The list used to belong. Most pharma companies—both multinational and Indian—once outsourced the job of producing injectables to Gland, says a senior executive with Gland Pharma. After all, in the early 2000s, Gland was the only player with FDA approval to produce injectables. For companies targeting the US market, it was the obvious choice for the outsourcing of generic injectables.
Several companies, including foreign ones such as Mylan and Pfizer and Indian companies like Dr. Reddy’s and Emcure, approached Gland to produce drugs for export to the US.
Distribution of the injectables
Gland grew on the back of this business, even attracting a $200 million investment in November 2013 from New York-headquartered private equity firm KKR. By 2016, it had grown to four pharmaceutical plants and manufactured over 100 commercial products for sale in the US. Its focus, though, was on manufacturing injectables for other pharma companies. For instance, in 2016, Dr.Reddy’s Laboratories inked a deal with Gland to market and distribute eight injectables that were pending regulatory approval. The gland itself never got the marketing right to develop its own brands, according to the senior executive quoted earlier.
It is a token IPO to send the right political signals. Both (Gland and Fosun) are very cash-rich companies. They don’t need external investments. A listed company would be seen with more confidence as compared to Chinese books which are viewed with suspicion.
—INVESTMENT BANKER WHO CONSULTED GLAND PHARMA
However, over the last few years, the list of companies outsourcing injectables production to Gland has shrunk. With stringent quality standards for export, pharma companies are wary of third-party manufacturers. Instead, they want direct oversight of production at drug manufacturing facilities to avoid falling foul of regulators.
Consequently, the injectables space has seen a lot of movement in the last decade. Japanese pharma company Otsuka entered into a joint venture with Ahmedabad-based Claris Lifesciences for its injectable business in 2012. The following year, Mylan acquired Strides Arcolab’s injectables unit, Agila Specialties, for $1.6 billion. And Pfizer entered the fray in 2015, with its acquisition of Hospira, the world leader in injectable drugs and infusion technologies. Hospira, while itself a US-based company, bought part of its injectables business from Chennai-based Orchid Chemicals for $400 million in 2009.
And in 2017, the same year Fosun bought its stake in Gland, US pharma company Baxter acquired Claris Injectables, a subsidiary of Claris Lifesciences, for $625 million.
The slow transfer of the injectables
As all these companies ramp up their own injectables capabilities, Gland is feeling the strain. Mylan used Gland’s facility to produce over 10 drugs before, according to the senior executive at Gland quoted above. This has now come down to about three, he says, as Mylan is slowly transferring production of injectables to Agila. Similarly, Pfizer to prefers its Hospira’s plants. Gland did not respond to a series of requests for an interview over many months, nor did it respond to an emailed set of questions sent by The Ken.
Thus as Gland gears for an IPO in India this year, what was once its strength has also become its weakness. Its first-mover advantage is gone. From a wide range of clients and buyers, it is increasingly becoming a captive plant for Fosun’s injectables export to the US and other overseas markets.
A Mumbai-based investment banker, who advised Gland’s senior management on going public, says that Gland is unique. It is one of a handful of companies globally that have developed the facilities and the skill set to produce small volume parenteral (injectables smaller than 100 ml), he says. Further, it has unique products that it sells in prefilled syringes that patients can administer without the aid of medical professionals. The global prefilled syringes market is expected to reach $22.5 billion by 2025, growing at 11.2%.
Importantly, Gland has a large portfolio that cuts across therapeutic areas including antibiotics, analgesics, anti-hypertensives, etc. “If I have a large portfolio of injectables, then I can become a one-stop-shop for hospitals,” he adds. Purchase managers of hospitals, he explains, are looking to do as much business as possible with just a few vendors in order to get better prices.