| Speech delivered by
Mr R Narayanan, Chairman
at the Fifteenth Annual General Meeting - July 19, 2007
Ladies and gentlemen,
It gives me great pleasure to welcome you to the Fifteenth Annual General Meeting of your Company. Your Company’s Annual Report and Accounts have been with you for some time, and with your permission, I shall take them as read.
Performance 2006-07
Your Company has done well in 2006-07 and is perched on the cusp of an exciting future. The establishment of high-technology projects and facilities, an expanded pipeline of international regulatory filings and approvals, consolidation and ramp-up in the large, high-growth US generics market, and alliances with major global players have collectively propelled your Company onto a new higher trajectory of robust earnings and growth.
As a result, apart from scaling a record turnover of nearly Rs 1000 crore, Your Company has achieved the highest ever gross operating margin (EBIDTA) of Rs. 291.37 crore and a robust profit after tax of Rs. 96.63 crore, reflecting a growth of 12% and 17% respectively over 2005-06.
Your Company has significant market share and revenue positions in its key cephalosporin antibiotic product introductions in the US. In 2006-07, we launched five additional generic products in multiple dosage forms and strengths in the US. Your Company now markets 11 generic dosage forms in the US. In the overall, your Company generated 43% of revenues during the year from regulated markets, most of which from the US.
Your Company has also initiated plans to introduce other niche generic products in the regulated markets, based on non-infringing processes and approvals of the Abbreviated New Drug Applications (ANDAs). This will keep up the growth momentum of the Company.
API (Active Pharmaceutical Ingredients) business
With the step-up in the regulated market activity a large portion of the API production is being integrated into formulations manufacturing. Your Company is accordingly de-emphasizing the API sales for the less lucrative unregulated markets. The sale of bulk actives (oral and sterile) accounted for Rs. 497.71 crore in 2006-07.
During 2006-07, your Company filed 16 DMFs (Drug Master Files) with the US FDA for additional key antibiotic and non-antibiotic APIs. We have till date filed 45 DMFs with the US FDA.
Formulations business
During the year under review, the finished dosage forms business grew significantly by 19% to Rs. 376.68 crore, supported largely by the earnings from the US generics market. There has been a notable growth in the domestic formulations business as well.
Generics business
Our generic product plan for the US comprises 21 antibiotic and 20 non-antibiotic products in 55 dosage forms, many of which are also aimed at European and other regulated markets. With 29 ANDA submissions of cephalosporin and betalactam antibiotics, of which 19 cephalosporin ANDAs have been approved, your Company has the largest ANDA filing and approval track-record in the antibiotics space. It has also 6 ANDS filings in Canada, of which 3 have been approved. It has also filed 12 dossiers in the EU.
In the non-penicillin, non-cephalosporin (NPNC) space too, your Company could make as many as 11 ANDA submissions within a short time span and is now geared to step up the submissions further. Your Company secured FDA approval and launched its first NPNC product, Terbinafine in July in the US. Your Company has an immediate development pipeline of 20 NPNC products covering diverse therapeutic segments, all of them backed by distribution partnerships. Some of the recent and planned filings in this space include products with first to file opportunity.
Research and Development
Over the years, the Company has established a state-of-the-art infrastructure for end-to-end connected drug discovery and development. Your Company’s drug discovery activities are channelized through the wholly owned subsidiary, Orchid Research Laboratories Limited (ORLL), which also has a front-end entity in the US, Bexel Pharmaceuticals, Inc. ORLL is working on six therapeutic programs with several lead NCEs which is indeed a remarkable thrust in this challenging area.
Your Company’s research in inflammation has resulted in interesting lead molecules. One of these has graduated to the regulatory toxicology study stage upon completion of various pre-clinical studies. In the oncology segment, your Company has identified a novel target and developed a key molecule to the late pre-clinical trials. The Company is planning to take these two lead molecules in the fields of inflammation and oncology to Phase I human clinicals this fiscal.
In tune with its focus on the anti-infectives segment, the Company has identified some novel antibiotic lead molecules belonging to the oxazolidinones series. Your Company is also in the process of developing novel NCEs in the fourth generation cephalosporins class to reinforce its leading position in antibiotics.
Our drug discovery unit in the US is actively involved in various research programs in diabetes, obesity and depression as part of our overall discovery effort. Bexel’s lead anti-diabetes molecule, BLX-1002, has moved into larger Phase II (a) clinical trials. These studies are being conducted in Europe and will provide a better picture of the potential of the molecule.
Contract research
In addition to the existing R & D contracts from Pfizer and Biovitrum, certain new projects have been initiated. Going forward, your Company is pursuing leads with a few other select global MNCs and discovery-oriented companies to develop its Custom Research and Manufacturing Services (CRAMS) business progressively.
Regulatory accomplishments
I must take this opportunity to make a specific mention of the regulatory achievements of your Company in terms of the successful inspections and approvals by US FDA and UK MHRA for several of its API and dosage form facilities during the year under review. This provides the base for further product-market diversification.
Projects
Your Company is in the process of completing a new sterile API plant in Aurangabad and a new sterile dosage forms plant in Chennai for the futuristic carbapenem range of products. Facilities for the upscaled production of NPNC APIs and dosage forms are under advanced completion in Aurangabad and Irungattukottai, respectively. The Company is also establishing a second high-speed line for manufacturing sterile cephalosporin dry powder injections as an adjunct to our existing cephalosporin facility. All these will add further production capacity and help your Company to meet the demand requirements in full.
Intellectual property
We have developed and filed 442 applications with various national and international patent offices. Of these, 44 patents were granted and 150 were published. Of the total filings, 30% relate to NCE and a few other innovative products with significant value.
Funding
During February 2007, your Company successfully completed its US$175-million FCCB issue to reduce expensive debt of about US$138 million. The balance has been invested in the carbapenem and NPNC product segments.
This funding initiative is expected to strengthen your Company’s competitive edge significantly. This zero-coupon funding alternative will reduce the interest liability with a visible impact in 2007-08.
Outlook
Your Company is poised for continued growth with a sustainable strategy anchored on generics and drug discovery.
In the generic antibiotics space, your Company will launch additional premium cephalosporin, betalactam and carbapenem antibiotics between 2007 and 2010 in the US, EU and Japan. In the non-antibiotics (NPNC) space, your Company is developing a robust pipeline of over 60 additional products covering diverse therapeutic segments, many of which will be launched during this period, some with shared 180 day exclusivity opportunities.
Your Company is also eyeing a foothold in the Japanese market, the second largest single market in the world leveraging its product portfolio and quality / regulatory infrastructure with an appropriate business strategy.
The growing costs of new chemical entity research and lengthening new drug approval periods are prompting global pharmaceutical companies to partner with drug discovery companies that offer competitive new product pipelines as well as research services. Your Company, with its world-class medicinal chemistry and biology infrastructure and a pipeline of NCEs in various stages of development, is poised to participate in this challenging innovation space.
In addition, your Company is leveraging its chemistry and formulation capabilities to develop the opportunity in novel drug delivery systems (NDDS) as an important growth driver. NDDS products, once developed, will provide a multi-year exclusivity for each approval and could be found as helpful tools of remunerative product life cycle management.
As your Company evolves into a globally respected pharmaceutical organization, I am optimistic that this is only the beginning of a new phase of increasingly remunerative business development leading to enhanced value for all stakeholders and superior returns for the shareholders.
Conclusion
In conclusion, I wish to thank the central and state governments, financial institutions, public and private sector banks, government agencies and non-government institutions who have extended their support in the development and growth of your Company. I also take this opportunity to thank the vendors, customers and business associates who have supported our business plans. I acknowledge the critical role played by the employees in contributing to the growth of the Company’s business.
On behalf of the Board, I would like to thank all the shareholders for their unstinted support in helping your Company to enhance its technological and business strengths and remain on the path of growth.
Thank you for your attention!
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