FDA issues to be resolved soon, promises Claris Life

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Claris Lifesciences listed on the bourses today. The stock opened down 10.55%. Arjun Handa MD and CEO at Claris Lifesciences, in an interview on CNBC-TV18 said he was confident of resolving FDA issues that were bogging the company, adding that he saw no regulatory issues cropping up.

Claris has a licencing and supply deal with Pfizer for regulated markets and the tie-up with Pfizer, he said was only a sales and marketing partnership. Handa further said that he expects, the company's expansions to be commissioned by 2011-end.

Below is a verbatim transcript of Arjun Handa's interview with CNBC-TV18's Latha Venkatesh and Sonia Shenoy. Also watch the accompanying video for more.

Q: The major worry that the market has had is about the FDA issues and the import ban that would have been in the short-term overhang in the financials. Give us more clarity about when the matter will be resolved and what exactly is the status on that one?

A: It's not a new issue for the pharma industry. It is an integral part of the industry and for the business model. There are plenty of companies who got this and they have showcased that they can resolve this. Indian Pharma has come a long way.

Therefore, I am very confident that we can resolve this issue very soon. From a standpoint of safeguarding the company and the valuations, that's how we have behaved in the IPO. We believe that in the future, the injectable business model and that part of the pharma industry has an immense growth potential.

Q: Just to lay to rest investor fears with respect to this issue, what could be a positive downside - is it a penalty, what is the kind of bottomline loss that you might expect if things don't turn in your favour with respect to the USFDA. There is also a fear that there is a contagion, there could be emerging markets like Kuwait which could perhaps not allow your products?

A: This issue happened in May and the warning letter came in early November. All that could have happened has happened with the company. We have resolved a lot of these things that have happened and therefore, going forward, we don't envisage any of these issues coming up.

Q: What can an investor expect in terms of a sales growth in the current year and more importantly in FY12?

A: Historically, we have grown very well. We will continue to go on that path. We are committed. In injectables you can excel only if you pursue it passionately. We focus on excellence whether it is new products or whether its openings up of new geographies. We believe that we are very strong footed here and we will continue to go on that path.

Q: You have signed a supply agreement partnership with Pifzer. What kind of monetary profitability are you expecting and can you give us a timeline as well?

A: We had that partnership. It is for products for certain geographies. It is a licensing and supply agreement. It is part of our regulator market strategy where we continue to sell in the regulator markets. We have been selling them historically, whether it was in the US earlier or it is in Europe today. It is just a sales and marketing partnership.

Q: You have had a very decent margin in calendar year 2009 maybe even 2010, the estimated is 34%, is that something we can go with? What can you tell us about the kinds of margins you will be able to maintain?

A: The modern economies of scale are depended on various things like your plant capacity utilization, your new product launches and the kind of new product that you launch. Yes, our endeavour is to maintain our current margins and to grow forward. We believe that we are confident with our strategy in place we should be able to do it.

Q: When do the expansions kick in?

A: Late next year is when the whole thing starts. In the next 24 to 36 months we should be able to complete that.

Q: What are you expecting in terms of sales in CY10 and CY11 how much do you think your sales could grow by and that you have used some of the IPO proceeds for your debt, where does the debt stand and how much will it come down by?

A: Our debt equity was initially about 0.6. Post IPO it should be around 0.3 approximately. In the next two-three years, all the debt is going to be retired.

Q: What about your sales expectations?

A: We focussed largely on the bottomline. If you see we have grown very well. Similarly, whether it is this year or next year, we believe that we will continue to grow as per our history.

Q: Give us some indication of how do you expect topline and bottomline to grow in FY11 and in FY12 because you know best about when your expansions will bring in the money?

A: From a growth standpoint, all these proceeds will be used over the course of the next 12 to 24 months. That is where all the expansion and the growth plans will come in. From a number standpoint we are told that I am regulatory still bound and so please allow me to side step with that.