed that perception. “We have proved that our products are equally good in quality. And other big companies have also launched low price products,” he insists. Sustaining profits (as the company scales up), and managing a large sales force will be two key future challenges, he says.
While it may not achieve his dream of becoming India’s No. 1 drug company by 2015, just about everyone accepts that Ramesh C Juneja’s company will be a very formidable industry player by then. That will be another giant leap for Mankind.
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