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Corporate - Diversification


Alkem Labs to foray into food processing

P.T. Jyothi Datta

Mumbai , July 20

AFTER 31 years and a robust Rs 600-crore kitty in place from selling medicines in the domestic market, Alkem Laboratories Ltd is set to take its first steps in the business of food processing.

It will be a major milestone after the company was started in 1973, Alkem's octagenarian founder-Chairman, Mr Samprada Singh, told Business Line.

"About 40 per cent of the country's fruits and vegetables go rotten and get wasted. There are opportunities not just in food processing, but also in cold-storage etc. We are looking at the different options being suggested by our consultants," he said.

Having grown steadily from a retail shop for medicines, to a distributor and now a full-fledged pharmaceutical company that today ranks among the country's top 10 - the unlisted company, Alkem also has plans for segments such as nutraceuticals and ayurveda.

But Mr Singh, who is virtually a "father-figure" in the organisation, however, indicates that the company does not intend to go public just yet. The funds required for Alkem's ambitious growth plans would be generated internally, he said.

But is the decision to diversify into food processing precipitated by the product-patent regime, come 2005? More so, since the new order is expected to tighten the noose around generic pharma companies or drug firms that make chemical copies of originally developed medicines?

"Dynamics in the local market involves dealing with the distribution network, medical-representatives and production. Multinational drug companies operating in India already outsource their manufacturing. So post-2005, more opportunities will arise from alliances in manufacturing and distribution," he countered.

Alkem has existing tie-ups with Pliva and Ivax and its recently initiated thrust on exports has generated revenues of about Rs 50 crore. The company looks to close March 2005, with a sales turnover of Rs 800 crore, of which Rs 100 crore would come from exports, he said.

The company is preparing its dossiers and documentation to enter regulated markets in about six to eight months, he said. With huge export plans, the company has got regulatory approvals for its production plants from different countries, including the UK.

Alkem has a new production facility coming up at Baddi, Himachal Pradesh, at a project cost of about Rs 60 crore. The plant is expected to go on stream by April 2005, he said. Once this happens, Alkem's Daman plants will become completely export-oriented, he added.

Alkem is among the largest producers of antibiotic cephalosporin, possibly only after Lupin. "There is a huge global demand for cephalosporin and few manufacturers in these countries. So they will largely source from India and besides Lupin and Alkem, other players in this category are Ranbaxy and Orchid."

But in an effort to reduce its dependance on cepahlosporins, the company hopes to develop about three molecules by the year-end in therapeutic areas such as cancer, Alzheimer's disease, HIV/AIDS and heart-related illnesses, he said.

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