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India's Alkem plans to double U.S. revenue by 2020, launch IPO in Dec

Friday, Nov 27, 2015

Alkem Laboratories Ltd on Wednesday said it expects the contribution of the US sales as a share of overall revenue to double in the next five years, just as it has doubled in the last five years.

International revenue, which was just 12.6% of the overall revenue in 2010-11, rose to 25.3% by 2014-15, the company management said. The US accounts for 90% of Alkem’s international revenue.

India’s fifth-largest drug maker, which is launching its maiden public offering in December, is planning to expand its generic portfolio.

Today, the US contributes just under a quarter of its overall revenue. Out of its Rs.3,783-crore revenue for 2014-15, the domestic market accounted for 74.7%, while the international market contributed 25.3%. Its US subsidiary, ThePharmaNetwork Llc, notched up a revenue of Rs.646 crore in the fiscal.

“The US is the most important market for us. From $10 million revenue in FY11, the revenue from that market comes in at $100 million today and we expect the same growth to continue. Commercialization of more ANDAs (abbreviated new drug applications) will boost US revenue,” said Prabhat Agrawal, chief executive officer at Alkem Labs. It also plans to expand Ascend’s product basket through in-licensing deals.

In India, the company is growing at 17%, he added.

As of 30 June, Alkem has filed 66 so-called ANDAs in the US, of which 18 have been approved and two have received tentative approvals. ANDA is an application for a US generic drug approval for an existing licensed medication or approved drug.

Of the 66 ANDAs, 29 were paragraph IV filings including first-to-file.

Compared to ANDAs, which are filed for marketing approval for drugs whose patents have expired, paragraph IV ANDAs are filed for exclusive marketing for drugs protected by patent. Through litigation, the applicant can claim that the patent of the drug is invalid and get the ANDA approved.

The generics industry in the US grew to an estimated $67.6 billion in fiscal year 2014-2015.

From 2015 to 2017, drugs with an estimated total sales of $43.8 billion are expected go off-patent, providing opportunity to generic pharma companies, according to a May 2015 IMS Health report-Market Prognosis Global 2015-2019.

Alkem entered the US market in 2010 by acquiring ThePharmanetwork Llc, the holding company of Ascend. In 2012, Alkem acquired manufacturing assets from NORAC, Inc. in the US and acquired a formulation manufacturing facility from Long Pharmaceuticals Llc in the US in June 2015.

In India, therapeutic areas such as anti-infectives, gastro-intestinal, pain and analgesics, and vitamins, minerals and nutrients accounted for 80.7% of Alkem’s total sales in the domestic market for 2014-15.

Currently, Alkem holds 3.6% share of Indian pharmaceuticals market, behind Sun Pharmaceutical Industries Ltd (8.4%), Abbott India (6.5%), Cipla (4.9%) and Mankind Pharma (3.7%).

According to a Crisil Research report, the domestic formulations industry was valued at Rs.745.8 billion in 2014-15 and recorded an annual growth rate of 12.3% from 2009 to 2015. The size of the domestic formulation industry in India is expected to increase annually at a rate of 13-15% to between Rs.1,359 billion and Rs.1,484 billion by 2019-20.

According to a draft prospectus filed with the capital market regulator in August, Alkem will offer 12.85 million equity shares, constituting 10.75% of its paid-up capital. The company plans to raise $210-220 million (Rs.1,400-1,450 crore) through its IPO.

“Though we are a cash-rich company, we are floating the IPO due to demand for liquidity from certain shareholders. No primary money comes to the company in the IPO,” said Sandeep Singh, joint managing director, Alkem Labs.

At present, promoters hold 54%, the promoter group holds 16% and relatives and friends hold the rest of shares in Alkem.

 

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