Somewhere in this growth lies their survival mantra. Their strategies indicate that mid-cap pharma companies are playing it smart and that entrepreneurs are getting smarter. Arch Pharma’s turnover rose to Rs 364 crore in 2007, up 47.4 per cent since last year. Its net profit rose 46 per cent to Rs 23.17 crore. Unimark’s turnover shot up to Rs 450 crore in 2007, a growth of 46.6 per cent over 2006. Unimark’s net profit details are not available since it is still auditing its accounts.

The Survivors
In 1999, three entrepreneurs — Ajith Kamath, Manoj Jain and Rajendra Kaimal — acquired a loss-making SME company, Merven Drugs, for Rs 16 crore and renamed it Arch Pharmalabs. “Scientists think everything is gold,” says Kamath. “But we had to turn the company around and so we homed in on three products.” He and his partners stuck at it and pruned down the number of chemicals manufactured by Merven Drugs from 10 to just three. Two core APIs — Atorvastatin and Clopidogrel — and one penicillin side chain, Isoxazole Penicillins. These three were shortlisted because there were no competing vendors in India. Market conditions helped since their rivals in Europe were not as competitive on price points and quality. Today, about 60 per cent of Merven’s market is now in the US, a key factor that helped the trio dodge all troubles and achieve their goal of profit.

“Since we were a financial firm, there were people who doubted our capabilities to survive in the pharma space,” says Kamath, who is also the chairman and managing director of Arch Pharmalabs. “But no one expected Arch to grow the way we did.” The company was struggling between 1999 and 2002. In 2002, the old chemical firm posted a net loss of Rs 2.18 crore. The turnaround began in 2003.

Like Arch, Unimark has also reinvented itself. Started in 1983, Unimark was a marketing firm for large pharma and chemical companies till 1995, when it entered the API manufacturing space. Most thought that it was a wrong move for a marketing firm, says Mehul Parekh, executive director, Unimark Remedies. But Unimark could afford to do so since its marketing team knew the products that were in high demand in the industry — they had an edge over the others.

But as Unimark’s API business grew, it faced competition from smaller firms. So, it had to reinvent itself yet again to cut manufacturing costs. “We created alliances with our competitors,” says Mehul. The alliance team would go to competitors and ask them to manufacture those products that Unimark no longer could on a large scale. They then entered into a profit-sharing agreement for the sale of such APIs. Unimark would exclusively market this API abroad. The model worked best with an API called Nimesulide, a pain management product. As a move up the value chain, Unimark has, so far, filed eight patents and its exports constitute more than 60 per cent of its revenues.

Now, both Unimark and Arch are preparing for larger challenges as drug prices are getting cheaper at the consumer end. Since original drug manufacturers (ODMs) are squeezing API price margins, SMEs are feeling the pinch. Through process patents they have combated price erosion in the market. Patenting processes means that the engineering process or the heating process of the chemical reaction can be patented. For example, the heat treatment in the reactor could be re-engineered to produce the same chemical at double the capacity. This activity has brought down the project cost by 35 per cent for Unimark. A similar process was followed by Arch.