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Saturday, June 24, 2006

Changing with the times

A caterpillar metamorphasises to become a beautiful butterfly. Similarly, Plethico Pharmaceuticals has evolved from a generic marketing company to a herbal and nutraceutical company with an international presence.

These are not the best of times for small pharma, and yet this good news. Sounds like a paradox, but it isn't. With Indian pharma making strides abroad, its time for the small companies to come out of the cocoon and evolve into a much stronger competition to the Indian mammoths. And one such company is Plethico Pharmaceuticals, which has revamped its business processes to keep pace with the changing scenario in the Indian pharma industry.

Reworking the strategy

Plethico started off in 1963 under the name of Plazma Laboratories for marketing generic drugs. They launched drugs like Doxycycline (Minicycline) and Cotrimoxazole (Timizole) in the Indian market.

The company established its presence with several major brands like RezQ, Reziz, Koxi, Monto 3, Monto 4, Recofast, Recofast Plus, Amloz, Amloz AT, Cebect and Cebect TZ, in segments like anti-malarials, anti-tubercular, cough and cold, cardiac and anti-microbials. This company was later renamed Plethico Pharmaceuticals in line with its motto which is 'pledged- to-ethics'.

"In 1998, after India signed TRIPS/ GATT treaty, it was perceived by management that in order to have a long standing and profitable business model, it is best suited that the company works on a non-infringing business model for robust growth, both in topline and in bottom line and steer clear of the infringing model," says Sanjay Pai, the Chief Financial Officer, Plethico Pharmaceuticals.

And going in this direction, the company lined up the viable options which was Contract Research and Manufacturing (CRAMS) foray into herbal formulations, nutraceutical formulations and OTC products.

"On going through the financials of the company, you will note that the company has actually built-up on this vision and has gained in the process," says Pai. Contract manufacturing or toll manufacturing operations (CMTM) is more of a stop gap kind of a working which is pending upgradation of the company's Kalaria unit situated in Indore to match UKMHRA standards. Once approved, the capacity of Kalaria unit will be ear marked for regulated markets and the CM TM business of Manglia in Indore unit will be transferred to the upcoming Jammu unit, which will have excise and sales tax benefits. These are essential for domestic companies to keep costs under control.

Heading for the herbal space

The international nutraceutical market, which is currently the domain of US and German firms is pegged at $500 billion. These players largely import herbs from India and China and sell final branded products, mostly food supplements and sports supplements. Plethico made a foray in this segment based on their belief, 'why not use the home grown herbs' and compete with the world leaders.

"We are focussing on herbals & nutraceuticals for a simple reason that they are commercially viable and make business sense and are vastly untapped. So a company tapping the herbal and nutraceutical segment faster will be able to create a niche of it's own," Pai observes.

Earlier, Plethico had prescription products predominantly in the segments like anti-tuberculosis, anti-malarial, cough and cold segment; which are not very lucrative segments to be in. Also, this segment is highly controlled and price sensitive. Going forward, the management perceived that this may not be self sustaining model and it was felt that perhaps an exit from this segment and return in future in a different therapeutic segment would perhaps help the business. Hence, the company exited from the Indian prescription market and sold its domestic ethicals business to a company called Shreya Lifesciences in 2003. In that same year, the company launched its OTC division with the introduction of the company' flagship product "Coach's Formula", a branded protein health drink, which is doing well in CIS countries, Asia and Africa, apart from India.

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