labels: industry - general, pharmaceuticals
Step towards full backward integration with supply chain says Granules MDnews
12 October 2006

Granules India has announced a 50:50 JV with Chinese company Hubei Biocause Pharmaceutical Company to manufacture and sell ibuprofen.

Krishna Prasad, managing director, Granules India, says this is the first step towards strengthening their relationship and fully integrating backwards into their supply chain, which is the model for Granules India.

He adds that the actual assets that are being transferred to the joint venture will be about $8 million. CNBC-TV18 shares with domain-b its interview with Prasad:

Could you give us more details of the joint venture, what's your role going to be in it and how much of an investment would you be looking at making?
This company has been our supplier of ibuprofen for quite sometime. This is the first step towards strengthening our relationship and fully integrating backwards into our supply chain, which is the model for Granules India.

Biocause, the parent company is spinning this ibuprofen plant into a separate entity and we would be owning 50:50 equity in this.

Biocause would be managing the manufacturing operations and Granules India would be lending its market reach, market expertise and market understanding in the regulated markets to Biocause.

How much money will you be pumping into this joint venture?
I am not at liberty to talk of how much we are pumping in. But all I can tell you is that the actual assets that are being transferred to the joint venture will be about $8 million.

What is the volume of ibuprofen that you will manufacture and how this tie translates in terms of margins? Would it enhance margins or is ibuprofen not a very high margin drug?
That's right. Our entire model so far has been on high volume and low margin products. We make our total value by high volume but ibuprofen is a step improvement from what we have been doing. Products like paracetamol were not giving as much margins as ibuprofen would give us.

Another product for which we really are looking at higher margins is metformin. Metformin, which has been approved in the US in some of the ANDAs gives us good margins and even ibuprofen approved in the ANDAs in the US would give us a better margin.

Which would be the key markets that Hubei and your venture would be targeting?
We are actually working with some companies in the United States for manufacturing finished dosages of Ibuprofen for them, so it will basically be the United States and Canada and a little into Europe too.

Would this joint venture at some later stage also include paracetamol and metformin?
No, this is only for ibuprofen API.

Give us an idea of a basket of PFI (pharmaceuticals formulation intermediaries) that Granules hopes to add because like you mentioned, you have four key elements and then you have combinations of those?
That's right. The four backbone APIs today we have are paracetamol, ibuprofen, guaifenesin and metformin. Then we have different combinations of paracetamol with some other ingredients or metformin with some other ingredients.

From now on we plan to add at least a two minimum every year and we will be focussing again on high volume APIs, could be products like Naproxen and a few other products.

How much revenue are you targeting from this JV?
The JV at full capacity production would give at least a Rs110 crore of topline.


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Step towards full backward integration with supply chain says Granules MD