Pharmaceutical Industry In India

Published Date: 02 Nov 2017

The Indian pharmaceutical industry has come a long way since the time of independence when multinational corporations dominated the industry. Over the years, under a favorable policy regime, the industry has grown phenomenally and has established itself as a major supplier of not only generic products but also new formulations. The industry, in addition to meeting domestic demand, is in a position to export significant volume of pharmaceutical products to various destinations including the developed markets of USA, EU and Japan.

Indian pharmaceutical industry can be classified into three stages or periods :-

Pre 1970s: - The size of Indian pharmaceutical industry was sparingly small in number of firms and the volume of production. MNCs dominated the Indian Pharma market, both in volume of production and patent holdings, in India. The patent regime, based on Indian Patents and Designs Act, 1911, Recognized both product and process patents. Attributable to monopoly status enjoyed by the MNCs, drug prices remained high during this period.

1970 to 1995: - The new act introduced by the Indian government that came into effect in 1972 recognizing only process patent and but not product patent. This Act enabled Indian firms to use ‘reverse engineering process’, to manufacture drugs, without paying royalty to the original patent holder. The Act, along with the Drug Price Control Order, provided little incentive for MNCs to introduce new pharmaceutical products in India. During this period, several domestic pharmaceutical firms increased considerably, from around 2000 units in 1970 to 24,000 units in 1995.

Post 1995 : - This is an another complete favorable condition of the Indian pharmaceutical industry as an amendment made in an agreement with World Trade Organization (WTO) of Trade Related Intellectual Property of Rights (TRIPS) provisions .This act reintroduced the product patent act in India that worked in favor of Indian pharmaceutical industry. During this period, tariff and non-tariff

measures have come down. Such developments have worked in favor of Indian pharmaceutical Industry to undertake activities such as clinical research and new drug development. At present the Indian pharmaceutical industry has annual turnover is over US$ 11 billion. Globally, it ranks 4th in volume with a share of 8% in the world pharmaceutical market. In value, it ranks 14th. Key therapeutic segments of Indian pharmaceutical industry include anti-infective, gastrointestinal and cardiovascular. Acute therapies make up about 60% of the present market. The Indian Pharmaceutical Industry is currently leading the industry in India’s science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology. In 1980s just before the Entrepreneurship booming started the annual turnover of Indian pharmaceuticals is about 0.3 billion $ and has been increased to 22billion $ by 2009-10. It also stood one of the top three pharmaceutical industries of world in production wise. India has shown tremendous development in productions of APIs in mid 1970 and got accelerated in the late 1980 where the revenue has increased from 900million $ to 78000million $. The Indian Pharmaceutical Industry had reduced the domination of MNCs that has over 70% of Market in 1970 to below 25% at present.

DOWNFALL OF MNC DOMINATION

Various Policies that effected Indian Pharmaceutical Industry

Future of Indian Pharmaceutical industry: - The Indian pharmaceutical industry has to keep high level concentration in manufacturing generics to become a key global player. The patent act of 1970 was aimed at keeping the cost of medicine at affordable levels by enabling domestic Pharma companies to build technical expertise in reverse engineering of existing medicines by modifying the manufacturing process and to become an efficient global producer of generics. Although India

Shifted to the product patent regime in 2005, the capabilities developed during the past two decades became a competitive advantage for the Indian Pharma industry in the 1990s, when the

rising health care costs in many developed countries forced them to seek the cheaper generic drug option. Thus, the Indian Pharma industry was able to exploit the enormous generic opportunity that was spawned. The share of the Indian Pharma companies in the total pie of approvals of generics has been rising steadily More than a 3rd of the approvals are from Indian origin companies this lead to increasing exports of generics from India and the momentum might continue for few more years. Along with higher competition, the global generic market is set to face another hurdle in the longer term. Already, R&D productivity of large global pharmaceutical innovators has slowed considerably over the past few years. R&D productivity, a function of the cost of new drug development and returns from those new drugs, is of critical importance as global players invest heavily in R&D (about 20 per cent of revenues). First, the average cost of developing a new drug has more than doubled in the past few years. Second, R&D activities by global players have resulted in only a few of new molecules. For sustaining growth, Indian drug-makers will, therefore, be forced to look at newer avenues such as entering niche segments, building relationships with global pharma for joint research and development and widening distribution networks through marketing alliances. Other potential areas include bio-pharmaceuticals, contract research and manufacturing, and new drug research.

The Indian bio-pharmaceutical industry is in emerging stage and is sized at about $1.4 billion as of 2010-11. However, Indian bio-pharmaceutical players largely market vaccines and are yet to make inroads into the U.S. and Europe. With the looming patent expiry of many bio-pharmaceutical products globally, Indian firms will look to build capabilities to capitalize on the opportunity that shall arise. The low cost of manufacturing renders India as an attractive destination for contract research, and the availability of a large patient pool makes it appealing for clinical trials, which contribute the most, in revenue to the contract research segment. An increased presence in contract research shall also help them build expertise to move up the value chain and engage in new drug development. Indian industry's R&D capabilities currently lie in reverse engineering drugs and in process chemistry. With limited experience and high costs associated with bringing a drug to the market, Indian players have traditionally shied away from drug discovery, or in a few cases, out-licensed molecules to multinational companies in early stage of development. At present, only a handful of Indian companies are engaged in new drug research; consequently, there are only 70-80 molecules in the pipeline from Indian players, of which more than two-thirds are still

in early clinical phases. Slower growth in the generics space, large Indian players will look to enhance their focus in this area. The high-risk high-return field of new drug research holds tremendous potential for Indian players.

The phenomenal growth of Indian bio-pharmaceuticals sector has been observed and expected to continue because of the driven market of vaccines. This is because of various factors like education, increased awareness in disease prevention, rise of disposable income and most importantly government participation in immunization programmes. The growth may be expected in different segments like cancer and diabetes. Worlds 10% of pharmaceutical production has been made by India. Now most of the Indian companies are targeting on foreign acquisitions that might affect Indian generic market. Thus the health ministry of India safe guarding the Pharmaceutical industry and built in to the foreign direct investment .In 2011 NPPP (NATIONAL PHARMACEUTICAL PRICING POLICY) of Indian government addressed to maintain the low prices on essential medicines. This draft proposed by NPPP focuses on national list of essential medicine (NLEM) and revises them

Periodically. The main aim of this is to change the principle of cost-based pricing to a market-based pricing model. The department of pharmaceuticals proposes that market-based pricing would result in more transparent and fair pricing; it also increases competition in the marketplace. This regulation will encompass all the drugs in NLEM, formulation containing combination drugs which are listed and non-listed in NLEM. If this happens 60% of the drugs currently available in India will come under price control.

VIRCHOW PROFILE

Incorporated in 1982, Virchow Laboratories Limited is the flagship company of the Virchow Group,

Promoted by Dr. N Venkata Reddy, Mr. M Narayana Reddy, Mr. L V Subba Reddy, and Mr. Ravindra Reddy, and their families. VLL has three subsidiaries: Andhra Organics Limited, Virchow Healthcare Private Limited and Virchow Drugs Private Limited. VLL, along with Andhra Organics Limited, is a leading producer of Sulfamethoxazole. Andhra Organics Limited is also involved in the manufacturing of CIS hydroxy lactum, besides Sulfamethoxazole; Virchow Drugs Private Limited is involved in the manufacturing of sulfa drugs (API); and Virchow Healthcare Private Limited is involved in the manufacturing and marketing of formulating products.

Virchow history :-

To know the history of Virchow Laboratories it’s important to know about Mr. Narayana Reddy who is the founder of Virchow .He had a master's degree in the field of organic chemistry and until 1981 he had been working for a pharmaceutical company where he had developed a molecule. As he always wants to become a job-provider rather than a job-seeker, besides enjoying a host of other financial and psychological rewards he thought of taking to entrepreneurship which is surely more a matter of aspiring to become an entrepreneur rather as being born as one. As Mr. Reddy willing to be an entrepreneur he came across two gulfs returned Medicos who had a similar wavelength of ideas joined Mr. Reddy and the seeds for VIRCHOW are sown. They never thought before if the decision is right or wrong but they worked very hard to make their decision right.

After a detailed study of the technical, economic, commercial and financial feasibility of the idea of manufacturing a bulk drug from the molecule, ‘Virchow Laboratories’ was started in 1982 as an SSI with an initial investment of Rs. 28 lakhs – Rs. 8 lakh in the form of equal contribution by the three promoters and Rs. 20 lakh funding from the Andhra Pradesh State Finance Corporation (APSFC). Once the financial arrangements acquired there comes a challenging phase of project implementation as he set out to acquire land, construct factory, purchase equipment, negotiate with suppliers, potential customers and obtain environmental, drug control and other clearances. Initially, it was he who acted as the pivot of the enterprise wheel. In the course of time, a strong managerial team was put in place and thanks to a persistent emphasis on good management, developmental

plans. In fact, plans for economic development would bear little fruit unless entrepreneurship development is regarded as a deliberate process of making people aware of entrepreneurship as a career at an early age and creating situations where they may actually make a choice to become entrepreneurs. As he was interested in entrepreneurship, he learnt from his mistakes and worked very hard to keep the proper working system in order so that the firm goes ahead according to the system but never relied on Individual.

GROWTH OF THE GROUP

Parent organization of the company, the $150 million Virchow Group is a name to reckon with in the burgeoning active pharmaceutical ingredients (APIs) and drug intermediates business in India. Founded in 1981, the Virchow Group today is the World's largest manufacturer of the antibacterial Sulfamethoxazole, while it’s another group company. Saraca Laboratories Limited is the World's largest manufacturer of the anti ulcer drug Ranitidine. Virchow Group produces and caters to 90% of the World's requirement of Sulfamethoxazole. Other group companies are leading manufacturers of the newer 2nd 3rd and 4th generation Cephalosporin’s and other specialty chemicals. Virchow group has developed a good expertise in the process development of Pharmaceutical and biological products. Virchow Group is known for its strong background in chemical process engineering for scale up and backward integration of active pharmaceutical ingredients and for efficiently managing the downstream operations involved in the production of various pharmaceutical product

The area of which the major firms are spread across (in acres)

The Virchow group consists in all of 7 Pharma manufacturing units and two Biotech setups. Although all the units are WHO-GMP and ISO 9000:2001 Certified, the Group is also credited with the two US FDA approved sites. These sites and products have also been approved by the Therapeutic Goods Administration, Australia (TGA) and by a European Union’s Certificate of Suitability (COS) Environmental protection is a process at all Virchow Group Companies and every employee is an active participant in this process of maintaining a clean and green environment. Virchow Group has the credit of being the first Active Pharmaceutical Ingredient (Bulk Drug) unit in India to receive Certification for compliance with ISO 14001 norms. This certification demonstrates that Virchow's Environment Management System (EMS) complies with several stringent environmental standards at international.

VARIOUS MAJOR APIs PRODUCED BY VIRCHOW GROUP PER ANNUM IN METRIC TONNES AND THEIR PERCENTILE

Individual Profiles in the group:-

Initial Years

Virchow Labs:-

Virchow Laboratories Limited is a renowned manufacturer and supplier of the pharmaceuticals. We incorporated in the year 1982, have a trusted name among various health care industries and offer a fine quality range of Dietary Supplements and Specialty Formulations. These products are manufactured using high-tech infrastructure and R&D facilities. Thus, these products are available with durability, efficiency, cost effectiveness and good quality. We have certification of European, ISO 14001, Australian Certifications in accumulation to WHO-GMP, ISO 9000 and USFDA Certification and also have partisanship of various reputed associations including Pharmaexcil, FIEO and FAPCCI. We have a large clientele in Europe, Indian Subcontinent, South East Asia and Middle-east Asia. Moreover, these products are available at market leading prices to our respected clients.

 Manufactured using high grade raw materials obtained from reliable vendors, these products ensure reliability. We offer these products as per the international quality standards and these products are highly acknowledged for their performance. Furthermore, we pack these products with extreme care to ensure hassle free delivery and also store these products safely and protectively in capacious warehouses. Our clients can avail these products from us with different payment modes. In addition, we also boast of facility to transmit them securely. These products are manufactured as per the given information by our clients and we offer these products with high productivity. Thus, these products have a great demand in the market. We offer these products with various quality characteristics to our esteemed clients.

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VLL are specialized in manufacturing and supplying a supreme quality range of Dietary Supplements and Specialty Formulations. These products are fabricated according to both the regulatory as well as statuary norms. Moreover, we also conduct various quality control facilities to give products as per the industrial standards. These products have various qualities including high nutritional value, good quality and heart disease resistance. Our product range includes various products, which mentioned as below:

Category

Products

Dietary Supplements

Ø  Nutriforte

Ø  Coenzyme Q10-XL

Ø  Alpha Lipoic Acid

Ø  Vircoflax

Ø  Vircoflax-DS

Ø  Lycoxid

Ø  Neurofit

Ø  VIrcoflax ISB

Ø  Superfect

Specialty Formulations

Ø  Osteofit

Ø  Calcirich

Ø  Cefclav 325

 

Virchow laboratories involved in manufacturing, exporting and supplying a wide range of Dietary Supplements. These food supplements are manufactured in accordance with international quality standards using finest quality and natural raw materials in export markets.

Omega Fish Oil Forte

Mother's Choice

Nutriforte Supplements

VIRCO Forte

Alpha Lipoic Acid

Lycoxid Capsules

Neurofit Food Supplement

Superfect Capsules

Vircoflax - DS

Vircoflax supplements

Vircoflax- ISB

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Virchow laboratories involved in production of hard & soft gelatin capsules, ampules pessaries, ophthalmic, injectables, tablets and many more. We also provide the best range of OTC Products such as Aquarest Sachet, Debridace Ointment, Debridace Spray and Relish Diet Sugar with an effective & timely delivery.

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Major Markets that we supply our products Africa, Europe , America, India Subcontinent , East Asia, Middle East , North America etc.

Certifications: - ISO 9001:2000, ISO 14001 , WHO-GMP, EU GMP, CS, USFDA TGA.

The key success of Virchow laboratories lies in strategy applied for the production of Sulfamethoxazole. The production of Sulfamethoxazole involves five steps, Condensation, Amidation, Hoffman rearrangement, Condensation and Purification. The production of SMX requires about 30 raw materials in various stages. The first stage is condensation and is processed in block one of the plant the obtained Methyl-5-Methylisoxazole-3-Carboxalate which is on Amidation gives 5-Methylisoxazole-3-Carboxalate. Now the obtained end product of stage one is subjected to Hoffman’s rearrangement in block 1 and 2 to get 5-Methyl-3-Isoxmaine, which is then a condensation gives technical Sulfamethoxazole, this on purification gives the actual Sulfamethoxazole. In initial years Virchow has to buy the raw materials and used to manufacture the SMX , at this stage the cost of the SMX used to about 1200rs per kg . But due to the strategies followed by Virchow the price has come down to 350rs per kg. The main reason for cost reduction is due to the backward integration process followed by Virchow.

Backward integration can involve a purchase of suppliers in order to reduce supplier dependency with regard to e.g. timely deliveries, quality concerns, innovation ability etc.. Later years Virchow highly concentrated in the backward integration process in production of raw materials and intermediates. The first raw material produced by Virchow is Acetyl Sulphnyl Chloride in 1987-88 .It

Has started Virchow Chemicals exclusive productions of ASC .Later it extended the production to Diethyl oxide in 1991-92 then sodium methoxide in 1992-93 . In 2011-2012 we started producing oxalic acid at Virchow laboratory production block 2 at Visakhapatnam which helped to acquire market share to 50%.

Incorporated in 1991, Andhra Organics Limited was taken over by Virchow Laboratories Limited, the flagship company of the Virchow group, in 2004. AOL is now a wholly owned subsidiary of Virchow Laboratories Limited and is involved in the production of Sulfamethoxazole. This acquisition made Virchow laboratories the largest producer of Sulfamethoxazole and holds about 90% of market share.

MANAGEMENT OF VIRCHOW LABORATORIES

Mr.M.Narayana Reddy,Chairman founder of Virchow

He is the Managing Director of M/s. Virchow Laboratories and Ex- President of Bulk Drug Manufacturers Association Andhra Pradesh.

M. Maha Vishnu, Executive Director

With a B.Tech Chemical engineering degree and MBA in Marketing (USA), he executes the group’s business operations. With his young entrepreneur skills he has played a key role in the company’s growth. He is also a director in Virchow group.

K Vamshidhar Reddy, Director

He is B.Tech( Mech Engg), and  MS  and MBA from USA. He is the industrialist, having around 10 years experience in the business. He is the director on the board and looks after the Finance, and other business plans. He is also a Director of M/s. MTAR Technologies, which is manufacturing the spares of cryogenic engines.

M Sudha, Director

She is the Director on Board.  Her qualifications are B.Tech (Chemical Engg.), and MBA (HR). She is the industrialist and having good experience in the industry and business. She looks after the HR and Industrial relations.

L D Maheshwar reddy Director, Engineering

He is the director on board.  He  is M.Tech( Chemical Engineering) from I. I. T- Kanpur, and having more than 12 years hands on experience in the bulk drugs and  agrochemicals industry. He worked in M/s Virchow laboratories, Hyderabad, M/S Ralchem(Rallis India Limited)  Hyderabad, M/s Jubilant organosys ( MAX PHARMA) , Mysore, and M/s GHARDA Chemicals Ltd, Chiplun, Maharashtra. He worked in manufacturing, projects, process Development and Design area, which covers the entire chemical industry. He has done M.Tech from IIT Kanpur, and having 18 years of experience in various bulk drugs companies in implementation and development of new projects.

KVSR Seshu Kumar, Director , R&D

He is the director on Board.  He is M.Sc (Chemistry), M.Phil (Chemistry).He is having very rich experience in R&D, QC. He is having more than 14 years experience. He worked in R&D in reputed organizations, M/S  VIRCHOW  Laboratories ltd ,  Hyderabad, Dr REDDY’s laboratories Ltd , Hyderabad and  M/S DAURALA ORGANICS, Delhi. He is looking after R&D, QC and Manufacturing. He has done M. Sc.(Org.chem.) from Bhopal University, Presently doing the Ph.D. from Adikavi Nannaya University, and having 18 years of experience in various bulk drugs companies in R&D for process development of new projects.

B.venkata Rami Reddy, Director

He is the director on the board, finished M.Sc (Chemistry) from S.K.University in the year 2002-2004 ,currently doing the PhD in Osmania University, Hyderabad and having an experience of 7 years as(Chemist to Manager) at R&D in reputed organization M/s Virchow Laboratories, Hyderabad.

MIDDLE-AGES

Saraca Laboratories:-

Saraca Laboratories Limited manufactures and markets Active Pharmaceutical Ingredients and Intermediates. The company’s products are sold in over 40 countries. The company was incorporated in 1992 and started producing bulk drugs and intermediates. Since then it has shown rapid growth and built a strong brand image in the market Saraca is a part of the Virchow family who are pioneers in the manufacture of APIs. The flagship company of the group is Virchow lab, that is the world’s largest producer of SMX. To make its presence worldwide, it has established R&D facilities at Hyderabad, India. Our core competence lies in the development of cost effective processes for APIs and their intermediates with consistent quality. The R&D consists of well experienced and talented scientists from different / various reputed organizations and institutes. Saraca exports its product to various countries spread across the world Viz., Brazil, Argentina, Switzerland, Spain, Mexico and Bangladesh. 

Quantity of APIs produced in Saraca Laboratories per month in tones and their percentile

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Products that are done at SARACA LABORATORIES include Ranitidine, Ranitidine Base, Cistophur Base NMSM etc.

Certifications: - WHO GMP, CS , USFDA

The production equipment for Saraca laboratories include Stainless steel, Glass lined and Graphite lined reactors (with an operating volume of 300 KL) , SS Centrifuges, SS Fluidized Bed dryers, SS Rotary Vacuum Cone Dryers, Etc. The operation procedure in the production area is followed under full cGMP as per ICH guidelines. The production area includes cooling services, brine, cool water, heating with thermal oil or steam, 100% standby power, warehouses & bulk solvent storage tank farms. A modernized Effluent Treatment Plant is established at Saraca which includes equipments like Gas Incinetors , Evoparators etc that treats liquid effluents and solid products chemically as per the standards.

At Saraca APIs and Intermediate product analysis are done in well equipped modern laboratories. The department of quality assurance at Saraca is very proficient in all the system designing and maintenance needed for cGMP facility .The company has a well-equipped and modern laboratory capable of handling all the testing required for analysis of APIs and Intermediates.The QA department is proficient in all the aspects of system designing and maintenance needed for a cGMP facility.The QA/QC team is lead by a group of talented professionals.

Health and safety and environmental concerns are strictly followed at Saraca laboratories.To achieve this we implement the state-of-the-art technologies to strictly comply with various statutory norms from time to time. Our EHS team promulgates the concept of sustainable development among all the employees and creates a congenial work atmosphere.

LATER YEARS (AFTER 2000)

Virchow Biotech:-

Bio-Pharma Convergence Biotechnology has emerged as one of the key technologies of this century. Biopharmaceuticals have been projected as potential drugs curing many diseases. Many research papers have opined that chemistry based medical innovations of the previous century are becoming to recede in importance, to be replaced by advances in biopharmaceutical research that will boost the growth of revenues and profits in the years to come. Given its potential, most of the global pharmaceutical companies are showing interest in the Biopharmaceuticals sector. This trend is likely to continue, as these companies would try to reap the benefit of their sales and marketing capabilities along with technical expertise in biotechnology.

Based on the above studies Virchow group has decided to start a firm, which is Virchow Biotech. It started with an aim of establishing itself in the sunrise industry of biotechnology; Virchow Biotech (P) Ltd commenced its Indian operations in the year 2001. The focus was to develop and manufacture a wide range of unique biological and high value bio-generic products at an affordable price. Since then we have made impressive strides in terms of product development and have built a strong foundation with a commitment to innovation and process efficiencies. We have rapidly cornered a name for ourselves as a developer of cutting edge therapies in this rapidly evolving biotechnology space. Our first mover strategy has enabled us to aggressively capture a lucrative niche in the therapeutic areas of recombinant medicines, advanced wound care products, Hemostats, ophthalmic; orthopedics and cosmetics amongst others. We have the credit of being the first company in the World to commercialize the biogenetics of recombinant Platelet Derived Growth Factor for wound healing and recombinant Parathyroid Hormone for osteoporosis. We also have a product portfolio consisting of 15 other niche products and five other recombinant bio-generics in the pipeline. We are a multi-faceted company, focusing not only on biotechnology innovation but also on training and developing the best and brightest scientific manpower. This combination of good scientists given the freedom and necessary resources, we believe, will lead to the generation of breakthroughs and ultimately result in the advancement of science that benefits mankind.

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The main focus of VBPL is to manufacture a wide range of biological and bio-generics by applying genetic engineering or classical fermentation. The facilities are equipped to manufacture products ranging from oral biological, recombinants to parental bio pharmaceuticals. The various equipments include Fermentors , preparative HPLC Systems ultra filtration units lyophilizer , prefilled syringe line

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Etc. The facilities also include a fully equipped animal research that routinely undertake acute , sub chronic and chronic pre clinical toxicology trails . VBPL also monitors and conducts large multi centric clinical trials in R&D which is recognized by the government of India

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Some of the products made by VBPL

Certification acquired by VBPL include: -WHO-GMP, CS, USFDA.

Covalent Laboratories:-

Covalent laboratories Private Limited, an ISO 9001:2008 & ISO 14001 (2004) accredited pharmaceutical company Covalent Laboratories and WHO GMP certified for all its products, is specialized in the manufacturing of Cephalosporin’s. It has a wide range of products and is fast expanding to meet the present and future market demands for the high value, low volume drugs. Covalent Laboratories manufactures the Active Pharmaceutical Ingredient (API) in bulk quantities for both domestic and international markets. All the drugs manufactured meets USP/BP/JP standards. Covalent Laboratories, which is professionally managed and has a well equipped Quality Assurance and Quality Control Lab, focus on higher production standards for superior quality products that surpass the international standards. Covalent Laboratories aims at reducing the production cost to give the best price to its customers through its aggressive process development lab.

Covalent Laboratories Private limited mainly Forging ahead in producing Cephalosporin’s. There are about 10 products underline and about 5 products are under development

CERTIFICATIONS: - ISO9001:2000, ISO14001, WHO-GMP

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A Strong volumetric growth of 33% from 329 MT in FY 11 to 437 MT in FY 12 driven by favorable demand for three of the four Active Pharma Ingredients (APIs). However, sale of Proxetile declined substantially.Consistent high capacity utilization reflecting the demand of the APIs manufactured and well executed capacity expansion plans Higher operating margins as compared to peers supported by the efficient procurement of key raw materials Planned foray into Sterile Cephalosporin APIs could strengthen presence in the cephalosporin class of drugs Strong cash flow generation, low indebtedness and limited capex requirement going forward.

Complete dependence on single therapeutic segment with limited products i.e. four cephalosporin based , APIs (Cefixime, Axetile, Proxetile and Cefdinir). The markets for CLPL’s key products have more or less matured. Therefore, CLPL’s future growth and profitability would be contingent on successful implementationof thee Sterile cephalosporin project. Profitability vulnerable to fluctuations in the raw material price on account of dependence on mature Cephalosporin molecules Limited presence in regulating markets leading to constrained profitability Exposure to foreign exchange fluctuations with sizeable imports though partially mitigated by natural hedges provided by experts.

Virchow Petrochemicals: --

Virchow Petrochemicals Private Ltd (VPPL) was incorporated in the year 2003 and started commercial production from Jan’2007. It has an installed capacity of 900 MTPA as on 1stApril, 2012. VPPL is into the production of GCLE (7-phenylacetamido-3-chloromethyl cephalosporanic acid p-methoxy benzyl ester), a drug intermediate used in the manufacturing of cephalosporins like Cefixime, Cefdinir and Cefprozil. The company was promoted by Mr. M. Narayana Reddy and Dr. N. Venkata Reddy.Supplier and manufacturer of drug intermediate, sulfamethoxazole, Sucralose, Ranitidine Hydrochloride, Cephalosporin’s, Cefixime, Cefpodoxime Proxetil, Cefuroxime. It is a main Supplier and manufacturer of drug intermediate, sulfamethoxazole, Sucralose, Ranitidine Hydrochloride, Cephalosporin’s, Cefixime, Cefpodoxime Proxetil, Cefuroxime.

The growth of 69% is recorded in sales of Vppl between 2008 to 2012 because of Volume backed by a favorable demand outlook for GCLE which is an intermediate for Second and subsequent generation of cephalosporins. Vppl has established a good relationship with Aurobindo Pharmaceuticals Limited, Hetero Drugs Limited and assured off-take from the group company Covalent Laboratories Private Limited (CLPL) .

Vppl now concentrating to change its Complete dependence on a single product & High working capital intensity of 38% in FY 12 on account of the high inventory of imported raw materials and high debtor days .

Virchow Drugs Ltd. manufactures Triclosan an antimicrobial agent. The company was incorporated in 2004 and is based in Hyderabad, India. Virchow Drugs Ltd. formerly operated as a subsidiary of Ciba India Ltd

SUCCESS STORIES

Initial years Virchow mainly concentrated in the production of Sulfamethoxazole, when we started production of this product there are about 40-50 suppliers and it used to hold about 10% of market share. As a part of the business plan Virchow concentrated on Backward integration which resulted in improved efficiency and cost saving. Due to the implementation of Backward integration the company share in the market has gone up to 40 percent with only 10 suppliers of the drug left in the market. As a part of this Virchow has produced all the intermediates and raw materials for the production of Sulfamethoxazole. The raw materials and the intermediates include sodium methoxide examine and n-acetyl sulfanilyl chloride. After reaching 40% of market share it decided to increase the market share so the company went for acquisition which increased the market share of the drug supply to 90% with only one major supplier left. Virchow has fully implemented current Good Manufacturing Practice in the system and its production facilities have been audited and approved by Therapeutic good administration. I was also audited by GlaxoSmithKline Hoffman La Roche Shionogi and Co and various US generic Manufacturers.

In Middle years as a part of Firm expansion Virchow has started a company called Saraca laboratories in 1992 for the production of its Bulk drugs and intermediates . In 1998 It started the production of Ranitidine and within a short period of time it has become one of the largest supplier of the Ranitidine .The main success of Saraca lies in the development of cost effective processes for APIs and Intermediates with consistent quality. Well experienced , Talented Knowledgeable innovated organic chemists, chemical engineers led their expertise in the production with low cost best quality and in short span.

In the late 20th and early 21st century, biotechnology has expanded to include new and diverse sciences such as genetics, recombinant gene technologies, applied immunology, and development of pharmaceutical therapies and diagnostic tests. Based on this another impressive step for the success of the Virchow has been taken that it had expanding hands on the field of biotechnology. In the year 2001 Virchow group has started another firm Virchow Biotech. The focus was to develop and manufacture a wide range of biological and high value bio-generic products at an

affordable price which we have succeeded .VBPL achievements include being first to commercialize in India the bio-generic of only genetically engineered product for wound healing to have been approved by USFDA. At present product portfolio consist of 15 products with five other recombinant bio-generics in the pipeline. As a diversified healthcare partner, we strive to protect the health, enhance the life and respond to the health needs of many people in the world today. We have a strong culture and at the core of it all, is the fact we never give up. It is this that makes us unique and makes the group proud to lead the company into the future.

OPERATIONAL AND ORGONISATIONAL STRUCTURE

The Company’s structure is based upon the principle of decentralized management. The Executive Committee of Virchow is the principal management group responsible for the strategic operations and allocation of the resources of the Company.

ORGANISATIONAL SCALE

Assumptions

NO OF EMPLOYEES

3000

NO OF OPERATIONS

50

NET SALES

1500-2000cr

THIS CHART IS AN ASSUMPTION

NEED TO INPUT ACTUAL FIGURES

Quality and safety:-

Our responsibility to our customers, consumers and patients regarding the quality and safety of our products is fulfilled not just in the products themselves but also in the policies and procedures we adhere to throughout the product life cycle, from concept to end use of products and services.

Health and Safety Requirements :-

The health and safety impacts of our products are assessed for improvement throughout their Lifecycle: from development of the product concept; through research and development; certification; manufacturing and production; marketing and promotion; storage, distribution and supply; use and service; and dispose, reuse and recycling. We estimate that 100 percent of our significant product categories in each business segment are covered by and assessed for compliance with health and safety requirements. How these assessments occur differs based on regulatory requirements around the world. Before they can be sold, finished products undergo quality checks and testing. Our commitment to safety continues after products reach the marketplace. Our companies work to ensure our products are used appropriately by helping people understand how to use and dispose of medicines and health care products wisely,

Educating doctors and other health care professionals on appropriate use, conducting post-marketing studies and monitoring safety data.

Products we do:-

Virchow Laboratories Limited is the largest producer of Sulfamethoxazole in the world intact it services more than 80% of the worldwide Sulfamethoxazole requirement. Also is a leading manufacturer of Sucralose, Ranitidine HCl, Cefixime, Cefpodoxime Proxetil, Cefuroxime Axetil, Cefdinir, and Cefprozil.

Considering the highly technical skill available in India and the changing scenario of the Pharmaceutical industry worldwide, we look at ourselves as the best service provider in the rapidly growing market. We also committed to provide affordable medicines especially in wound care, hepatitis and osteoporosis.

Other finished products that we do, includes Aquarest , Rebazo,Verbitol,Entos which are

Gastroenterology products, Anti-microbial like Viprax, Virdox, Videcef, Virulide,Zinavir,

Viraxone, Virocillin and Viropenem. We also had our hands in the production of some generics and

Some of the OTC products. The generic list includes cefrtriaxone, omeprazole, rabeprazole,

Omeprazole injectables and cotrimaxazole. The OTC products includes kal-206-

Calcium. calcitriol+vit K (2) 7, relish-diet sugar sucralose, VIFE-Z and Instaclen

STRATEGIC PLANhttp://www.ilcnsw.asn.au/assets/strategy.png

At the heart of everything we do are people. Through our products we do help to prevent and where needed. As economies and societies evolve, we need healthy populations to meet the future challenges that we face. Our business strategy consists of four key pillars of growth namely integrated operations, global outreach, innovation and sustainability. Integrated operations enable moving up the value chain into higher value-added products and services through vertical integration of various business lines. The key strategy of our global outreach is to increase penetration of our existing and new products with special emphasis on regulated markets and entry

Into new regions especially in emerging economies .Through innovation, we have introduced new products in the market and continuously improved our processes and multiple technologies resulting in increased revenues and improved margins

Mission, Vision and Values:-

MISSION

Our mission is to discover new therapeutics to improve human health by building on our pioneering science and technology http://www.nmcauditingcollege.com/upload/cms_selling/120816053408_7738vision_mission.jpg

VISION

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To be recognized as a trusted and respected leader in our chosen healthcare segments globally

• Consistently delivering value to patients, customers, employees and shareholders; 

• Where public value speed, simplicity and efficient delivery on our promises; 

• Accountable for the environmental, social and economic impact of our actions; 

• With a Top 3 selling product in key therapy areas where we compete; 

• With sustainable growth that withstand all financial conditions

VALUES :-

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Improving quality of life of our customers, as we believe quality is a way of life.

Creating value for our shareholders, for the trust bestowed on us.

Building an empowered and ethical Virchow group, as the foundation for a bright future.

Responsibility towards the society and the environment, as we owe our existence to them.

Being innovative in solutions, for being different, counts.

Striving for excellence in whatever we do, to follow the exclusive path to leadership.

Flexibility and speed shall be our oars for navigating the turbulent seas.

ROLES AND RESPONSIBILITY:-

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Performance Against Priorities Our citizenship priorities are fourfold: advancing human health and well-being; safeguarding the planet; keeping our business strong; and conducting business responsibly. All these four helped the business to grow and be strong even after 30 years under various financial crises.

Advancing Human Health and Well Being:

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We’re working together to advance global health. Our efforts range from generic licensing, Biotech products, Recombinants, APIs production etc. From developing new medicines to improving current standards of care and increasing access to health care, our work focuses on significant unmet health care needs usual.

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Safeguarding the planet:

We have a strong history of leadership in environmental goal setting and achievement, and we’re expanding the way we think about how we influence the planet. The way we do is working within our own businesses, across our enterprise supply-

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We have a Chain model to reduce complexities and redundancies thus we try to consistently produce high quality products that are environmentally conscious. Our EARTHWARDS process has enabled product teams to apply sustainability concepts throughout each product’s life cycle that measurably reduced environmental impacts. We’re also targeting our water conservation efforts, having mapped the location of our manufacturing facilities against known areas of water stress. We’ve increased the amount of clean-technology energy capacity that is installed or under construction. In addition, we’ve transformed and expanded our supplier standards to reach beyond our external manufacturers and go further regarding sustainability, applying the new standards to our entire supplier base.

Keeping our business strong:

We are focused on maintaining a strong, successful global business that tries to extend the access to health care in an economical and sustainable manner and enable us to continue developing new health care innovations. Whether it is bringing the highest quality products , for patients and customers; introducing lower cost versions of products that are equally accurate and effective in emerging markets; or training and educating physicians in developing markets, we use various approaches and strategies to ensure the long-term success of our business and the long-term

benefits for our patients and consumers. We launched several innovative new products to address unmet health care needs across the globe, advanced our pipelines, and strengthened our product portfolios and leadership positions in many areas.

Conducting business responsibly :-

responsibility

Our Credo inspires us to do great things. We strive to deliver high-quality products and services to meet our customers’ needs, and to do it accurately and promptly. We say we must treat each other with respect and be open to each other’s ideas. We promise to be good citizens of the world, protecting natural resources. We commit to experimenting with new ideas, and by extension, to learning from failure. By staying focused on these ideals, we live up to our own expectations and those of our customers. We’re listening to our customers and other stakeholders to help us to continue to be a trusted partner in health and well-being

Increasing innovation in Research & Development

Healthcare needs have changed and will continue to do so and as an industry we have to adapt to meet these needs. To have a real impact, we have to build a sustainable business to invest in delivering innovative solutions. At the same time we need to improve access to medicines and improved health care. In order to move along in this ambition, we continue to push forward with our key strategic priorities. R&D has always been and will continue to be the cornerstone of our group. The advancements in science& Biotechnology mean that more targeted, more effective treatments are in reach and we are ready to take on these challenges.

We have R&D in the organization that focused on meeting unmet needs of patients and delivering truly innovative solutions. Virchow Biotech R&D monitors and conducts large multi-centric clinical trials and is a Government of India recognized R&D Centre.

Growth opportunities:

-The changing face of the industry, healthcare needs and scientific discovery has all led to the realization that we need to diversify and look outside at partnerships and acquisitions to expand the business. We have been successful in searching out the best science, the best companies to acquire. We have strongly reinforced our business in particular areas such as APIs Productions , Biotechnological products , Gastroenterological , OTC , and some generics

Facing future challenges

The successful companies of tomorrow are those that go beyond delivering products to delivering real solutions and services. We have identified growth platforms that drives the business - emerging markets, generic, Gastroenterology, Biotechnology etc. As such, we are taking more care on R&D and expansion of Biotechnology.

We never give up

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As a diversified healthcare partner, we strive to protect the health, enhance the life and respond to the health needs of many people in the world today. We have a strong culture and at the core of it all, is the fact we never give up. It is this that makes us unique and makes the group proud to lead the company into the future.

MARKETING STRATEGY: - (how do we withstand , what factors we took into consideration )

We are unique (includes knowing the consumer

Reason why we are unique: - The demand for effective medicines is rising, as the population ages, new medical needs emerge and the disease burden of the developing world increasingly resembles that of the developed world. The E7 countries – Brazil, China, India, Indonesia, Mexico, Russia and Turkey – are also becoming much more prosperous, with real gross domestic product (GDP) projected to triple over the next few years. By 2020, the E7 could account for as much as one-fifth of global sales. http://sdong0222.files.wordpress.com/2011/07/unique.jpg

As per the sources the biopharmaceutical sector (Pharma) will find it hard to capitalize on these opportunities unless it tries to change the way in its functions. Its core problem is lack of productivity in the lab. Several external factors arguably exacerbated the industry’s difficulties, but the inescapable truth is that it now spends far more on research and development (R&D) and produces far fewer new molecules than it did 20 years ago. The shortage of good medicines in the pipeline underlies many of the other challenges that Pharma faces, including its increasing expenditure on sales and marketing, deteriorating financial performance and damaged reputation, but Virchow group have always had an eye on the above factors , as well as Demographic, epidemiological and economic shifts pharmaceuticals markets. The group also concentrated on various aspects globally to withstand the market .The population is growth and aging, new areas of medical need that are emerging and the diseases from which people in developing countries suffer are increasingly high levels. These are the areas that the group has concentrated and generated some huge opportunities.

For the success of Virchow group a reasonably credential part goes the strong marketing team of the firm. They always work on the basic principle of getting attention, generating interest, creating desire and reaching goal (as per the company policy). The projected plan

Of the firm sometimes plays a major key role in the success of the group. The projection plan sometimes may be intimidating. However, they are less a matter of mathematical aptitude and more a matter of the knowledge of the business, the industry and the market. To make projections, such as sales forecasts, break down sales into manageable parts, based on these numbers our experienced marketing team makes an educated guess regarding total sales. The key success of the marketing team is that they always double check the projections with the expertise and then compare the two final assumption figures of projections and work accordingly.

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Credit Strengths Lately

Flagship of the Virchow Group of companies having a consolidated Group turnover (largely within the pharmaceutical segment) of close to Rs. 1100 crore in 2010-11 Leading producer of

Sulfamethoxazole (SMX) which has a stable demand as reflected by consistently high capacity

utilization (92% in FY11) of group High backward integration in operations with in-house

Production of major raw materials protecting profitability to an extent; captive power plant insulates company from risk arising due to power shortage in Andhra Pradesh Strong financial profile characterized by a conservative capital structure, healthy cash accruals and strong coverage indicators.

Credit Challenges

Revenue concentration on mature molecule Sulfamethoxazole (80% of consolidated FY 11

Revenues); SMX is the major API used for an essential drug Co-trimoxazole, limit pricing

Flexibility Profitability vulnerable to fluctuations in foreign exchange rates and raw material prices, particularly given the limited pricing flexibility Limited growth prospects over the long term given the strong revenue concentration on Sulfamethoxazole, which has low growth potential Production impacted adversely due to strike at Andhra Organics Limited

Revenue Growth & Profitability

Operating income of VLL remained range bound for the last 3 years owing to low growth in the demand of its only product SMX, however in FY11 VLL has witnessed a growth of 11 % in sales of SMX in Volumetric terms. The operating margin of the company has remained volatile in the past on account of vulnerability to fluctuation in exchange rates and raw material prices. In FY10, VLL witnessed high operating margins due to rupee depreciation and declining prices of key raw materials. The operating margins declined significantly in FY11 primarily due to lower realization of SMX resulting from rupee appreciation. The margins further declined for 9mFY12 on account of increasing raw material prices and rupee appreciation in H1, FY12; however the rupee depreciation in Q3, FY12 limited the impact to some extent. ROCE for the company has been declining for last 3 years primarily due to declining profitability. Financial Policy and Capital Structure VLL’s financial profile are characterized by strong and sustained cash accruals and low debt levels primarily to meet working capital requirements, resulting in a low gearing. As of December 31, 2011 gearing of the company stands at 0.15 on account of low debt and strong net worth accumulated over a period of last 30 years. Over the years VLL has been funding the aggressive capital expenditure of subsidiary AOL through ICDs, which has incurred a capex of Rs 100 crore in the last 4 years Working capital intensity of the company has remained high which is also characteristic of the industry. The company offers a credit period up to 90 days to domestic customers while for the international customers credit period varies between 90-180 days.

However, the company has been receiving payments from all its clients in a timely manner and there have not been any cases of unexpected delays. Most of VLL’s working capital requirements are however met through its internal accruals resulting in lower borrowing levels and comfortable debt protection indicator

ENVIRONMENTAL STRATAGIES

Virchow group of companiesis movingg quickly to integrate proactive management policies into their overall business strategies. Also Virchow introduced pollution prevention and clean manufacturing practices throughout product and process life cycle analysis to reduce waste and minimize environmental impacts. By adopting Environmental Management Systems (EMS’s) which meet internationally accepted standards such as International Organization for Standardization’s (ISO) 14000 series guidelines, the pharmaceutical industries can commit to reduce the negative environmental impacts to a major extent .http://farm4.static.flickr.com/3425/3915514240_7609b7b56a.jpg

We recognized negative environmental impacts from their facilities which can risk the health and safety of their employees, diminish the quality of life in communities. Virchow group follows proper objectives and policies for safeguarding the health and safety of employees, public and protecting the environments in which the industry operates, and it is the top priorities of the group. We think Proactive environment is not only a corporate social responsibility but also a powerful means of reducing costs, increasing efficiency and enhancing competitiveness. The environmental management within the group takes the responsibility to carry out objectives and policies .We established our own health, safety and environmental policies covering the key

Principles established at the corporate level and we maintain appropriate arrangements to facilitate and monitor effective implementation. We also provide information, instructions, training and supervision for all staff so that they can carry out their duties in all environmentally responsible manners. Corporate safety and environmental engineering groups of our firm work with manufacturing executives to improve process safety, waste management, pollution control and environmental stewardship. We are also taking care of our new construction projects and buildings comply with all environmental regulations . We have continuous programs for a sustainable reduction in energy usage and Greenhouse Gases (GHG) emissions with a focus on revenue enhancement from green products.

CHARITIES: - "we believe in one person can make a difference"

Though we are not a member of any major charitable organization we do care for the society, we involve individually or as a grouphttp://www.leblancresources.com/wp-content/themes/LeblancResources/images/slides/subpages/086_Charity_Hands%20Together.jpg

Or as a group in many charitable programs that are held locally. We do respond to help and act accordingly. The kind of help may financial or volunteering or skillful involve .The Virchow group employees also respond and take part in various charity fund risings events conducted for natural disasters , health related (cancer, heart etc.) , environmental awareness etc. As a group now we are thinking to take part in any one of the major charity organizations are planning to start a new charity organization so that we can be helping people in needs on a regular basis. This proposal is under discussion and we will be proud to announce it as soon as the decision is made.