R&D spends weighed heavily on Q4 margins: Ajanta Pharma

The pharma will be spending a total of Rs 300 crore on its new facility in Dahej in Gujarat.Below is the verbatim transcript of Yogesh M Agrawal's interview with Reema Tendulkar, Mangalam Maloo and Ekta Batra on CNBC-TV18.Reema: While the topline growth is at 14.5 percent, your margins have contracted by 280 bps, could you tell us the reason why?A: We have had a good quarter. Our growth for the quarter was 44 percent and our topline growth was 14 percent. Basically the R&D spend for the current quarter has gone up and that has impacted. For the whole year, the R&D spend was about Rs 100 crore. Out of that in the last quarter itself the spend was about Rs 30 crore. So for the quarter if you see the R&D spend, it works out to about 9 percent but on an annualised basis it works out to 6 percent. That has impacted the margin but besides that the fundamentals of the business remains strong and we believe we have delivered a strong quarter.Mangalam: Recently, we had the global fund which did not allocate or refrain from allocating malaria tender to Ipca Laboratories so could the company see additional market share benefits coming in from that in terms of the malaria drug?A: I would refrain from commenting and speculating on certain aspects but we have had a good year and we believe that we will continue to maintain our market share in the next year also for the financial year 2017. We do not see any constrains in delivering on the numbers which we have delivered for the last year.Ekta: With regards to the US business, we understand that you have applied for the drug such as Abilify generic in terms of an approval, can you give us a status on that as well as the number of approvals that we can expect in this fiscal?A: We have about 26 abbreviated new drug applications (ANDAs) out of which 10 are approved and out of that 10 we have already commercialised 5 products in the market. Another 2-3 will be commercialised during the year. That leaves us with 16 ANDAs, which are awaiting approval.We believe that we are at an advanced stage of review process with the FDA for number of ANDAs. It is very difficult to give the timelines or predictability on the approval dates but we believe we should have some decent number of approvals during the year. Already the pace of approvals of the ANDA has accelerated, in fact out of the 10 ANDAs which we have approved, 8 of them were approved during the last year. So we already see a good level of activity with the FDA and all goes well, we can expect some good approvals during the next 12 months.Ekta: What is the status of your facilities right now? We do understand there is a new facility in Gujarat also which is coming up. Can you give us a sense in terms of the regulatory approvals from the various regulatory authorities including US Food and Drug Administration (US FDA), World Health Organization (WHO) as well as the UK Medicines and Healthcare Products Regulatory Agency (MHRA)?A: The current facility, which is at Paithan is approved by all the regulatory agencies, which you have just mentioned, WHO, US FDA and UK MHRA. The new facility we have put up that is in Dahej, Gujarat so far we have spent around Rs 250 crore on that facility and another Rs 50-70 crore will be spent during the current year taking the total capex of this facility to about Rs 300 crore. The project completion stage is over.Right now, we are undertaking the regulatory filing batches at this facility. In next three-six months, we will be filing for the regulatory approvals or to trigger the inspections with this various stringent regulatory authorities. So we believe that maybe in 12-18 months from now, we will have the regulatory approvals for this new facility.Nevertheless, pending these approvals for some of the other markets, we would be starting the commercial production from this facility from April 1, 2017.Ekta: Your total India sales were sluggish including your institutional business. What led to that and was there any impact because of the ban also that came through?A: Our Indian pharma market is a branded generic business, that continues to remain very robust. In the last quarter or the whole year, we have seen the degrowth in the institutional sales business, which is a low margin and unpredictable business. So company has consciously chose not to pursue that business very strongly. If you remove that part of the business, we have delivered a very strong growth and in fact, the Indian pharma market grew at 14 percent whereas overall Ajanta as an Indian pharma market, grew at 23 percent. So if you remove the institution business and I believe that will be the right way to look at and analyse our numbers, we have posted a very robust and very healthy growth in our domestic market and we believe that we can continue to do that for the next year as well.