Kolkata: Personal care products maker Emami Ltd has discovered a trove of indigenous Ayurvedic formulations in the laboratories of Zandu Pharmaceutical Works Ltd—the 99-year-old herbal healthcare company, in which it acquired 72% stake and seized management control after a protracted takeover battle last year.
“We could make mountains of money from these formulations,” said Emami chairman R.S. Agarwal. “Over the next two years, Emami will be launching some 50 drugs from the Zandu stable—some of them had been launched earlier but pulled from the market because the company couldn’t market them.”
For decades, Zandu’s scientists had worked on some 400 classical formulas, most of which were from Gujarat’s “Kathiawar school”. They had also developed some 30 formulations on their own, according to Pawan Sharma, a physician and associate vice-president of Emami, who is responsible for product development.
Herbal benefits: Emami chairman R.S. Agarwal. Indranil Bhoumik / Mint
Of these, around 100 formulas are unviable because ingredients aren’t available any more. “That still leaves us with some 300-odd formulas… but the 30 formulations that Zandu’s scientists had indigenously developed have tremendous potential,” he added.
Zandu had on its own developed drugs for treating a wide range of diseases—from neurological disorders such as schizophrenia and Parkinson’s to rheumatic arthritis and asthma. “Results from clinical trials were very encouraging. Yet, Zandu couldn’t market any of these drugs,” said Dev Kumar Vaidya—grandson of the company’s founder Jugatram Vaidya—who along with his sister Anita, sold 23.6% stake in Zandu to Emami in May last year.
The company had developed two drugs Zandopa and Brento, which, in clinical trials, showed “positive results” on people suffering from Parkinson’s disease and schizophrenia, respectively. “Schizophrenia is, in a sense, the opposite of Parkinson’s disease,” said Vaidya. “Dopamine (a neurotransmitter) activity increases in people suffering from schizophrenia, and lack of dopamine secretion causes Parkinson’s disease.”
Zandu’s research and development facility was one of the best in the country, according to Narendra S. Bhatt, a physician and former chief executive officer of Zandu, who quit two years ago. “We had some 50 scientists… Some 55 clinical trials were conducted during my tenure, but Zandu increasingly lost its focus on research and development,” he said.
Yet, lately the only products that sold well were its balm and chyavanprash—a herbal nutritional supplement and immunity booster. Because of the bickering between Zandu’s erstwhile promoters—the Parikh and Vaidya families—the company failed to exploit the formulations that it had developed, Agarwal said.
In the year till March, Zandu’s turnover was Rs194 crore, with the balm alone contributing about Rs100 crore of revenues. Its net profit during the year was Rs25 crore. The discovery of formulations explains why Emami paid around Rs750 crore for 72% stake in the firm valuing Zandu at over Rs1,000 crore, which is more than five times its annual revenues, say analysts.
Some of Zandu’s indigenous formulations could be around 150 years old, developed by Karunashankar Bhatt, a physician in Jamnagar, whose grandson Jugatram founded Zandu in 1910, according to Dev Kumar Vaidya. The company went public in 1920 because it needed cash to expand its production and research facilities.
“Right from its early days, Zandu was technology-savvy,” said Narendra S. Bhatt. “The company introduced several formulation devices that were imported from Japan, which in pre-Independence India was unthinkable.” The company had even tried to secure patent for some of its formulations, but couldn’t because of “unfriendly patent offices”, Bhatt added. Agarwal, however, said Zandu had obtained patent for some of its formulations, but couldn’t readily name them.
With passage of time, not only did Zandu lose its focus on research and development, it even started replacing expensive herbs by cheaper substitutes, which eventually forced the company to pull some products from the market, said a former research scientist, who quit Zandu in 2001 and did not want to be identified. “But I am not convinced that Emami will not do the same thing—compromise the formulations for maximizing profits,” he added.
Emami, which is merging Zandu’s herbal healthcare business with itself, is soon going to restart clinical trials of the latter’s drugs such as Brento and Zandopa, according to Sharma. “We can convince doctors and consumers about these drugs only by clinically proving their worth,” he said.