 "Wockhardt")
After selling a major part of its generic drug business to Dr Reddy’s Laboratories (DRL) in February last year, Mumbai-headquartered Wockhardt took a strategic decision to channel its energies to two core areas — diabetes therapies in regulated markets like the US and novel antibiotics research. The Covid-19 pandemic added a third focus: Vaccines. “In the next three to five years, vaccines will be an important part of our business,” said Habil Khorakiwala, chairman and CEO, in late May.
In October last year, Wockhardt’s plant at Wrexham, North Wales, which had been supplying drugs to the National Health Service, signed an agreement with the UK government for filling and finishing the AstraZeneca vaccine that was being developed in collaboration with Oxford University. In February this year, the company said the contract had been extended to August 2022.
One more Covid-19 vaccine will be produced at this site in the latter half of this year as well, Khorakiwala said, though he did not disclose the collaborator. Explaining the move, he said, “The site is being utilised to the extent of 35-40 per cent at the moment.” This year, Wockhardt aims to have a top-line from Wrexham of £45 million, more than three times FY21’s revenues of £13 million, by filling and finishing around 80 million vaccine doses. The EU and UK’s share in Wockhardt’s turnover grew to 46 per cent in FY21 from 35 per cent in FY20.
These plans accelerated Wockhardt’s international expansion momentum after it went public in 1992. It has a presence in the UK, US, Ireland and France and overseas revenues account for 82 per cent of the company’s top-line. That gives the company robust access to these markets should it up its global vaccine play even further.
But India has also come into focus on account of the acute shortage of Covid-19 vaccines. In India, Wockhardt aims to make 2 billion doses of Covid-19 vaccines within the next one or two years but has not disclosed the identity of the tie-ups. Its vaccine play in India will not be limited to a filling and finishing operation: It also is re-purposing its Aurangabad plant to make a vaccine API (active pharmaceutical ingredient or bulk drug substance). It is in the process of a technology transfer from a foreign vaccine maker for a 500 million-dose deal that could be made public in a few weeks. Discussions are on with more players for tech transfer and contract manufacturing.
Khorakiwala is upbeat on the opportunities that manufacturing Covid-19 vaccines present in India. “We have land in a Special Economic Zone near Chennai where we can set up a new plant,” he said. The company has approached the Indian government to help in discussions with foreign vaccine makers to contract-manufacture vaccines and supply the government at “affordable rates”.
“We were making insulin, yeast-based products, and some protein products already, so we have the technology required to make vaccines,” Khorakiwala said. Talks are also on with next generation vaccine makers (for oral and nasal Covid vaccines) that are in the clinical development stage. “These things will take about two years or so. We can also partner to conduct phase 2 and 3 clinical trials in India.”
Margins in contract-manufacturing of vaccines are not high, however — 10-20 per cent given the price stringency in India. Therefore, the earlier emphasis on antibiotics and diabetic drugs will remain an integral part of the company’s strategy after it sold a portfolio of 62 brands in multiple therapy areas to DRL for Rs 1,850 crore to exit the extremely price-competitive generics business. The deal was renegotiated when the pandemic hit and DRL held back Rs 300 crore contingent to sales performance of the brands.
Why did Wockhardt choose to focus on these two areas? Industry sources say margins in novel chemical entities (new drugs) can be quite high. “Typically, margins in generics could vary a lot — from 10-20 per cent (in price controlled drugs) to 50-60 per cent as well. On Novel Chemical Entities (NCEs), this is much higher, but it is difficult to put a number to it,” said a senior pharma executive.
The DRL deal infuses liquidity to invest in biosimilars for the US market and focus on clinical trials of NCEs in the antibiotic space. Wockhardt has been working on antibiotics for some years — it had filed around 785 NCE patents till FY20. It became the first Indian pharmaceutical company to get the drug regulator's nod for two novel antibiotics, which it plans to launch in the next few months in the domestic market. The new drugs will target superbugs that have become resistant to other molecules.
Similarly, on insulins and oral diabetes products, Khorakiwala had told Business Standard last year the US had relaxed regulations for approval for biosimilars, including insulin. “Earlier, they were asking for extensive clinical work. While a normal biologic would have required $16-17 million for clinical trials, now the cost would be $10-12 million for the data they are asking for. This reduces costs significantly,” Khorakiwala had said. The company already has a presence in Mexico and Brazil with insulins, and will now focus on the US. It has an India market plan, too — to introduce products with 50 per cent more insulin at the old price. Insulin alone is a Rs 2,500-crore market. “If we get 15-20 per cent share in the next three to four years, it would be significant in terms of value,” the chairman had said last year.
All these realignments stem from Wockhardt’s past financial woes. From 1997 to 2007 Wockhardt went on an expansion spree to pick up UK-based Wallis Laboratory, Germany-based Espharma, Negma Laboratories in France and Morton Grove in the US, Pinewood Healthcare in Ireland and so on. The 2008 global financial meltdown led the company to near-insolvency. A corporate debt restructuring exercise by lenders in 2009 forced Wockhardt to pare many assets such as animal healthcare and nutrition businesses and some hospitals. This financial discipline and focus on the US market turned the company around by 2011. But in 2013, the US Food and Drug Administration issued an import alert on the Aurangabad-based Waluj and Chikalthana facilities, causing the company to recall some products from the US market. By 2019, however, both plants had passed USFDA inspections.
Developing Covid-19 vaccine has opened another door for the firm. But much would depend on the success of the deals that are now in the works.
