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Ajanta Pharma: A Dose Of Strong Medicine
Lacking the financial or operational muscle to compete with pharma giants, Ajanta focused on first-of-its-kind drugs to script a turnaround
Photo Credit : Umesh Goswami
The Agrawal brothers of Ajanta Pharma — Yogesh and Rajesh — travelled to at least 100 countries and scoured India to learn the ropes of the speciality pharmaceutical market when they joined their ailing family business almost 15 years ago. Saddled with huge debt and declining growth, they were tasked with doing something urgently to save the business and also with learning what not to do.
The US-educated sons of founder-promoter Mannalal Agrawal began by deciding to undo several things that the 40-year-old company had been doing.
Ajanta was manufacturing generic drug formulations, active pharma ingredients or bulk drugs, and over-the-counter products including herbal brands. Sales revenue was mainly from government supply of generic medicines/institutional sales and from exports of bulk drugs. A few brands in the OTC health and energy space, including India’s oldest herbal energy pill 30-Plus, were also selling.
But Ajanta remained a small player in a market full of pharma giants. The young management decided to delineate the business by putting an end to OTC drug sales and supplying drugs to government health agencies in India and abroad. “It was painful and risky decision to discontinue all these, especially exiting from the age-old API business and completely withdrawing from government sales,” recalls Yogesh Agrawal, MD. “But it was a do-or die-situation where we had no other solutions to revive it.”
When the brothers took over in 2001-02, the firm had sales of around Rs 85 crore with an annual loss of Rs 1.09 crore and a debt of Rs 125 crore. Today, it is one of the fastest-growing and the most profitable drug makers in India.
Changing the business model
After realising that a company needs a focused business model, Agrawal decided to overhaul company strategy. The firm would focus on speciality generic drugs; identify the right segments, products and markets; and borrow to invest in research and development (R&D).
“We knew that getting into something profitable would require additional investment,” says Rajesh Agrawal, the joint managing director of the pharma firm.
Ajanta decided to divest OTC herbal energy pill 30-Plus as the company couldn’t leverage the brand further. It discontinued several of its “me-too” products in the general therapy area along with the OTC and herbal portfolio.
After zeroing in on the specialty drugs strategy, which demanded additional investment in R&D and manufacturing, the bigger challenge was limited resources.
This forced the young management to limit their focus to four key segments — ophthalmology, cardiovascular, dermatology and pain management in India — and niche generic products in unregulated and semi-regulated markets outside. For this, Ajanta had to expand research, upgrade and set up new manufacturing facilities.
“We had to borrow more and convincing banks was challenging. But all these efforts were rewarding as we were very clear about our strategies and execution,” Agrawal says.
In the African market, Ajanta introduced the first single tablet dosage for adult patients for malaria.
“Malaria is the biggest disease segment in Africa; it didn’t make sense for us to enter that market without a malaria drug. But it was almost impossible to compete with existing players, including multinational companies. We wanted a differentiated product, which brought about this innovation,” Agrawal says.
In India too, this innovative drug strategy helped Ajanta take giant strides. As many as 127 of the total 181 actively sold brands were first-time and new-on-the-market launches. The specialty strategy not only helped increase focus but reduced field force as well. Even in R&D, the management’s clarity on the final output and processes ensured cost efficiency.
“Our direct experience and involvement in the markets, production, people management and other areas helped keep costs under control and optimise profitability,” Agrawal says.
More than a decade’s hard work and ground-level efforts have started showing results. Ajanta’s sales have grown almost 26 times during this period. In 2015-16, the company expects to post sales of close to Rs 1,800 crore, an increase of more than 20 per cent from Rs 1,498 crore in 2014-15.
What’s the next focus area for Agrawal? Scaling up Ajanta’s presence in North America.