GlaxoSmithKline Pharmaceuticals, the Indian unit of British drug major GlaxoSmithKline and one of oldest pharmaceutical companies to have survived in India, has been re-calibrating its business for the last several quarters to stay agile and respond to changing dynamics of the domestic formulations market.
The strategy includes focus on fewer products and therapies, but deeper market penetration, new launches of patented products and line extensions, and control over the supply chain.
Focus on fewer products and therapiesThe company had cleaned up its portfolio to identify 20 brands and five therapeutic segments -- anti-infectives, dermatology, respiratory, gastro-intestinal and anti-pyretic -- as core to drive future growth in India. To go deeper and engage more with doctors and pharmacists to generate sales of those brands, the company has expanded its sales force by over 30 percent, taking its total marketing representatives (MRs) strength to 3,500.
Annaswamy Vaidheesh, Vice-President South Asia & MD India of GSK, who is been leading the charge of executing the new strategy, said in an exclusive interview to Moneycontrol that the company has started reaping benefits of the same.
"We are seeing strong growth, our market shares have improved, and we are able to reach more patients in all these five therapies," Vaidheesh said, on the sidelines of Motilal Oswal 15th Annual Global Investor Conference.
"The brands that we focused on have never had this level of growth. Some of our bigger brands are growing at 27-28 percent. Since we discontinued some brands, it reduced overall growth. But at this point of time, putting the energy where it matters, is paying dividends. And we are seeing improvement in our profitability," he added.
Vaidheesh said 90 portfolio rationalisation is complete.
In Q1 FY20, GSK’s key brands such as Augmentin and skin drug T-Bact saw 19.4 percent and 32 percent growth in sales, respectively.
Despite a weak flu season, net profit increased 35 percent year-on-year to Rs 113.5 crore and revenue rose 7.1 percent to Rs 788 crore.
EBITDA (earnings before interest, tax, depreciation and amortisation) jumped 21.9 percent at Rs 165.3 crore, with margin at 21 percent YoY.
Seven of GSK’s brands appear in the list of top 50 medicine brands in India. The drug maker’s antibiotic Augmentin contributes about one-tenth of revenue. The vaccine division that markets eight vaccines, including Synflorix (pneumonia), Rotarix (diarrhoea), among others, contributed around one-fourth to FY19 revenue.
GSK commands around 30 percent market share and is growing at 13 percent in the private market for vaccines, which is currently estimated to be Rs 2,200 crore for the year-ended February, as per IQVIA.
Vaidhesh said there is still enough room for growth of its top brands such as Augmentin.
New launchesGSK is also working at a faster pace to launch products from its global portfolio in India, along with line extensions of its existing brands to further aid its sales growth and deal with margin erosion caused by price controls.
At present, around 28 percent of GSK's product pipeline in India is covered under the National List of Essential Medicines (NLEM), bringing them under the drug price control.
The company launched Nucala -- an biologic drug used to treat severe asthma -- and paediatric Infanrix Hexa vaccine.
Vaidheesh hinted at new launches such as a vaccine (Bexsero) to protect infants against Meningitis B and a new drug to treat autoimmune disorders.
"As and when a pipeline is available, we find a way to launch it in India. We launched Nucala in a record 22 months, where we managed to get all clearances done. Similarly, we are looking at (launching) Bexsero and another product to treat an autoimmune disorder. Unlike the past, you will hear a lot of launches the next five years," he stated.
Investment on manufacturingThe management is expanding its manufacturing footprint in India. The company's 50 year old finished dosages plant in Nashik, Maharashtra is running to the brim and isn't able to meet demand. GSK is relying on contract manufacturers for many of its products sold in India, but wants to have additional control over the supply chain and quality of products as part of its new strategy.
The company is building a new factory at Vemgal near Bengaluru at an investment of Rs 1,000 crore. The upcoming facility will be the first greenfield pharmaceutical site that GSK has built across the globe over the past 10 years.
The plant can manufacture eight billion tablets and a billion capsules. GSK plans to transfer part production from a contract supplier to its own plant at Vemgal once it turns operational by December-end.
"GSK has been around for 94 years and will be here for another 100 years. We need to secure our supply chain. Our Nashik plant is 50 years old, so we need another manufacturing facility that will take care of us for the next 50 years. The idea is not to make a quick buck on this investment. This is primarily a long-term strategy. As per our forecast, our capacity will be maxed out by 2024," Vaidheesh said.
Slowdown in pharma salesHe said the slowdown was due to weak flu season in January-March and adjustment of cash flows and inventories at the grass root level. "In July, our domestic sales growth was 17 percent. We expected to end FY20 with 10 percent growth," he added.
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