Germany-based pharma major Merck KGaA is targeting a five-fold increase in revenues from India over the next five years. The company, which bought biotech major Serono in 2007 to become a leading drug company in the world, with more than $9.6 billion, is also into making chemicals, speciality chemicals and liquid crystals. Karl-Ludwig Kley, chairman of the executive board, Merck, spoke to Business Standard’s Gautam Chakravorthy and P B Jayakumar about the company’s plans and how it is weathering the global financial crisis.
You bought Serono and divested your generics business. But globally generics are gaining more popularity and the big pharmaceutical companies are finding it difficult to maintain revenues. Will you rethink your strategy?
As a matter of policy, we want to focus on innovative medicines and also at the local needs of the population. We will not move into the generics business again. After the acquisition of Serono, we reviewed our strategy to focus our research on oncology, auto-immune disorders and neuro-degenerative diseases, which have a common synergy in the research process. At the same time, we are also expanding our biotech focus and have a good pipeline.
Global pharmaceutical companies are facing a dwindling pipeline of products and losing revenues. How are you dealing with the situation?
We are investing in technologies in research. We are looking at in-licensing deals where we find promising molecules or technologies. Globally, we have done around 40 deals in the recent past. We are confident that some of these will lead to results. We have also defined our area of research portfolio and our funds are utilised for speciality products than general practitioner focused products.
What are your plans for India?
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India will be one of the key focus countries for us in future. For us, India is a long term growth story. In the next five years, we hope to earn revenues of around $675 million from India, which is nearly five times from the current figures. We plan to optimise production at our Goa-based export oriented unit before looking at other locations.
The business in India will also be driven by launches from our parent company as well as tailor-made products and chemicals for the Indian market. The Indian market for photo-voltic products is expected to mature in the next few years. We are a global leader in liquid crystals and could look at setting up mixing facilities here, but first the business has to mature. Now we have mixing plants in Japan, Korea and Taiwan in Asia.
Merck has refrained from conducting many clinical trials in India. Why?
India has been included for the third-phase clinical trials of Stimuvax, a therapeutic vaccine for lung cancer and this trial will start soon as part of the global trials. India was part of Erbitux’s study, though it was not included in the current additional indications studies. But, we will add India in future studies. They are decided based on the disease and genetic profile of people in different geographies.
What is the impact of the global financial crisis on your company?
Our conservatism has stood us in good stead. Plus we are well diversified. We are quite stable financially. Our net debt in the last quarter was $1.08 billion, which is negligible considering our total exposure. The orientation of the company was to position ourselves in areas which are less risky and price sensitive.