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Monday, March 2, 2009

Neuland Laboratories Limited:-CEO speaks

q)India being fast emerging as the preferred destination for offshorings clinical trials what are your plans to make Neuland the leader in this segment?

ans)To render clinical research services, Neuland has tied up with US-based Cato Research to conduct phase 2 & 3 clinical trials in India. We have invested USD 0.5 million in the JV.The company would subsequently enter other areas of drug discovery support services such as formulation development, pre-clinical research, and bioanalytical studies. The company is also exploring setting up of another manufacturing facility to the existing two facilities.With Cato Research and Cato BioVentures we can accelerate development and commercialization of several new innovative products. Our strategic interests are well aligned, as each party offers unique strengths to make this arrangement successful. This JV takes us one step closer towards our objective of becoming an end-to-end service provider for the pharmaceutical industry.

q)Tell us more about your JV with US based CATO Research?
ans)It is a JV with Neuland having 70% stake and CATO 30% stake. Together, the initial investment will be about USD 0.5 million in the JV. Depending on the project, Neuland is expected to conduct between 10 and 20 trials annually. The company would conduct only phase II and III trials. Most of the investments would be used as operating expenses for the new company. The operations are not expected to be very capital-intensive.Neuland entered into a JV with CATO Research to form Cato Research Neuland India Ltd to assist healthcare companies in efficiently bringing innovative drugs to market while using high quality and cost effective resources located in India.Cato Research will provide business development, personnel training, senior management recruitment and implementation of SOP guidelines. In collaboration with Cato BioVentures, the venture capital affiliate of Cato Research, Cato Research will also provide CRO services to include clinical studies, data management activities, statistical analysis, as well as regulatory services.The joint venture will further allow Cato to expand its international presence. The addition of India into Cato Research's international network will increase Cato’s ability to conduct multinational clinical trials and provide a wide range of CRO services in the international arena.

q)Is company eyeing more acquisitions, joint ventures in Indian and global market?
ans)Currently we will focus on the JV with Cato. But as we grow and continue to add further capabilities, we will look at other ventures, which bring value to the company and its stakeholders. We shall keep you informed on the same.In the near term, to capitalise on the opportunities that the company has created over the past several years, Neuland will work towards achieving two objectives - to increase its plant capacities for meeting business plan requirements and to develop capabilities in areas of contract research and clinical research.We are planning to expand our manufacturing capacity to approximately 2000 tons of API per year. To diversify its export revenue base, the company is also eyeing the Japanese market for both APIs and contract research.

q)The company recently inaugurated a 40,000 sq feet R&D center in Hyderabad. What are your future investment plans in India?
ans)Investment into R&D has been increasing at a rapid pace over the last two years. The recently inaugurated state-of-the-art R&D centre required an investment of approximately Rs 250 million.Neuland Laboratories Ltd plans to invest Rs 400 million for expansion plan in 2008-09, which includes setting up research & development facilities and enhancing the production capacity.The company plans to expand its contract research and clinical research services business, as margins in the API business are relatively small.The company also plans to focus on the Japanese market to improve its revenue from the Asia-Pacific region.
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q)Exports constitute a major chunk of the company's revenues. Are these revenues under pressure on back of global economy slowdown?
ans)In the near term, the global economic crisis may have a marginal impact on the pharmaceutical industry primarily due to banks freezing credit facilities for expansion and also due to pricing pressure due to reduced government spending on healthcare. In the long term, we only expect the situation to benefit the industry as outsourcing of contract research and contract manufacturing activities are likely to increase as global pharma companies strive to increase their profitability.Since Neuland has completed majority of its expansions in the past two years, we do not see the credit crisis impacting us significantly. Reduction in healthcare spending may affect prices in the near term but this is where Neuland will differentiate itself. Over the past few years, we have developed a diverse pipeline of niche APIs, in many of which Neuland commands a dominant market share worldwide. In addition, our expansion into other areas of pharma like contract research and clinical research will also help us continue to be a leader in new business models.

q)What initiatives Neuland has lined up to tap the highly regulated USD 64-billion Japanese pharma market?
ans)We have a wholly owned subsidiary in Japan, which is expected to be commissioned shortly. Our focus would predominantly be on marketing & business development not on manufacturing. Since we make only APIs, we target pharma companies who make the finished dosage. We have signed 15 clients and have four API’s registered in the Japanese markets so far, our API’s for Japan are for cardiovascular and anti-infectant segments.

q)Your views on current global slowdown specific to clinical trial industry?
ans)In the near term, global pharmaceutical companies may express some hesitation in initiating new projects in India, especially if they are not familiar with the country. However, given the opportunity that India has to offer to companies looking to conduct clinical research on large pools of treatment naïve population and where the English language is not a barrier, the outsourcing of clinical trials will continue to increase at a very rapid pace.

q)What sort of financial performance could we expect for the forthcoming quarter and fiscal? Will global slowdown impact bottom line in next fiscal?
ans)We do not offer guidance for our results. However, the performance will continue to be in line with the growth that we have demonstrated in the recent years.

q)Would you like to convey any message to the investors and shareholders of the company?
ans)Neuland’s business model is to become an "end to end" service provider of the industry. As a result we do not manufacture any generic formulations as that puts us in a conflict with our customers- other pharma companies. In the same manner, we do not want to develop our own molecules since that could also create a conflict with our customers.

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