Celestial Biolabs Ltd Management Discussions

Company Overview

Dr. A. N. Singh had a vision of making Celestial Biolabs Limited (CBL) a pioneer in herbal, enzymes and nutraceutical products and under his leadership CBL has invented many OTC products which got wide acceptability in the market. With an intention to make CBL a global herbal product company, he has started R&D and manufacturing facility at Shamirpet. The project could not be completed due to varied reasons like dynamics in herbal products, competition from new entrants, cost of borrowing, cost escalation in the project etc. The sudden demise of Dr. A. N. Singh has left the company at a crossroad as he was the key person and instrumental in all R & D activities of the Company. During this turbulent period, Mr. Amit Kumar Singh took the responsibility of safeguarding the interests of the company by exploring various opportunities.

Industry structure and developments

The dynamics of Pharmaceutical industry outsourcing keep changing, depending largely on the size, structure and strategic intents of the companies. Virtual companies outsource almost the entire drug discovery or development process to third party organizations. The big pharma companies increase their R&D portfolios significantly through acquiring partially developed products from other companies. There is an increasing outsourcing trend of R&D activities to service providers. According to an analytical report by Vision gain, drug discovery outsourcing will continue to grow over the next decade and will rise to a $43.7 billion dollar industry by 2026, as compared to an estimated 19.2 billion in 2016.(Source - Biopharmatrend.com). India is one of the favorable destinations to outsource such activities given the cost advantage and talent pool. Further, in the pharmaceutical, biopharmaceutical and medical device industries, products must conform to applicable national and international regulations. Regulations are constantly revised to upgrade the safety and efficacy information on products, and therefore the need for more safety assessments and testing continues to grow. These are favourable trends for our business.

The global biopharmaceutical Industry has come a long way since its first drug - Humulin was approved in 1982. Today more than three hundred biopharmaceuticals have already been approved and many more are in late stages of clinical development. These drugs have not only advanced the prevention and treatment of a number of life threatening diseases, but have also provided the thrust for the continued success of the pharmaceutical industry. Under mounting economic pressures to increase their outputs, pharmaceutical manufacturers have embraced biopharmaceuticals as a means to maintain flow in their drying pipelines. Bringing a biopharmaceutical, however, represents a very risky proposition as out of every ten drugs that enter the clinical phases, only three manage to gain market approval. But the industry‘s US$ 109 Billion figures and double digit growth rates in 2012 bears a testimony to the fact that the ones that finally do get approval represent goldmines for investor.

Although factors like biosimilar entry and cost containment in the developed markets are likely to restrain the growth of this market in the coming years, it is expected that with their high potency and ability to attack targets beyond the reach of traditional small molecule drugs, biopharmaceuticals provide the industry with a huge scope for future growth. A rich late stage pipeline and increasing demand in emerging markets are also expected to be major drivers in the coming years. It is expected that global biopharmaceutical market to exceed sales worth US$ 166 billion by 2017

(Global biopharmaceutical market report- 2012).

Opportunities and Threats.

Segment-wise or product-wise performance

Cadalmin GAE to treat arthritis has made a significant improvement in the performance and made a significant contribution growth of about 25% in the sales. Thyroid is a big problem among ladies and gents. A safe formulation from natural sea weed extract is planned to be added shortly to address the requirement. Biovita a prominent health drink has improved and made a growth of about 35% of sales. Biovita in sugar free category is being developed to be used by elders as well as diabetes paitents. Enzymatic Feed Supplement covering cattle , Poultry and Fisheries are sold in Six variants and slowly shall be improved by enhancing the nutrition and medicinal value The value addition is being continuously monitored in Enzymatic Feed Supplement so that farmers and producers are immensely benefitted.

Outlook

Total 125 products in single and multi-herbs formulation have been approved and licensed by Ayush. Celestial currently is manufacturing and marketing 15 products in seven states of India . After our capital expansion , Celestial will be able to produce and market about 100 formulations consisting multiple and single herbs formulation,. Celestial plans to have 25 clinically validated and approved Dozier from CCRAS ministry of ayush, Govt. of India. Clinically validated herbal products are well accepted by MBBS and Ayurvedic doctors community as there is authenticity in the data that have been derived by accredited clinical agency.

Risk Management and Compliance

All the Regulatory Norms are being followed and the necessary disclosures are being provided at regular interval

Internal control systems and their adequacy

GST compliance software is installed to take care of smooth business and effective control.

Material developments in Human Resources / Industrial Relations front, including number of people employed.

Qualitative discussion and training by experts are introduced and organized at different interval to strengthen proper SOPS and methodologies. Regular monitoring and Continuous effort is being made to increase the strength in research development, quality control and clinical validation. A concrete steps are being taken to reorganize research setup and product development A strong research with varieties of clinically validated products shall play key factor in the growth of the company. Research collaboration with key Govt institution, not only provides support of very good infrastructure but also provides quality knowledge sharing which is the key in any collaborative research.

Disclaimer

Some of the statements in the Management Discussion & Analysis, describing the Companys objective, projections, estimates and expectations may be “forward looking statement” within the meaning of applicable laws and regulations. Actual results might differ substantially from those expressed or implied. Important developments that could affect the Companys operation including changes in the industry structure.