Wockhardt preparing for competition

Foreseeing that the Indian pharmaceuticals industry will undergo a consolidation phase over the next seven-eight years, Wockhardt has worked out a strategy to help it survive in a scenario of intense competition, in which MNCs will play a major role.The three-pronged strategy includes expanding domestic business in formulations, developing bulk drug active substances for the international market, and sourcing formulations in the US and Europe in two-three years time.

Wockhardt has an expansion plan of Rs.200-300 crore for the next three years which will include newer areas of bio-technology, antibiotics, fermentation technology and active substances for the world market. The business is divided into formulations, bulk infusions, food and dietetics, and biological products.

Wockhardt enjoys a diverse product profile and its focus on the export of Captopril, whose generics market in the US is huge, and which went off-patent in February 1996, will help reap high returns. The bulk drug for Captopril fetches higher margins in the US market. It thus has access to the US generic market. A similar marketing strategy through a 100 per cent subsidiary was adopted in Europe.

Other markets that Wockhardt is tapping for formulations through manufacturing joint ventures are South Africa, China, Russia and the Gulf. The export market now accounts for 20 per cent of Wockhardt''s sales, 80 per cent being bulk drugs -- and the percentage of exports could grow to 40 per cent over the next five years.

Although its margins are slightly under pressure in the IV fluids segment which contributes about 26 per cent of turnover, this division has gained a critical mass, has fairly good manufacturing facilities and capacity utilisation, and is cost-efficient, and therefore has better price realisation. The company, which has been pushing exports, now plans to strengthen its position in the domestic market.

Wockhardt will be one of the few Indian companies to do well once IPR comes into effect.