MARKSANS PHARMA Chairmans Speech

The year 2016-17 was a critical point in the journey of Marksans Pharma. Even as the Company reported a weaker performance, the Company invested resources in preparing for the future.


Over the last few years, regulatory standards the world over have become increasingly demanding in response to growing customer and doctor concerns related to the quality of medical interventions required to bring patients soonest to complete health.


These evolving standards are warranting an ongoing reinvention of existing processes and practices; they are also requiring a complete rewiring of the attitudes and aptitudes of shopfloor workers and quality professionals.


During the course of this transition, there have been a number of Indian pharmaceutical companies that have been flagged by prominent regulatory bodies, some of these being among the largest in India. While it would be ideal for companies to clear these regulatory hurdles at the first shot, there is a growing recognition that with the goalpost continuously moving, companies should be able to respond with speed and sensitivity to negative observations, with the objective of returning to erstwhile reality in the shortest time.


It is with this background in mind that I am glad to report that during the year under review, the UKMHRA regulatory agency issued a full-fledged GMP certificate to our Goa facility.


At Marksans Pharma, we responded to this reality with speed; we focused on the basics, trained our workers, widened training from the functional to the behavioral, streamlined processes around global standards, reinforced our technological platform and raised the level of our compliance.


The result was that the subsequent audits by Australian TGA and the UKMHRA at our facilities were successfully cleared. By the end of the fiscal, we had successfully reacquired all the certificates by prominent global regulatory bodies, a validation of our compliance competence.


We also completed the absorption of Time-Cap Labs into the Marksans fold and leveraged 90% of its erstwhile American distribution channel. Subsequently, we strengthened our reputation as a front-end pharmaceutical company in the US, enjoying a healthy demand for proprietary drugs. The most visible manifestation was in the form of enhanced revenues, graduating the US into our largest geographic source of revenues at a time when the US market was marked by a distinctive pricing pressure owing to consolidations taking place at the wholesale-level.


In a long-term forward-looking initiative, Marksans Pharma is modifying its product portfolio across the Farmingdale and Southport facilities. The Company is graduating its portfolio towards niche and margins-accretive products. Besides, a number of R&D investments empowered the Company to extend its product pipeline; we are in the process of gaining approval for these before launching in these markets.


For a considerable time, we had largely focused on the regulated markets, deriving more than 90% of our earnings from there.


We believe that during these years, the Company strengthened its revenues, margins and operating standards based on this approach. However, during the year under review, the Company made a strategic shift. With the objective to emerge as a globally-pervasive pharmaceutical company, Marksans Pharma extended to key pharmerging markets including India.


The Company extended into the prudently-identified markets of the Middle East, South East Asia, Africa, Russia and CIS nations.


We believe that a number of reasons make these markets some of the most attractive in the world.


These geographies account for a growing population; the demographic profile in most of these markets is young and economically productive; these countries are raising their health care standards that indicate opportunities for quality-respecting companies; these regions are marked by increasing incomes that provide a foundation for the enhanced consumption of higher value and superior quality medicines.


As a matter of prudence, we approached these markets with a method.


We addressed the most attractive verticals (respiratory, dermatology and central nervous system), marked by an unmet and growing therapeutic need, coupled with a growing willingness of patients to consume higher-priced medicines.


Besides, we readied our formulations line for a pan-India launch and roped in senior industry personnel to oversee our Indian operations. We are filing dossiers in these markets and aiming to increase the contribution from these markets to 15% over the next 2-3 years.


At Marksans Pharma, we are optimistic of our prospects for a number of reasons.


The overarching environment continues to be positive. Healthcare bills are increasing as the global population becomes older. Health systems need to respond to the altered needs of those living longer.


The global pharmaceutical industry stands at the edge of yet another patent cliff; we expect a host of opportunities arriving our way in the generic drugs space. Our proven expertise in the manufacture of soft gels (marked by relatively low competition and high entry barriers) is expected to catalyse revenue growth.


Marksans possesses all relevant regulatory approvals, a visible front-end consumer-facing presence in US, a strong product portfolio, and a growing presence in pharmerging markets. In view of this, the Company appears attractively placed to report respectable growth rate over the near-term.


I am thankful to our shareholders for staying invested in our company through the challenging phase. The fact that we successfully navigated the challenges indicates the maturity of our management bandwidth and strategic vision.


I am optimistic that we are competently positioned to add significant value for the benefit of our investors over the foreseeable future.


Regards,


Mark Saldanha


Managing Director

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