A languishing state-run drug maker pulls up its socks, is set to go global

Kerala govt-owned KSDP to start exports to African nations and Cambodia in FY19, set up three units at a combined Rs 1 billion

Even as private sector pharmaceutical manufacturers are struggling to grab a pie in the competitive generic market, Kerala State Drugs and Pharmaceuticals Ltd (KSDP) is expected to start exporting its medicines to African nations such as Ghana, Kenya and Zimbabwe, and Asian nation Cambodia from 2018-19 onwards. KSDP is said to be the only state government-run pharmaceutical manufacturing public sector undertaking (PSU) in the country. 

In the past few months, the company received Good Manufacturing Practice (GMP) approval for its manufacturing facility from the World Health Organization (WHO). The certification will enable KSDP to supply medicines made in its factory, under the brand 'Kerala Generics' to countries that follow these quality standards. 

The company, which has been incurring losses for the past several years, is expected to be profitable during this fiscal, says Kerala Finance Minister T M Thomas Isaac. In the State Budget for 2017-18, Isaac had cited KSDP as a model for restructuring and announced plans to enhance its capabilities.

"...by the end of financial year 2017-18, KSDP would have turned into a profitable public sector undertaking. It is expected that everyone will unanimously agree that this is a rare record in plan implementation," Isaac had said in his budget speech.

The PSU had been facing a severe crisis following the implementation of the revised GMP standards for pharmaceutical industry in India in 2006. Its facility, which was already struggling due lack of proper utilisation, could not meet the new standards. In 2010, the betalactum manufacturing facility to produce antibiotics was revived as per GMP standards with an investment of about Rs 120 million, though a considerable amount of time was take for its revival.

The KSDP gameplan

Set up a Rs 320 mn non beta-lactam factory

Invest Rs 540 mn in injectables unit

Set up a Rs 200 mn oncology plant

Start exports to Africa in 2018-19

Revenue target of Rs 5 bn in five years

Struggling to compete with larger companies that sell branded medicines, KSDP could sustain by relying solely on the health departments functioning within and outside the state. The margins in this segment are very low in any case. Kerala Medical Services Corporation Limited (KMSCL), which provides services to government healthcare facilities in the State, had been asked to give top priority to the company for its requirements. Despite this,only about 25 per cent of the production capacity at the betalactum facility is being used at present. 

However, this year there has been a spurt in sales, as apart from government supplies in Kerala, it has begun supplying to Telangana and Andhra Pradesh and is likely to add Tamil Nadu next month. It is also appointing a group of distributors and service providers to cater to Gujarat and Jharkhand. 

"It should be ensured that during 2018-19, orders for medicines worth at least Rs 750 million are given to KSDP by KMSCL. Including this, next year’s target of production would be Rs 1.50 billion," said Isaac. 

A non-betalactam facility, which manufactures paracetamol and other such products, is likely to commence production soon and would contribute to the revenue target. It is expected that about Rs 2 billion would come from both these facilities in 2018-19. 

During the last fiscal year (2016-17), the company clocked a revenue of Rs 300 million, which is expected to grow to Rs 400 million during this fiscal year. 

"We are targeting around Rs 1.05 billion from the non-betalactam facility in the first year itself," said S Syamala, managing director, KSDP. 

A significant portion of the expected revenue growth is expected to come from exports and sales to other states following the WHO GMP approval and from the capacity expansion into new medicines, including cancer drugs.

The new facility would also be compliant with the global standards and will manufacture 145 formulations. It is also initiating a process to apply for USFDA approval.

Apart from all this, the foundation stone for an injectables factory with an investment of Rs 540 million will be laid in April, with an aim to complete it within a year and start production in 2018-19. The company would also start a unit for oncology drugs, with plans to commence production in 2019-20. Around Rs 200 million bas been allocated for this facility by the State government.  

This factory, which will comply with WHO standards, aims to produce low-cost patent-expired cancer medicines on a large scale. KSDP's generic medicines will be sold under the brand name ‘Kerala Generic’ and exported to African countries by 2018-19. Steps will be taken to establish a ‘Mini Industrial Park’ as a KSDP subsidiary, Isaac said.

The company hopes to have all these initiatives in place by 2019-2020, and is targeting a revenue of Rs 5 billion over the next five years, said Syamala.

One expert, however, suggests that the company should look beyond quality manufacturing in order to establish a global footprint.  

"It is a great thing that we have a government-owned body setting up a factory and getting WHO GMP approval. However, it is not just about manufacturing, but also about how creating relationships in the overseas market and having right networks and human resources. KSDP is also exposed to the vagaries of the different markets, such as the disruption seen in the US," says Amit Mookim, general manager, South Asia, IQVIA, a global consulting firm formed through the merger of IMS Health and Quintiles.

The gameplan has to be much bigger than manufacturing, and it is here that KSDP will encounter stiff competition and will need to invest in the right resources.