Enaltec bets on niche APIs to earn Rs 400cr by 2016

Entrepreneurship is not for the faint hearted and it is about taking a leap of faith. This is what drove three young men to leave their high profile jobs to start up on their own in the USD 80 billion healthcare market in India.

The trio of Anand Shah, Susheel Koul and Sivakumar, all former colleagues at pharmaceutical company Glenmark Pharmaceuticals decided to start Enaltec Labs in 2006. The idea was to develop complex, small volume, technology driven active pharmaceutical ingredients (APIs) at competitive prices providing the critical India advantage to generic formulators across the world. Today, Enaltec Labs exports 80 percent of its APIs to companies in South America, Asia-Pacific, US and Europe and has a gross revenue of Rs 70 crore. Going forward, it plans to launch new products into new markets as part of its plans to touch Rs 400 crore in revenues by 2016. The idea to manufacture niche APIs struck the trio when they saw leading Indian pharmaceutical companies targeting blockbuster products that were coming up patents in regulated markets. They decided to focus on small volume and high value APIs. Developing complex, small volume technology driven APIs at competitive prices, Enaltec Labs has grown from a turnover of Rs 8.5 crore to over Rs 70 crore in seven years. The company's two manufacturing facilities located in Maharashtra churn out over two tons of APIs every month. Anand Shah, MD & CEO, Enaltec Labs says, "A lot of these small volume products are very challenging, very critical. Equal amount of efforts are to be put in whether you see a large blockbuster or a smaller product. So, when we do these smaller products, large volume companies or big pharmaceutical companies, we were always looking for these APIs to be outsourced rather than making it themselves. That is, where a neutral API manufacturer is not going to compete to them, not going to conflict to them becomes a good supplier or a good partner to this company of bringing a critical India advantage to these pharmaceutical companies." Anand and team set up a dedicated research unit Getz Pharma Research in 2007. This unit services three types of customers, generic companies that have their own research and development (R&D) labs but want to outsource products, virtual companies that have no R&D and manufacturing facilities, and companies who focus on innovation alone. On the other side, Enaltec Labs targets three regions. The first is, fast and easy entry in the markets like Pakistan, Bangladesh, Middle East and Indonesia; second segment is the semi regulated markets with a two-three year gestation period like Argentina, Brazil, Turkey and Korea and thirdly, regulated market with a gestation period of three-five years like the US and Europe. "In terms of contribution, regulated markets give us a major contribution, volume is less but the revenues are better. The mid-markets are literally in between – some products are large volumes, higher volume products as well and the lesser regulated markets are mainly price driven. So the competition is higher in this genre," adds Shah. Growing 100 percent year-on-year (YoY) for the last five years, Enaltec Labs offers APIs in major therapeutic categories like ophthalmic, cardiovascular and dermatology. With the team of 70 people working in the R&D department, Enaltec Labs has already filed close to 80 patents since inception of which between 5 and 10 are in review and process of grant. Today, Enaltec Labs exports 80 percent of its APIs to companies in South America, the Asia-Pacific region, US and Europe. However, being first generation entrepreneurs has not been an easy journey. Shah says, "Right skill set and getting them on the board and then retaining them is the biggest challenge." The second constraint was again getting into the banking side. There are constraints, complications when one starts. Getting confidence of bankers in the start-up firm becomes very critical and then performing year-on-year (YoY) and giving them right ratios and revenues becomes very critical. However, getting customer confidence, too becomes another issue. When one has a big pharmaceutical company, you want them to get into your company and start off some initial work. Then, getting their confidence in you as a company and the team members becomes very critical. Going forward, the next big thing Anand is looking to focus on is the US-FDA approval which he claims will open up business worth Rs 250 crore for his company. If this clicks, by the end of the year, Anand hopes to enter new markets with new products and with an eye on touching Rs 400 crore in revenues by 2016.