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Dishman Carbogen Amcis expects turnaround in FY22, working on resolution of regulatory issues at Bavla site

The European Directorate for the Quality of Medicines and Healthcare rates the corrective actions taken by the company on certain quality issues as appropriate. The European body had inspected the company’s Bavla site in February 2020.

June 29, 2021 / 03:53 PM IST
Dishman Carbogen Amcis | Promoter Adimans Technologies LLP reduced stake in the company to 59.32 percent from 61.93 percent earlier, via offer for sale route.

Dishman Carbogen Amcis | Promoter Adimans Technologies LLP reduced stake in the company to 59.32 percent from 61.93 percent earlier, via offer for sale route.

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Dishman Carbogen Amcis, the contract development and manufacturing services (CRAMS) company, is heading towards a resolution of the regulatory compliance issues raised by the European Directorate for the Quality of Medicines and Healthcare (EDQM) at the firm’s Bavla site in Gujarat.

The company believes that the site would resume about 70 percent of its production in FY22.

“We have responded to the EDQM observations and have appointed consultants to supplement the team in India. To rectify the deficiencies highlighted during the audit, the company has submitted the Corrective Action Plan and started its implementation," Harshil Dalal, Global Chief Financial Officer, Dishman Group, told Moneycontrol in an exclusive interview.

Dalal said the company received the final audit closure report from EDQM, which has considered as appropriate the company’s approach to remediate the deficiencies.

Dishman has also carried out the risk assessment of all APIs and marketable molecules to assure its customers that no products were negatively affected, the company said.

Bavla manufacturing site

Bavla is a large industrial site where the company’s active pharmaceutical ingredients (APIs) and intermediates are manufactured.
The site was inspected by the Swissmedic and EDQM in February 2020 for the company’s product Dihydrotachysterol. They observed certain shortcomings on the EU good manufacturing practices (GMP) front, and the certificate of suitability for certain products was suspended.

EDQM observations hit revenues

The EDQM’s adverse observations, along with COVID-related disruptions, did have an impact on the company.

The revenue for FY21 dropped 6.4 percent year-on-year (YoY) to Rs 1,912.03 crore, as compared to Rs 2,043.60 crore in FY20. The company reported a loss of Rs 165 crore in FY21, versus Rs 159 crore in FY20. The CRAMS revenue declined by 5.1 percent YoY.

About three-fourths of revenues come from CRAMS, the rest from marketable molecules that include Specialty Chemicals, Vitamins and Analogues, Disinfectants, and Generic APIs.

Dalal said the company has undertaken a major restructuring exercise to make the organisational structure leaner and more efficient.

Growth drivers

Dalal says the outlook for the CRAMS business, supported by commercialisation of high potential molecules, healthy increase in customer inquiries, and execution of contracts, remains healthy.
Dalal says 16 molecules have entered the Phase-3 or late-stage clinical trials which will need higher supply volumes, thereby increasing revenues.
Around 12 of these late-phase projects are being prepared for validation in a single year in FY22.

During FY21, Dishman Carbogen successfully executed an agreement with a Japanese client to commercially manufacture a novel oncology drug linker in a new facility co-funded by the client.

In FY22, the company expects 10-12 percent revenues on a constant currency basis, with 22-23 percent EBITDA, said Dalal. From FY23, the company expects a much better growth, with 27 percent EBITDA and revenue growth of 15 percent.

Dalal, however, says growth would hinge on the company's ability to get Indian manufacturing facilities, especially Bavla, up and running.
Dishman acquired Carbogen Amcis, a Switzerland-based CRAMS player, which gave it a platform to win contracts globally. The company mostly deals with contracts from innovator companies.

More and more big pharma and biotech startups are utilising the services of CDMOs as they look at speed and investments for manufacturing capacities.

The increasing need for R&D efficiency and manufacturing cost controls are creating a significant need for high-quality outsourcing companies.

Currently, India commands less than 4 percent share of the global market, much lower than over 16 percent for Chinese CRAMS companies, implying significant growth opportunities.

Viswanath Pilla
Viswanath Pilla is a business journalist with 14 years of reporting experience. Based in Mumbai, Pilla covers pharma, healthcare and infrastructure sectors for Moneycontrol.
first published: Jun 29, 2021 03:53 pm