The finance of alchemy: Prabhat Agrawal

From a starting point of just a few products in 1973, Alkem Laboratories has grown into one of India’s top 5 pharmaceutical companies (in the domestic market), with a portfolio of 750 brands including its market-leading anti-infective brands like Taxim, Taxim-O and Clavam. Not content with its strong position in India (more than 70% of the country’s prescribers specify one or more Alkem brands), it set its sights on capturing market share in the US, the largest generic market in the world.

Through its continuous R&D investment, and the rigour of the company’s transformation readying for the IPO, it is now well positioned to continue expanding its presence in international markets and developing products to address high-growth chronic-therapy areas, as its CEO Prabhat Agrawal explains.

The CEO Magazine: How did you come to join Alkem Laboratories as its CEO, and what drew you to the role?

After graduating from the University of Mumbai and qualifying as a chartered accountant, I pursued further studies in the US, including  management at the Indian School of Business. While abroad, I worked in  various sectors, such as the automotive industry, as well as conglomerate and financial services, and in other emerging markets, including Brazil and Africa.

I was looking to return to India, so when Alkem’s promoters approached me about the CEO role, I was excited about the opportunity. I had some initial reservations, as pharmaceutical was a completely new sector for me; but after meeting the promoters, especially the chairman, and understanding the organisation and its immense growth potential, I had no doubt that Alkem was where I wanted to be.

What have been some of the highlights along Alkem Laboratories’ growth journey?

Established in 1973, Alkem has had an incredible journey over the past 43 years. Starting as a regional player with less than 100 employees, it has evolved into a global pharmaceutical player with more than 13,000 employees. The company is in the top 5 pharmaceutical companies in India and is the largest anti-infective company in the country, with leading positions in gastrointestinal and pain management, as well as vitamins and minerals in the therapeutic segment. It has built a formidable portfolio of more than 750 brands.

5 of them are among the top 50 brands in India’s pharmaceutical market. One of the highlights has been building India’s first anti-infective brand   — Taxim — to generate more than Rs100-crore revenue. The company continuously works on extending its market penetration and increasing its prescriber base on the back of a consistently high-quality track record and the strength of its sales and distribution infrastructure.

After firmly establishing itself in India, the company pursued expansion opportunities in international markets. In 2004, it started working on US product pipelines through its R&D set-up at Taloja in Maharashtra, and it acquired a US marketing company, Ascend Laboratories, in 2010, to secure the necessary marketing and distribution platform in the US. The company has since multiplied the US business manifold and has built or acquired the necessary infrastructure for pursuing aggressive growth in the world’s largest generic market.

Apart from the US, the company sells its product in more than 50 countries around the globe. This evolution was made possible by our visionary founders and the tireless efforts of a very committed and passionate set of employees. With every passing year, the company has emerged a stronger player in the global pharmaceutical arena with a broader product portfolio, greater global reach, and stronger manufacturing and R&D capabilities.

"Looking ahead, Alkem is also judiciously investing in the areas of biotechnology, which is expected to be the next major growth driver for the global pharmaceutical industry."

What have been the biggest challenges, and how have you worked to overcome them? 

When I joined, one of the priorities was preparing the company for an initial public offering (IPO). The IPO is not only a one-time event of getting listed, but a whole transformation from a privately held company to a public one with the associated compliance, reporting and governance requirements. A lot of preparatory work needs to go into the process,
such as building a board with the requisite independent directors; optimising the organisational structure; reporting and compliance frameworks; and building the company’s story, margin profile and business plans for marketing roadshows. With the firm support of the promoters, and dedicated efforts of our employees, we were able to launch the IPO in record time with a very successful outcome.

Why was the company’s listing on the Bombay Stock Exchange in 2015 a landmark transaction, and how has it contributed to the company’s success?

Alkem successfully listed on the stock exchanges (BSE and NSE) on 23 December 2015. It received overwhelming interest from investors, with the issue oversubscribed 44 times, the highest demand generated in the history of India’s pharmaceutical sector. The IPO’s positive impact on the company’s market image and brand helps us attract talent, strategic alliances and partnership opportunities. Our systems and processes, risk governance, compliance, financial reporting and disclosures are now in line with regulatory requirements and investor expectations. All this makes the company better positioned to deliver enhanced shareholder value. 

The company has focused on acquisitions in the US in the past 5 years. How important is the US market to Alkem, and do you have further plans for international expansion?

About 27% of the company’s total revenue comes from our presence in more than 50 international markets, with the US contributing about 20% to total revenue. The company has invested aggressively to build required growth enablers such as a product pipeline —more than 70 ANDA filings — through R&D, 6 US FDA-approved facilities, including 2 located in the US, front-end marketing capabilities, and a competent and passionate team.

The company has used an inorganic route to acquire capabilities such as a manufacturing footprint and a marketing front end, and forged strategic alliances for in-licensing to enhance the product portfolio. We believe we have built or acquired the necessary infrastructure to push for aggressive growth in our key international focus markets. We will continue to evaluate opportunities that could further enhance our capabilities or provide competitive advantage in these markets.  

How important is R&D at Alkem Laboratories? 

Being a part of a research-intensive industry, R&D plays an important role in the company’s overall strategy. Alkem has 4 R&D centres, 2 in India and 2 in the US, employing more than 500 scientists. These R&D centres are well equipped to carry out the process development, formulation development, and analytical research to develop new products and improved drug-delivery mechanisms. The company also has a 100-bed clinical research facility where it conducts bioequivalence and bioavailability studies in accordance with the regulatory guidelines in our markets.

As mentioned, the R&D team’s efforts have led to Alkem filing more than 70 ANDAs, including some first-to-file products with the US FDA and more than 1,400 dossiers across several other international markets, not to mention many market-leading products in India. Looking ahead, Alkem is also judiciously investing in the areas of biotechnology, which is expected to be the next major growth driver for the global pharmaceutical industry. 

How important is culture to the business, and how do you instil this in your employees?   

Alkem has certain shared values and beliefs that drive the organisation and give it a unique personality. It is an aggressive and extremely result-oriented performance culture where outperforming the market through building market-leading brands and forging strong connections with healthcare professionals is a shared goal that binds our 13,000-plus Alkemites. At the same time, Alkem is like a close-knit family where people have a strong commitment and attachment to the organisation. Our first employee is still with Alkem.

This culture has evolved through the conduct and leadership style of our founder brothers, Shri Samprada Singh and Shri BN Singh, who have an indomitable spirit and passion for the organisation. Even in his nineties, our chairman comes to the office and works daily with the same zeal as a 25-year-old. Since the foundation of any culture starts at the top, it is deeply ingrained in the whole company, and we are very proud to take this legacy forward.

What are 3 key areas of focus for the next 12–18 months?

Alkem Laboratories has led the market in acute therapy areas like anti-infective and gastrointestinal, and invested aggressively in certain high-growth chronic-therapy areas
such as cardiovascular, anti-diabetes, neuropsychiatry and dermatology. One of the key focus areas is to aggressively grow in chronic care through market-share acquisition and building leading brands. 

Another key focus will be scaling up the international business primarily through our presence in the US. While Alkem is a relatively new and smaller player in the international arena, we have all the fundamental building blocks to scale up significantly. 

Third, we will focus on building and strengthening people’s ability to deliver market-leading performance. We have various training, development and automation initiatives in progress, aimed at making our salesforce more effective.