Express Pharma - June 1-15, 2008

Competing in niche segments like parenterals and injectibles, Marck Biosciences has a story, which is not very run-of-the-mill. Arshiya Khan finds out why Marck is a class apart

Marck Biosciences was born in 1997. Though quite a young company it rose fast under the leadership of Bhavesh Patel, Managing Director of the company. In its very first year of its inception, the company generated an annual turnover of Rs 6.5 crore. In the second year, it almost doubled the turnover touching a whopping Rs 11 crore. But that was not all. "My baby has grown more than ten times in less than eight years," beams the proud promoter. According to him, the reasons for the fast growth are investment and diversified business mix. It is perhaps the way of life that the company believes in. The company started off with intravenous (IV) fluids because they consider IV fluids to be the first line of defence in terms of an emergency. Besides this, it has also benefited from being located in Gujarat. "The state is very enterprising and has an atmosphere which encourages industries to grow. This has contributed a lot towards developing pharma industry especially SMEs and SEZs," avers Patel.

Not a big deal

Every rose comes with a thorn and so also there were obstructions that came in the way of Marck. The biggest of all challenges was that the man who started the company had absolutely no knowledge of the pharma industry. An engineer with an MBA in finance, Patel just dreamt and today the dreams are true.

Set up on an area of 12 acres of land at Kheda, in Gujarat, with an investment of Rs 22 crore, the company has today expanded to 25 acres. "Initially the company was present in a small scale. When it was born it was number 12 in terms of age and capacity. Therefore, it was difficult to be competitive," says Patel.

Apart from competition, there were calamities which made their way into the history of the company. As unpredictable as they are, heavy rains in 1998 struck Marck destroying the plant facility. The company was still in its infancy and the floods came as a major blow. It took around three to four months to get the facilites back in action. Since then, nothing could stop the company from growing with steady flows of investment from the management into Kheda facility. Being a family owned company, there were a lot of personal finances (from the family) which went in as investments, in addition to loans from banks. However, as the company expanded its product portfolio it also felt the pain of being located in Gujarat. Like most other entrepreneurs in the state, Patel feels that, Gujarat pharma industry is adversely affected by special tax incentive zones in other states like Jammu, Baddi, Uttaranchal and Sikkim. Secondly, the Drug Price Control Order (DPCO) he feels is now acting as another hurdle. The reason for this he feels is that, "The spirit behind the DPCO is good but mechanism of implementation is outdated. My personal view is that some sort of price control is fine but it must get factored by latest development. For instance, the prices that were worked on six years ago, still remain. Especially, in case of manufacturing IV Fluid, where the polymer prices have gone up by 300 percent." Also like others he feels that the shortage of manpower is an issue to be looked at. Besides this, he highlights that although Gujarat has got a good road and rail network, it still needs to be improved.

The stepping stones which came in the form of floods did not make the journey any easier but the company managed to wade its way through troubles to a better future.

Trickling down

There is more than water which trickled down into the company. Initially the company dabbled in IV fluid manufacturing and grew into small volume parenterals (SVPs) and large volume parenterals (LVPs) and IV parenteral formulations. Today the company boasts of products like irrigation solutions, formulations in ophthalmic and respiratory care, diluents and small volume injectibles. What gives the company an edge over others is that it is the only company producing 0.5 ml injectibles to 1,000 ml irrigation solutions. In both LVP and SVP categories, Marck sells the products directly in both international and domestic markets. However, 40 percent of revenues come from IV fluids alone, 20 percent from diluents and remaining from respiratory products and contract manufacturing. Products are not just what interests the company. Marck does contract manufacturing for 48 of India's top 50 pharma companies and also some major international pharma companies. Marck's customer base in contract manufacturing includes companies like Dr Reddy's Laboratories, Torrent, Cadila, Themis, Zydus, Shreya, Glenmark, Ranbaxy and international customers from USA, South East Asia and Africa. Contract manufacturing demands state-of-the-art facilities and the company ensured the same and recently invested Rs 72 crore in its Kheda facility. After expansion of the Kheda facility, Patel predicts that the company's national sales business would grow four times. "You cannot grow unless you have some volumes in place and volume cannot grow unless we create capacity. So all these seven, eight years, our strategy has been investment centric. But now that we have created enough capabilities, enough versatility and good amount of experience our focus will be on marketing. We will shift our focus from manufacturing to marketing," explains Patel. With marketing on the cards the company is moving up the value chain and aims to achieve an all India presence for its products.

Number game

A decade is enough in business to decide a company's future. As we all know that the market is least predictable like any other natural calamity, the numbers change in the blink of an eye. So to sustain in a highly competitive environment, there is definitely hard work that goes in besides the luck factor that also plays a pivotal role. The company till now has been on an upswing with regards to generating revenues. As the company is catering to different areas of businesses, the revenue also comes through different ways. Thirty percent comes from exports, 25 percent from contract manufacturing and 45 percent comes from national sales. Earlier national sales were very small in terms of contribution to the company's revenue. Major revenues were generated from contract manufacturing and exports.

Crossing boundaries

Exporting to more than forty countries, the company's next target is the South East Asian market because of its highly lucrative nature. The company started its exports with the African countries and gradually expanded to CIS, Central America and some parts of Latin America. Patel gives two reasons for not capturing the South East Asian market saying, "First we did not have that kind of capacity to do justice to that kind of market development. Secondly the market development itself is a costly affair. Unless we have good product basket it doesn't make sense. So with the ophthalmic and respiratory products, we will enter into South East Asia. South East Asian market is much smaller than the Indian market in terms of units but in terms of pricing, it is very high." The company will bank on opthalmics and diluents in the Philippines market as it does not want to export diluents over a certain distance due to the high cost of transportation. The company expects a market share of ten percent for its diluents by 2008 and for opthalmics, it is targeting at two to five percent to start with and an increase it to 12 to 15 percent by 2009.

Some more dreams

Although Gujarat has numerous facilities which meet international standard, the small scale sector has got a number of units which need to modernise as well as improve scale of operations. This is something which if not taken care of might derail progress of Gujarat. The company has more dreams to work on as it aims to get into the top 50 league for IV fluids. It is looking at having a presence in all the advanced markets of the European Union (EU) and US. Anything more than injectibles and parenterals can eventually happen at a later stage. But the prime focus for Marck is to commission the Kheda facility. The company is also planning an investment of approximately Rs 80 crore over the next three years. Patel says, "We will have to continue that process and the logic is not only on commissioning but also in doing smart marketing, which we will be doing now."