Laurus Labs, post a successful IPO, is embarking on the next phase of its growth, armed with the advantage of its core competencies and a strategy to breach new frontiers By Lakshmipriya Nair
Even while political and economic turmoil caused a dip in IPO activity globally last year, India bucked the trend and saw several companies make successful débuts at the stock exchange. As EY Global IPO Trends 2016 4Q report highlights, “India was the standout performer, recording a 38 per cent increase in deal volume and a 79 per cent surge in proceeds raised, driven by stronger economic fundamentals and a pro-business political regime.” IPOs by 21 firms across sectors raised Rs 19,379.10 crores in the first nine months of the year.”
A successful debut
Laurus Labs, an API manufacturer based in Hyderabad, is the latest pharma company to go down the IPO route. Held from December 6-8, 2016, the total IPO size was Rs 1,331.79 crores. It comprised a mix of offer for sale (OFS) by existing partners Aptuit Asia, Bluewater Investment, FIL Capital Management and Fidelity India Principals as well as as issue of fresh shares for Rs 300 crores, both priced at Rs 426 – 428 per share. The final day of the IPO saw it being subscribed by 4.54 times.
While the results of the IPO was modest in comparison to some of the blockbuster ones the industry has witnessed earlier in the year, by no means was it a small feat for a company which has completed justa decade of existence. So, what are the factors which made it an alluring proposition to investors?
At a glance
- Inception in 2005
- Operates in four business lines: generics – APIs, generics-FDFs, synthesis and ingredients
- In FY16, the company sold its APIs in 32 countries
- It has commercialised 59 products and filed 37 DMFs
- The company has been granted 34 patents and had applied for 152 patents (as of September2016)
The market analysts who gave a thumbs up to the company believe that a rapid pace of growth, healthy product portfolio alongwith cost advantage, vast experience and expertise of the company’s management, a strong position in high-growth therapeutic areas like anti-retrovirals (ARVs), Hepatitis C and oncology, its plans to enter into niche formulations business are a few of the reasons which helped the Hyderabad – based pharma company to come across as a favourable investment option and raise a successful IPO despite tumultuous market conditions. The company informs that a majority portion of the IPO proceeds will be utilised for repayment of long-term loans and the balance will be utilised for general corporate purposes.
So, what’s next for Laurus Labs? Its founders, Dr C Satyanarayana, CEO, and VV Ravi Kumar, Executive Director, Laurus Labs outline their vision for the company’s progress in exclusive interviews with Express Pharma. Excerpts…
Fortifying the current position
“We are particularly focussed on growing our presence in our key therapeutic areas, comprising ARV, Hepatitis C and Oncology. We have built a leadership position in the manufacturing of APIs in the ARV therapeutic area and believe that there are significant growth opportunities in this area as a result of expected increase in the HIV patient pool as well as the current WHO guidelines recommending initiating early treatment for infected HIV patients, regardless of age and viral load. We believe that our superior process chemistry skills and cost effective process optimisation have led to new synthetic routes and product variants, and have given us market leadership for our key products in the ARV, Oncology and Hepatitis C therapeutic areas. We believe that our position as a preferred supplier of APIs to several major pharma company participants of the tender driven ARV market insulates us from the wins and losses of our customers and significantly hedges us against revenue volatility,” says Dr Satyanarayana.
Ravikumar emphasises that the company is looking at both forward integration and backward integration as a strategy for growth and says that strengthening its current product portfolios is a major goal for the company.
Venturing into new growth paths
Ravikumar also expresses his pleasure in the fact that the IPO was oversubscribed despite a volatile market and informs that now the company is looking to grow in new therapeutic areas such as anti-diabetic, cardiovascular, anti-asthmatic, gastroenterology therapeutic areas and APIs for the ophthalmic therapeutic area. He speaks on the existing partnership with Natco Pharma to supply Hepatitis C medicines and speaks about expanding in the US market through the partnership. He informs that there are plans to expand in the European market and the emerging markets as well though he refuses to divulge the plans in detail at the moment.
Dr Satyanarayana informs, “During the financial year 2015, we established our wholly owned subsidiary in the US, Laurus Synthesis, to directly offer process chemistry services to the US clients. With a view to develop our pipeline for clinical phase manufacturing of new chemical entities and contribute to the supply chain of our customers, we established a presence in Greater Boston, Massachusetts, in 2015 with 12 scientists and four sales personnel who are focused on strengthening our synthesis business. We intend to focus more on the supply of key starting materials and intermediates for new chemical entities as the molecules move to Phase III and to a commercial stage, which would result in significant revenue. We also acquired 100 per cent stake in our subsidiary Sriam Labs. It was an associate company but now it has become a wholly owned subsidiary, with effect from November 1, 2016.”
Investing in R&D
Dr Satyanarayana highlights that R&D is a major area of focus for the company. He states, “We continually aim to utilise advanced technologies to bring in cost efficiency in existing API products and processes and enhance our product portfolio through investments in R&D. Many of the APIs in our current ARV portfolio for donor funded markets will bring significant near term opportunities for the US and European markets after the relevant patents expire in these markets. We intend to continue to leverage our process chemistry skills to expand our API product portfolio.”
“We are a research-driven manufacturing company”, informs Ravikumar. He also highlights that five per cent of the company’s revenue is invested on R&D. He goes on to elaborate that they have an R&D facility in Hyderabad which has around 500 employees. He also mentions that they operate a kilo lab at their R&D Centre at Hyderabad for small volume products.
Enhancing manufacturing capabilities
“We believe that our regulatory compliant manufacturing facilities are attracting global generic pharma companies to engage us for the contract manufacturing of generic APIs. We are also developing capabilities for botanical extraction and purification, to capture the growing market of natural ingredients. We are currently in the process of setting up a separate manufacturing facility to add to our existing capacity for botanical extraction and chemical synthesis,” says Dr Satyanarayana.
Ravikumar informs that they have three manufacturing facilities in Visakhapatnam through their acquisition of Sriam Labs. “We also have two additional manufacturing facilities, one in Bibinagar, near Hyderabad and the other in Visakhapatnam,” he informs adding that now they are in the process of setting up two additional manufacturing facilities as well.
Ravikumar informs that they have plans to make significant investments in technology and human resources as they are important to ensure quality with efficiency, important prerequisites for growth. Ravikumar also emphasises that they ensure products of one quality for all markets and have the same standards at all their facilities.
Thus, the management is very gung ho about embarking on the journey to achieve greater heights. It would be interesting to see how the company would withstand the challenges of an increasingly volatile market and sustain its growth without losing momentum.