JB Pharma: Betting big on India

Pegged as one of India’s fastest growing pharma companies, JB Pharma’s recently released fourth quarter and year ended March 31, 2023 results continue to beat market growth rates.

As per IQVIA MAT March 2023 data, JB Pharma continued to be the fastest growing company amongst the Top 25 in FY23, outperforming the Indian Pharma Market (IPM), growing at 22 per cent versus 8 per cent, aided by the organic business growing at 21 per cent. India business (domestic sales) of the overall sector grew by 15 per cent for Q4 FY23, whereas JB Pharma’s domestic business grew double at 30 per cent. (See BOX: JB Pharma Business highlights: Q4 FY23 and FY23).

Will JB Pharma’s dream run continue? And what are the risks of pursuing an acquisition-driven growth strategy? As pharma promoters in the India pharma sector contemplate bringing strategic investors on board, JB Pharma’s transition strategy and steady rise up the ranks is being closely observed and could well become a success story worth emulating by its peers in the sector.

Nikhil Chopra, CEO and Wholetime Director, JB Pharma commented that this “market-beating performance” is “pivoted around their strategy to make big brands becoming bigger, and significant demand acceleration in the acquired portfolio.” He pointed out that each of their top seven brands (Rantac, Cilacar, Cilacar-T, Metrogyl, Nicardia, Azmarda and Sporlac) have ascended through the ranks. Further, Sporlac, the acquired business in probiotics and pediatric segment, is the newest entrant to IQVIA’s Top 300 brands from their portfolio.

Flashback

Till 2020, JB Pharma was like many promoter-driven pharma companies. Started in 1976 by the late JB Mody as JB Chemicals & Pharmaceuticals Laboratories (JBCPL), the company made a name for itself with brands like Metrogyl (1977), Nicardia (1980), Rantac (1989), Cilacar (2007). Overseas, the company’s Doktor Mom and Rinza brands were able to tap into the Russia and CIS OT market.

Founder JB Mody carefully steered the ship through the choppy seas of evolving regulations, spiralling prices and increasing price control. Cut to July 2020, when the JBCPL founders sold controlling stakes to private equity firm Kohlberg Kravis Roberts and co (KKR).

With KKR at the helm, and a new management team headed by Chopra, the company jumped nine ranks in two years, from rank #32 in MAT 2021, to #23 in 2023. The company’s prescriptions continue to grow at a market-beating pace; with the company ending FY23 ranked #15 in the IPM.

Building blocks of a successful transition

Analysing JB Pharma’s transformation strategy post KKR acquiring majority controlling stakes in the company, Chopra highlights three major initiatives.

1. Transformation of India business by establishing a new go-to-market model, making big brands bigger.

After KKR came on board in July 2020, Chopra reveals how they took up a restructuring exercise both internally and externally. Showing its aggressive intent, the new management had initiated a series of measures to transform the entire business.

He narrates how the management put forth an accelerated growth strategy where they would not only build upon core competencies but also leverage strengths to enter into new therapeutic areas. Backed by over 5,000 employees including a 2,500-strong sales force, Chopra says JB Pharma has put in place a new ‘go-to-market’ model, where they focus on life-cycle management for big brands and evaluate new growth opportunities to further enhance productivity.

Giving more granular detail, Chopra explains how their focus on making “big brands … bigger was substantiated by launching line extensions of existing franchises and focussing on sales force excellence and automation. Furthermore, expansion into tier 4 and rural towns helped India business in increasing the reach and availability for current brands.”

Chopra analyses how one of the pillars of strategy has been acquisition-led growth. JB Pharma completed four major acquisitions (brands from Sanzyme, Azmarda, Razel franchise and paediatric portfolio from Dr Reddy’s Laboratories), thus foraying into the fast-growing probiotics, paediatric and the niche of the heart failure segment. These portfolios offer deep geographic and distribution synergies along with prescriber overlap. In six months, Sporlac now is among the top three brands in the probiotic segment, providing significant opportunities to expand through line extensions.

2. A ‘beyond the pill’ marketing approach

Chopra revealed that he emphasised a ‘beyond the pill’ marketing approach in the Indian pharma industry, which involved organic and inorganic initiatives to enhance patient awareness, education, diagnosis and adherence through various ‘phygital’ initiatives.

Other areas of expertise include digitalisation of the pharma field force and engagement with doctors, nurturing talent and creating cross-functional collaborations and propagating technology in improving healthcare access and awareness.

He stresses that for JB Pharma, the domestic formulations business remains a key focus area and it has been consistently growing at better than industry growth rate over the last several years.

He also refers to another trend in the IPM. While India has historically been a market dominated by acute therapies, the trend has been shifting to a larger contribution from chronic drugs in the consumption base. As per IQVIA IMS data, the share of chronic therapies in the IPM has expanded from 31 per cent to 36 per cent in the period between FY13 and FY21. This is in line with the trend in several global economies that have seen a larger incidence of lifestyle diseases on the back of improved diagnoses and better compliance by patients.

JB Pharma’s international business contributes around 50 per cent of the total revenue, comprises three segments: export formulations, API and contract manufacturing. The business grew by 16 per cent to Rs 382 crores in Q4 FY23 versus Rs 330 crores in Q4 FY22. The international formulations business was at Rs 255 crores in Q4 Fy23 versus Rs 218 crores in Q4 FY22 recording growth of 17 per cent.

JB Pharma operates distinct operating models across multiple international businesses with a direct presence in Russia and South Africa as well as distributor relationships in the US and a large number of markets across Asia, Africa and Latin America. According to Chopra, JB Pharma has a leading global position in the contract manufacturing market driven by marquee client relationships.

3. Development beyond financial metrics to a new cultural identity

JB Pharma also recently marked one year of a new corporate identity as JB, centred on being “simple, reliable and agile” while building on the strong foundation of “integrity, trust and reliability” nurtured over the past 45 odd years.

Explaining the vision behind the new identity, Chopra said, “The company offerings and capabilities are becoming more diverse to cater to the evolving needs of customers, manufacturing processes are becoming more robust, and lean, and our vision of looking at the healthcare industry is becoming more progressive globally.

We are adapting ourselves to become more responsive to the needs of the healthcare world. In sync with the evolving healthcare industry and the changing need of customers, JB has re-visioned the cause of spreading good health in India. JB aims to support healthcare providers and enrich patients’ lives in innovative new ways while remaining committed to its core values of integrity, trust and reliability built over 45 years.”

This was inculcated in terms of initiatives within the organisation that made employees and departments agile and cultivated a cross-collaborative culture. As CEO, Chopra reportedly played an active role in developing this and led leadership culture-building exercises such as OneJBWay (a leadership transformational programme). Furthermore, the same OneJBWay culture is cascaded to the second in line of leaders (N-2) through a forward-looking leadership training and excellence programme called LEAP.

4. Publishing inaugural sustainability (ESG) report

Chopra explains how the ESG report was prepared following the international reporting standards framework, the Global Reporting Initiative (GRI) as its Core Standard, and linkages with the Sustainable Development Goals (SDGs).

As per Chopra, from FY 2020 to FY 2022, the organisation has reduced energy consumption by 9.2 per cent and augmented green energy through solar power. Additionally, its Scope 1 and Scope 2 emissions have reduced by 14.6 per cent and 10.7 per cent during the same period. During the reporting period, waste sent for co-processing stood at 757.65 MT. All sites are Zero Liquid Discharge.

JB Pharma’s strategy for FY24 and beyond

Looking ahead, Chopra is emphatic that “our biggest bet is India as 50 per cent of our revenue comes from here. We will continue to leverage opportunities that lead us to organic growth and diversify into newer categories that can be in generic formulations, wellness etc. We will also be looking for acquisition opportunities, which are a strategic fit and assure returns within the payback period. The other strategy is to grow our big brands such as Cilacar, Cilacar-T, Rantac, Metrogyl, Nicardia and Azmarda.”

Spelling out the goals for the next few years, Chopra says that they plan on accelerating towards their 50th year in 2025. “In the next three years, we want to increase our market share by being among the top 20 companies in the IPM market. Under the new strategy, our major focus is to strengthen our core therapy segments i.e., hypertension, respiratory, gastroenterology, nephrology, cardiology, dentistry, and paediatrics.

If FY21 was about realigning the structure and portfolio to ensure sustainable growth and focussing strongly on the lifecycle management of their flagship brands, the next priority is to scale up R&D and business development initiatives towards building a progressive portfolio for the US, Russia, South Africa, and API. Chopra says that they will focus on consolidating their business areas through a deeper presence in existing geographies and this will be aided by multiple new launches over the next two to three years.

Building a cohesive entity

With four brand acquisitions in 15 months and close to 1500+ appointments, across businesses and geographies in the last year, JB Pharma’s new identity is evidently an attempt to ensure common brand values across a rapidly expanding workforce.

Chopra says that each brand acquisition came with a sales force from different companies that was relevant to their existing salesforce team and gave geographical synergies. This added almost 500-600 people across divisions of heart failure, hypertension, wellness, respiratory etc.

And Chopra reveals that there could be more acquisitions, as the company will continue to evaluate (further brand acquisition) opportunities and see if there are assets available within the space of paediatrics, cardiology, metabolics, respiratory, and anti-infectives.

It will be interesting to observe how JB Pharma is able to assimilate the ‘acquired’ sales force into a cohesive entity. Talent retention will be a key component, given the cutthroat competition in the IPM. According to Chopra, the company’s continuous focus/endeavours on talent retention led to 200+ promotions in FY23. Most pharma companies struggle to increase productivity per sales professional, leading to high attrition rates.

Chopra reiterates, “Our current philosophy has a strong foundation of the legacy brand on which the new identity has been built and carried forward. This is highlighted best in three aspects – our people, our results and our products. We are the fastest growing company with fast-tracked growth for careers as well. This is supplemented by strong learning and development programmes across levels and locations. Last but not the least, a healthy work-life balance is critical to increased productivity which is catered to by our wellness initiatives. We are also in the process of introducing a competency matrix which would aid in talent retention.”

JB Pharma’s transition from a promoter-driven to a private equity-led entity is part of a larger trend not just in India, but across the globe. Balancing the legacy of the founders with the management strategies of the strategic investors will be crucial in the quarters ahead.

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