Can you give us an overview of your business model in the India, Australia, Russia and New Zealand markets?
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Paul Mimnagh
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The IMCD business model is based upon the identification, development and motivation of high calibre individuals within a culture of freedom and accountability. This model has seen IMCD grow into Europe’s number one supplier of speciality pharmaceutical ingredients. Our success is based upon the 80+ pharma focused technical sales experts we employ. These highly knowledgeable people carry vast experience in the pharma industry and are challenged to continually grow their knowledge and experience through value added collaboration with our clients and within IMCD’s own network of formulation laboratories. Whilst our pharma model is relatively young with respect to the Indian and Russian markets, it has already gained significant traction with our clients. We aspire to work with our clients from early phase research and development through to final formulation and manufacture, offering them best in class service through the highest quality GDP standard supply chains. Our goal is to emulate our European position as the number one pharma ingredients supplier in these markets.
With respect to Australia and New Zealand, IMCD is presently the leading speciality chemical supplier. However, we believe that we don’t have to be bad to be better! We have invested in strengthening our value proposition to the pharma industry in ANZ. This is today manifested in the deployment of one of the group’s core pharma experts to commit time and support to ANZ customers, in areas such as formulation and regulatory support. In 2014, it is our aim for example to hold our first programme of formulator workshops and seminars. Furthermore, despite this being a mature market fighting against manufacturing moving offshore rapidly we remain committed to expansion, having recently completed the acquisition of Capitol Ingredients.
Patent expiries and the global economic slowdown have seen big pharma companies struggle to balance the books. How do you generate business out of such companies who are themselves trying to cut down on expenses?
Pharmaceutical companies are indeed coming under increasing pressure to cut down on expenses. Furthermore it is becoming clearer to many of our clients that cutting expenses has to be approached in a much more holistic manner than the simple targeting of the purchase order price. If we look at the cost breakdown of a pharma formulation, the relative contribution of excipients for example, is in fact small, however, the cost of a break in supply of any ingredient can be business critical. At IMCD, we offer a bespoke strategy for our larger pharma clients, this in some cases involves global service level agreements, vendor managed inventory initiatives, force majeure contingency initiatives, QA cost reduction and quality agreement programmes and many others. Essentially we try to encourage a ‘white paper approach’ from our larger clients. If we do not add value we do not survive in the supply chain, and have no right to do so.
What challenges do you face for doing business in developing markets in Asia as compared to developed markets of Europe and Australia? And, how do you overcome them?
Every market we operate in has its own dynamic and nuances. To succeed, IMCD must be able to navigate the terrain of any market, so while we have a strong governance of our pharma business plan in general, for an organisation our size we have a relatively light touch with respect to local or regional business management. Our IMCD sister companies all conduct their business in line with company policy and guidelines however they also have the freedom to operate in their environments in the manner that is required. Understanding the dynamic of our market is key, the success of our business locally cannot survive solely by strong knowledge of our chosen industries; it must be complemented with strong local market knowledge. This matrix of industry focus and local knowledge is fundamental to our success.
Have you noticed any India specific business challenges while distributing your products to the pharma industry here?
The sheer size and geography of India in itself presents a challenge. We are investing heavily this year to broaden our resource base to reflect this. As we have grown in recent years we have been aware that our structure has been too central, thus we have already added a highly experienced resource to cover Gujarat and the North and will add two more this year to ensure we have the right blend of experience and knowledge deployed in all regions of the country. Another challenge which we are particularly aware of in India is keeping good resources. This is a concern for every company in every market, however, we are resolute in our determination to keep our staff happy and motivated, this is especially important in India where we see a particularly strong attraction for good people when presented an opportunity to leave distribution and work for the ingredient manufacturers. We keep our good people as they are so core to our business and as our business develops and grows in India, we keep a watchful eye that our new team members feel a part of the broader IMCD ethos.
Also of particular relevance to India is the requirement to maintain a senior level of contact with the key decision makers in the client base. It is important that our senior business managers locally support the team effort by maintaining a somewhat statesman like relationship with their counterparts in our client base.
What percentage of your revenue comes from the Indian market?
It’s approximately five per cent of our global pharma revenue presently. Our aspiration is that this share will grow considerably based on ambitious but realistic plans for organic growth and targeted acquisition.
Who are your major clients in India?
We work with most of the leading manufacturers within the regulated pharma sector. We also have quite a strong business in manufacturing for the domestic consumption sector.
You would find suppliers from India supplying quality products that too at much cheaper rates. How do you handle such competition?
The competitive threat from cheaper sources, where quality is or has improved markedly in recent years is not an issue restricted to the Indian market by any means. Irrespective of the market we are in, this is a threat we compete with day in, day out across our business. The suppliers who we partner with, and want to partner with us are leading in their respective fields. For our partners we excel in competing against these challenges, maintaining a profitable market share. Our clients for the most part appreciate that value does not solely equate to price, and as I said unit price is an area in excipients particularly, which has a limited potential to deliver cost reduction. Truly valuable ingredients are those that are supported by the supplier in such a manner as to help our clients meet challenges and opportunities, for example information and product bundles to assist in QbD submissions, or improved functionality to assist production efficiencies, bioavailability enhancement or even to assist in patent applications. The pharma industry has not nor never will be built on the basis of the cheapest sources for the cheapest drugs.
What is going to be your growth model for India in the future?
We are going to do what we and our partners do best. Bring a high value supply and service model to the Indian pharma manufacturing sector. This year we will add three new technical sales resources to our existing pharma team of five, strengthening our geographic coverage in India considerably and allowing us to offer our core supply partners a credible IMCD Indian vehicle to drive the tried and tested business plan we have successfully implemented throughout the rest of our partnership.
We are also reviewing the feasibility of adding to our pharma formulation laboratory network, a formulation lab in India is a possibility. This is core to driving a high value offering to the market by way of ensuring we have the best trained and most practically and conceptually knowledgeable people in the market. We will also continue on the acquisition trail. We wish to further add to our excipients and synthesis business in India in the short term.
Ultimately our goal is to emulate the position we hold in our core markets today and to be able to justifiably say we are the leading pharmaceutical ingredients supplier in India.