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Customers from Europe, US, Japan approached us as they make their supply chain less dependent on China

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After a slump in Q2FY20, Hikal’s earnings release of 9MFY20 reveals that the company’s performance was back on track. The company has successfully closed two US FDA inspections and increased capacity commissioned in the Bengaluru facility has started adding to revenues in Q4FY20. In fact, the impact of COVID-19 could turn out to be positive in the medium to long run for the company. Manoj Mehrotra, President – Pharmaceuticals Business, Hikal gives details to Viveka Roychowdhury of the company’s strategy to counter the COVID-19 lockdown’s impact and the new inquiries coming their way as companies de-risk their supply chains from China.

How will the extension in the COVID-19 lockdown impact Hikal’s supply chain to pharma clients and vice versa? What are the strategies taken to remedy this?

Hikal manufacturing sites have the permission to get 50 per cent of manpower and operations are now running at 55-60 per cent of capacity. All administrative, commercial and support staff continue to “work from home”. The ongoing transportation and logistics disturbances have impacted the inflow of certain raw materials. However, these issues are getting resolved in a phased manner. As and when the government announces new guidelines, Hikal shall ramp up operations and maintain its supply chain to the pharma companies.

What measures could have been taken to ensure smoother operations of the essential goods business during the lockdown?

All the directives from the Central Government were very clear to allow essential services. The intent was very much there but it took almost 7-10 days to smoothen coordination between various government departments.

To what extent will the lockdown impact the revenue in this fiscal for the business as well as the sector?

We are in constant discussions with all our customers and we are not seeing any downward trend in demand. The challenge will be to maintain raw material supplies and ramp up operations in line with government guidelines.

Who are your major clients in the pharma sector?

Hikal supplies Active Pharma Ingredients (APIs) and Intermediates to several leading global innovator and generic companies across the world.

What are the employee benefit initiatives and safety measures undertaken by Hikal during the lockdown and planned for the post-COVID-19 era?

Hikal has taken several measures to make our employees safe in the current environment. Some measures are highlighted below:

  1. All employees are picked up from their homes in company buses and cars. Social distancing norms are maintained in all means of transport
  2. Thermal scanning of all employees prior to boarding company bus and before entering manufacturing sites.
  3. Personal protective gear and hand sanitisers are freely available at multiple locations at the sites.
  4. Social distancing norms are being strictly followed at the workplace
  5. Overnight hotels for stay have been organised for many of our staff and thereby avoiding a long commute to work

We believe that these measures will have to continue for several months and Hikal is gearing up its facilities to ensure that such practices are well imbibed in our company.

Many companies dependent on China have taken steps to de-risk their supply chains. What has Hikal done on this front?

Hikal in the last 20 months has undertaken a structured supply chain de-risking programme for all our products. The strategy is to have a primary supplier of all Key Starting Materials (KSMs) in India and alternative suppliers in China and Europe. We are also building a network of strategic manufacturing partners in India who will support Hikal in all the KSMs. Process development will be done by Hikal R&D and technology transferred for commercial manufacturing to one of these strategic partners. Hikal’s team is working very closely with these network partners to meet our expectations on environmental, health and safety (EHS) and quality.

Can India leverage this opportunity to position itself as a key source of KSMs and APIs? Has Hikal received enquiries along these lines from customers shifting to non-Chinese suppliers?

Several customers from Europe, the US and Japan have approached Hikal recently as they intend to make their supply chain less dependent on China.

What are the new products in the pipeline of your pharma division? Anything related to the COVID-19 pandemic?

Hikal continues to work on several new products in the Central Nervous Systems (CNS) and diabetic therapies and validations have been completed. Recently, we have started lab work on two drugs which are on trial for COVID-19 treatment. They are Feveperavir and Remdesevir.

What is the significance of Hikal being the first Indian life sciences company to be certified by the International Council of Chemical Associations (ICCA) as a Responsible Care® company?

This is a very prestigious certification in the chemical industry. Hikal was the first pharma company to get this certification.

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