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Morepen to phase out bulk drugs business

Bhupesh Bhandari

Morepen Laboratories Ltd has set in motion an exercise to alter its business portfolio by phasing out its domestic bulk drugs business over the next five years. "We want to reduce the presence of bulk drugs in our portfolio from the current 74 per cent to 26 per cent by 2005-06. There too, we will only do international generic business and not domestic bulk drugs," Morepen chairman Sushil Suri said.

Instead, the pharmaceutical major plans to make a splash in branded formulations. "The contribution of formulations will go up from 25 per cent to 75 per cent in the next five years. Within that, the focus will be on branded formulations," Suri added. Currently, branded formulations make up around one-fifth of the formulations business. By 2005-06, Suri expects formulation sales to consist mainly of branded formulations.

With this aim, the company has lined up 66 new branded formulations for launch during the current fiscal. At present, Morepen has 32 such products in the market. So far this month, it has rolled out 18 products. The company has identified seven focus areas of the formulations market -- dermatology, respiratory tract infection, gastroenterology, neuropsychiatrics, cardiac, diabetics and gynaecology.

Suri expects the latest products to boost sales of branded formulations from Rs 220 million in 2000-01 to at least Rs 600 million this financial year.

At the same time, Morepen has beefed up its sales and distribution network. Its sales strength has gone up from 150 to 447 in the last one year. Besides, the distribution network has been extended to the North East and the southern states of Tamil Nadu, Kerala and Karnataka. "This has made it a national network," Suri added.

Explaining the reason for the shift, Suri said that it was prompted by three reasons: firstly, the investors' perception of the company needs to be changed from that of a commodity company; secondly, with a stringent patent regime coming into effect replicating bulk drugs is not going to be lucrative; and finally, a nationwide distribution network can be leveraged to distribute products of MNCs.

By shifting from bulk drugs to branded formulations, Suri hopes to move up the value chain, which will strengthen Morepen's bottomline. According to Suri, while the profit margin on bulk drugs in 12-13 per cent, that on branded formulations is as high as 18-19 per cent.

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