As a strategy to further grow its contract research
and manufacturing services (CRAMS) business, Chennai-based
Shasun Chemicals and Drugs Limited has identified a synthetic
wet lab in the US to take it on long lease.
to whole time director Vimal Kumar, small drug innovator
companies would like to outsource even the lab activities.
And for them a lab in US will be much more comfortable.
Shasun group a lab in the US will complement its wholly
owned subsidiary Shasun Pharma Solutions Limited activities
in UK. It may be recalled Shasun Chemicals acquired the
French company Rhodia''s two custom synthesis and contract
manufacturing plants in the UK in 2006 for €1 million,
that also included stock of raw material worth €13
million, through Shasun Pharma Solutions. However Shasun
Chemicals did not acquire Rhodia''s lab in the US. (See:
Smooth integration of maiden acquisition)
to N Govindarajan, CEO and managing director, Shasun Chemicals,
normally synthetic wet labs will first develop new drug
molecules in very small scale (50 / 10 gram level) and
then will scale it up to the next stage-kilogram level.
"When the results are satisfactory the product will
be made at the pilot plant level and finally reach the
commercial scale level."
a lab on lease works out cheaper compared to setting up
a new lab or acquiring one. "The cost of acquisition
would work out between $2 - 4 millon whereas setting up
a new lab would require an investment of $5 million. On
the other hand lease cost will be $1 million."
the first year of the lab operations there will not be
any great jump in the revenues but there will be an increase
in the company''s research product portfolio.
apart the Rs9.62-crore equity based Shasun Chemicals has
chalked out Rs1,100 crore capex this year. "We will
set up a multi product pilot plant at Vishakapatnam (outlay
Rs60 crore) and start submitting drug master files (DMF).
Later a commercial scale plant (outlay Rs50 crore) will
be built. The UK subsidiary will invest Rs90 crore in
increasing its capability," said Kumar.
said, "At Shasun Pharma Solutions the capability
increase will be made by installing cryogenic coolers
and other equipments. There will not be any increase in
the existing active pharmaceutical ingredient (API) production
capex will be funded through an equal mix of debt and
internal accruals. According to Kumar, the consolidated
debt portfolio stands at Rs170 crore (Shasun Chemicals
Rs105 crore and Shasun Pharma Solutions Rs65 crore) with
the debt: equity ratio being 0.8: 1. "The average
finance cost for the new borrowings would work out to
6 per cent."
Shasun Chemicals has closed the FY07 with consolidated
revenue of Rs793.34 crore and a net profit of Rs52.62
crore. Kumar is confident of closing the FY08 with a turnover
of Rs1000 crore.
to Kumar, the growth in CRAMS business after the acquisition
of the two UK plants has been significant and the total
revenue from this business segment for FY07 was Rs342.98
crore as compared to Rs37.53 crore registered the previous
duo - Kumar and Govindarajan - are happy with the turnaround
of the UK operations from negative EBIDTA to a positive
figure. Even after starting to spend on raw materials
from the fourth quarter of the last fiscal, the UK company
has posted a positive EBIDTA figure of 0.43 million pounds,
Pharma Solutions closed last year with a turnover of 41.44
million pounds and EBIDTA of 2.19 million pounds. The
company has 19 commercial products under its belt and
17 molecules under phase II and phase III for launch by
a stand alone basis the bulk drug company Shasun Chemicals''
turnover stood at Rs425.82 crore and a net profit of Rs38.29
crore compared to the previous year''s figures of Rs370
crore and Rs36.50
crore. The company board has recommended a final dividend
of Rs.0.90 per share taking the total dividend declared
to Rs1.70 per share for the year.