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""We Are Looking At Integration, Globalisation And Innovation""

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Chhavi Wadhwani BSCAL
Last Updated : Aug 03 1998 | 12:00 AM IST

Kopran has been undergoing restructuring with the simple objective of becoming a global, integrated player. Surendra Somani, managing director, Kopran spoke to Chhavi Wadhwani on his strategy.

Q: Kopran has been undergoing a major restructuring exercise. What is the strategic imperative behind spinning off the semi-synthetic penicillin (SSP) division?

A: We are looking at a strategic alliance to integrate backwards in penicillin as far as our semi-synthetic bulk production is concerned. And with our capacity being one of the largest in Asia and among the largest in the world, surprisingly, we do not manufacture penicillin. Earlier in 1994-95 and 1995-96 had planned to enter manufacturing. But when we realised that too many players are coming in, we dropped our plans. In the meantime we entered into alliances with Harbin Pharmaceuticals and other local companies like Hindustan Max GB.

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We estimate by 2000-2001, the supply-demand situation should match and prices should start firming up. So, its time that we settle down, have an arrangement or a strategic alliance or may be a joint venture with a penicillin player. SSP is just a division and working on its performance becomes difficult. Spinning it off as a separate company facilitates an alliance or integration.

Q: In Kopran Drugs, how are you planning to improve shareholder value considering the fact that SSPs are not doing particularly well?

A: Lets go back in time. SSPs, primarily amoxycillin, contributed significantly to turnover and profitability. Several players came up in this field, leading to a pressure on margins. In 1997-98, we decided to play the volumes rather than the margin game. We have increased our market shares, but we let our margins go down and thus reduce the number of players. We intend to continue this and increase our market share. Kopran drugs will add some more products like oral cephalosporins, di-cloxacillin, flu-cloxacillin etc. Hopefully, we will expand further in a year or year and a half. That should add value we offer to the shareholders.

Q: What will be the function of the wholly owned subsidiary, Kopran Research Labs limited ?

A: It will continue to focus on biotechnology-based research. For instance, last year we were able to manufacture cephalexin from 7-ADCA by an enzymatic conversion: this was for the first time in Asia. Similarly, we have now developed the process for cephalosporin-C from 7-ACA which now we have licensed to Gujarat Themist Biosyn (GTB). Now that Kopran Research Labs is an independent company, it is free to docollaborative research, or work for other companies.

It is not necessary that we develop processes and products only for Kopran. With an independent company, the scope is larger. We are filing process patents for some of products we are developing.

All the new molecules, relating to cardiac, oncology, anti-ulcerants or antibiotics, cephalosporins or macrolides are being developed at our R&D. Till the patents bill is signed, nobody is ready to talk about it. We are interested in tying up with multinational players for research, but I cannot comment on whether we have firmed up plans.

Q: What is the objective behind having strategic business units (SBUs) and what long term purpose does it solve?

A: Basically to enhance our marketing networks. We are looking at a focused segment for a division. Of the four SBUs, Kopran Pharma name will represent cardiac, gastroentrology and some antibiotics, NSAID. Respiratory products primarily, anti-asthmatics backed by anti-TBs and antibiotics, these will be under the new division Kresp. We will have to put a lot of energies to attain a critical mass for respiratory products. We are looking at 5-6 types of inhalers. We are not going into a new segment at all.

Lastly, is the exports unit. We are looking at UK and Europe, South America, some parts of Africa etc. Exports of formulations is a different strategic business which needs a different style of marketing. Also, it would facilitate us to go in for ventures and that's all I can say. But as of now, hiving off any unit has not been envisaged.

Q: What is your export strategy? Could you throw some light on how the Dubai venture fits into your export strategy?

A: We have no export strategy. Kopran is looking at globalisation, integration and innovation to add to the value chain. We are trying to maximise our markets and market shares. We are not in the GCC at all. We would also like to cover the whole COMESA market and make our presence in the US market.

In the current year, out of the Rs 500 crore group turnover, we will achieve more than 50 per cent export turnover. We are talking of Kopran as a group achieving exports worth Rs 225 crore bulks and Rs 45 crore from formulations.

Q: In future what form of strategy would you adopt? Would it be mergers/ acquisitions/co-marketing arrangements /joint ventures or technical alliances?

A: We are not averse to anything as long as we are adding value to the company and the shareholders. Our present product profile is limited to antibiotics, cardiac, gastroentrology, NSAID-analgesics respiratory.

Beyond this, we are looking at oncology and dermatology. If we find something we will go ahead with it. In that process, We start a product from scratch and create a brand equity or acquire a range of products. All that will be dependent on the cost effectiveness. Our objective for 2000-2001 is Rs 450-500 crore for Kopran and Rs 250-300 crore from Kopran drugs.

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First Published: Aug 03 1998 | 12:00 AM IST

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