Statement from the Managing Director
My singular message to my shareholders is that I remain committed to grow this business. Because when commitment to grow is at the heart of any journey success is a natural corollary.
Fiscal 2018-19 was an important milestone in our journey from a strategic perspective. We achieved some important successes which showcase our commitment to grow our organisation amidst economic headwinds and sectoral challenges. Because when commitment to growth is at the heart of any journey success is a natural corollary.
Our defining step was the acquisition of Soneas a dedicated CDMO player at the start of fiscal 2018-19. CDMO is an interesting space to be in owing to its inherent characteristics such as customer stickiness revenue visibility and superior margins. But it has its challenges too-extensive research expertise and a long gestation for investments to transform into returns.
Vivimed through UQUIFA has established its presence in the global CDMO space having successfully delivered projects to global pharmaceutical players. The CDMO business grew exponentially over the last five years.-from <5% of UQUIFAs business in 2012 to ~25% in 2017.
Interestingly CDMO business opportunities are increasing as global players are focused on optimising costs in keeping with the clarion call across the global of reducing healthcare costs. According to a report by Credence ResearchInc.' Pharmaceutical CDMO Services Market-Growth Future Prospects Competitive Analysis 2018-2026 the global Pharmaceutical CDMO Services Market was estimated at US$65.6 Bn in 2017; it is expected to expand at a CAGR of 6.5% from 2018 to 2026 to reach US$116.2 Bn by 2026.
To capitalise effectively of the growing market opportunities we needed to widen our technology pool expand our capability matrix and our service offering across product development value chain. This is where Soneas appears as a best fit to our API business spearheaded by UQUIFA.
Hence Soneas I am confident will add considerable value to UQUIFA's operating model. Moreover it will bring to fruition Vivimed's vision of making UQUIFA an integrated global CDMO player and catapult the combined CDMO piece into a new growth orbit.
The other important move was the exit from the joint venture with Strides Shasun in the Finished Dosage space. It was a win-win for both partners. For us it released critical management bandwidth to sharpen our focus on certain markets of our choice. For Strides it strengthened their presence in the US market. Moreover we utilised the funds received owing to the exit to pare down our debt.
Having said that I must mention that debt management has been foremost on our minds. Between March 2017 and June 2018 we have reduced our debt burden from C1010 crore to C837 crore (includes CI11 crore added in 2018-19 owing to the acquisition of Soneas). We will continue to focus on debt reduction in the coming years.
The road ahead
I am particularly optimistic about our prospects over the medium term.
Our API business is gaining healthy traction. I believe that with team's efforts in seeding multiple markets we may soon be faced with a capacity shortfall for some of our key products. We would need to debottleneck our infrastructure to release capacity to accommodate additional volumes.
Our CDMO segment is also picking up momentum with a healthy uptick in orders in the first quarter of the current year (2019-20). I am hopeful of sustaining this momentum in the current year.
Our finished dosage business should experience a healthy uptick in volumes over starting from the current year as the team has worked tirelessly in expanding their footprint in new markets. I feel these new markets would start delivering returns in the next 12-18 months.
One of the most heartening facts is that we have replicated the CDMO model in our formulations space but with a difference. We call it the Virtual Pharma segment. This is an interesting concept. We will create a pool of high value high risk molecules using are extensive knowledge in the pharma industry. On successful development we will enter into a profit-sharing alliance with a large pharmaceutical majors for manufacturing and marketing the product in regulated markets of the US Europe and Canada. This asset- light operating model would open a new profitable and sustainable revenue stream for the Company.
I feel we are well positioned on our performance journey. But I must admit that during this journey there will be ups and downs. We will be putting ourselves in uncomfortable challenging positions. But the point is regardless of outcome it's the focus on each step and each moment of the learning that is critical.
Because these learnings are the essentials we will need to rely on to develop progress and perform. Because these learning will help us challenge status quo push ourselves outside our comfort zone and take on new challenges and opportunities with a vision of a better tomorrow.
As we move forward into 201920 I would like to express my sincere gratitude to my fellow Directors for their commitment and professionalism in paving the Company's long-term path.
I would like to thank our esteemed shareholders partners and other stakeholders for believing in our story and reposing their confidence in our capability and extending their support in our long journey of endurance.
And most importantly I place on record my gratitude to our management team and staff for their valuable and ongoing dedication in contributing to the Company's growth
A fellow shareholder