THE US$ 30 BN ANIMAL HEALTH INDUSTRY POSES AN EXCITING OPPORTUNITY FOR YOUR COMPANY.WHILE THE INDUSTRY HAS TWO MOVING PARTS IN THE COMPANION AND PRODUCTION ANIMALS OUR FOCUSIS MORE TOWARDS THE UNDERSERVED PORTIONS OF THE PRODUCTION ANIMAL VERTICAL.
Fiscal 2015-16 was by far the most exciting phase in our journey to become a trulyglobal animal health enterprise. Our efforts to reinvent our business with a calibratedplan went according to schedule and I am pleased to state that your Company now standstall among players in the animal health space with footprints in over 90+ countries. Thetransformation from a volume-driven API-led company to a formulation-led value-drivencompany has indeed been a journey replete with challenges learnings and excitement.
As it stands your Company has a strong formulations business in key veterinary marketsof Europe LATAM India Turkey Africa and South East Asian countries. Along the way inthis journey we have made our Company the number one Animal Health company in Turkeydoubled our business in India forayed into Europe Brazil and other Latin Americancountries along with setting up manufacturing bases in Europe which adhere to thestrictest of manufacturing regulatory and quality requirements.
THE GLOBAL PHARMACEUTICAL MARKET RECORDED YET ANOTHER YEAR OF SIGNIFICANT REVENUES ANDAS PER IMS THE MARKET IS LIKELY TO EXPAND MANY FOLDS TO US$ 1.4 TRILLION BY 2020.
The US$ 30 bn animal health industry poses an exciting opportunity for your Company.While the industry has two moving parts in the companion and production animals our focusis more towards the underserved portions of the production animal vertical. Our effort hasbeen directed not only towards improving the productivity of the livestock but alsobecoming an important partner with the animal owner in safekeeping the health of ananimal. There exists a definite gap in the demand and market availability of products inthis space and your Company has been working towards bridging this gap and as a result getcloser to end-users in the select markets where we envisioned this"opportunity".
On the Human Health side we continued our focus in niche areas and made investments inthe women healthcare that adds a different dimension to our business. The globalpharmaceutical market recorded yet another year of significant revenues and as per IMSthe market is likely to expand many folds to US$ 1.4 trillion by 2020. This gives usenough comfort that the pharmaceutical industry has enough room for a player like us tokeep following our niche API strategy.
It is our belief that we have put in place a foundation for an organisation that cancapitalise on the growth opportunities and create enormous value in the burgeoning animalhealth and human health industry.
Let me take the opportunity to share with you the reasons why we believe that thedecisions taken this fiscal are steps in the right direction to creating a valuableenterprise:
FIRST THE INITIATIVES AT ALIVIRA
All Animal Health initiatives have been consolidated under the single brand of Alivira.We laid the foundation for Alivira in 2015 and consolidated its presence in 2016 through aseries of measures including:
a. We are now the number one Animal Health company in Turkey
Post our acquisition of Provet in the previous year we also acquired Topkim one ofthe oldest and reputed manufacturers of Turkey. The consolidated entity has made us thelargest Animal Health company of US$ 400 mn animal health industry of Turkey along withcapabilities as to take us the advantage of being a first mover in the new GMP regime atTurkey.
b. We have doubled our business in India
This year we registered 72% growth in the India business. We not only grew ourhomegrown markets but also added the Animal Health division of Lyka Labs toAliviras business fortifying our cattle and poultry business. The business wasimmediately accretive and in the long run it augurs well for fortifying our business inIndia. With an India business sales force of 250 people Alivira offers close to 250products and has significant presence in the cattle and dairy segment.
c. We have extended our global presence
During the fiscal we acquired three front end companies viz. N-Vet AB andFendigo to debut in the European veterinary markets. While Turkeys acquisitions gaveus strong manufacturing capabilities the integration of N-Vet AB and Fendigo strengthenedour front end capabilities in the key markets along with access to market registrations.The acquisition of a majority stake (after FY16) in Vila Vina Participations group thatowns Karizoo Spain Phytosolutions Spain Covivet Spain and Karizoo Mexico bolsters ourpresence in Europe. This transaction brings into Alivira an EU approved manufacturing basealong with strong R&D capabilities which we intend to leverage for our globaloperations. This apart we recently closed our transaction with Interchange Indstria eComrcio de Produtos Veterinrios S.A. Brazil (Interchange) which provides Aliviraaccess to Brazil the third
POST OUR ACQUISITION OF PROVET IN THE PREVIOUS YEAR WE ALSO ACQUIRED TOPKIM ONE OFTHE OLDEST AND REPUTED MANUFACTURERS OF TURKEY. THE CONSOLIDATED ENTITY HAS MADE US THELARGEST ANIMAL HEALTH COMPANY OF US$ 400 MN ANIMAL HEALTH INDUSTRY OF TURKEY ALONG WITHCAPABILITIES AS TO TAKE US THE ADVANTAGE OF BEING A FIRST MOVER IN THE NEW GMP REGIME ATTURKEY. largest veterinary market in the world accounting for 7.5% of the global animalhealth business.
The corporate actions above on our part have put in place an organisation that hasstrong formulations business in key veterinary markets of Europe LATAM India TurkeyAfrica and South East Asian countries. Alivira is a Global Indian firm as over 80% of therevenues are generated outside India with manufacturing operations in Spain BrazilIndia and Turkey which are ably supported by R&D development centres in India Turkeyand Spain.
d. We are a research-backed and formulation-led Animal Health business
Until 2015 20% of our revenues accrued from the formulations business. You will noticethat the contribution of formulations in the overall Alivira business is now close to 60%.While we are already one of the worlds leading producers of APIs we foreseestronger growth in the finished dosage business going forward. To stay competitive andcommitted to the niche we have carved for ourselves we have also initiated an aggressiveglobal R&D programme with over 25 products in various dosage forms including oralssolids liquids injectable and pre-mixes.
Alivira thus has a well set platform to capitalise on the emerging opportunities andour focus for the future would be on integration of these businesses to drive synergies aswell as an aggressive new product development programme that drives us to the next orbitof profitable growth.
SECOND OUR SUSTAINED FOCUS ON NICHE HUMAN HEALTH
The Human Health business which recorded a robust 77% growth this fiscal broadlyfollows the footsteps of the strategy we laid out in the previous years. Our key moleculesin the niche space have started yielding results and this enables us to focus on newmolecules to enter the commercial stage. In line with our strategy this year we forayedinto female healthcare segment with distinct focus on steroids and hormones. We acquiredcontrolling stake in Naari (formerly known as Indo Phyto Chemicals Pvt. Ltd.) based out ofDelhi to merge its enhanced product portfolio and skills to a strong global base that wepossess in the APIs. Naari also gives us capabilities in fermentation and chemicalsynthesis thus enabling unique ability to produce APIs from the basic starting materialsthat are extracted from plants. We remain excited about our Human Health strategy andwould continue to develop and scale up new molecules that upholds a strong position forus. We bolstered our API strategy by acquiring 3 USDMFs.
THIRD WE ADVANCED OUR R&D CAPABILITIES
This fiscal our research team attained success in commercialising 4 products inveterinary APIs along with 4 Human APIs. Besides the team at our central R&D centre atMangalore we have created capabilities based for research at our manufacturing centres inrespective formulation setups. Our consolidated pool of intellectuals now has 120scientists. This apart we have bolstered our future pipeline with 7 Animal Health APIsand 17 (including 10 products in female healthcare) Human Health APIs under developmentand 25 formulations in various dosage forms.
LASTLY THE FOUNDATION IS SET FOR ANALYTICAL SERVICES
FY16 was a quiet year for our analytical services vertical owing to some businesschallenges at the client level of our top contributing customer. We opened our new GLP(Good Laboratory Practices) compliant Analytical Services Centre at Bengaluru. This 10000square feet centre has given us access to a wider range of therapies including Beta Lactamand Hormones. For our current and prospective clients we have in place best-in-classinfrastructure coupled with rich scientific knowledge definitive cost advantage andin-time commitment which adheres to changing regulatory needs and highest qualitystandards.
THIS FISCAL OUR RESEARCH TEAM ATTAINED SUCCESS IN COMMERCIALISING 4 PRODUCTS INVETERINARY APIs ALONG WITH 4 HUMAN APIs. BESIDES THE TEAM AT OUR CENTRAL R&D CENTRE ATMANGALORE WE HAVE CREATED CAPABILITIES BASED FOR RESEARCH AT OUR MANUFACTURING CENTRES INRESPECTIVE FORMULATION SETUPS
Looking back FY16 was also a year of financial growth for our Company. Whileprofitability at the net level continues to be a challenge in this investment phase ourperformance at the sales and EBITDA level demonstrates the size of opportunity that theindustry offers. Due importance was also given to strengthening our balance sheet and allefforts are towards ensuring growth does not come at a cost of financial imprudence.
We are quite excited about the business and the opportunities that lie ahead in frontof us. I would thank all our stakeholders for your continued support and conviction in theunique business we are building. I also take this opportunity to thank our customersemployees partners suppliers regulatory agencies and lenders for their continued trustand support.