Drug maker AstraZeneca Pharma India Ltd (APIL) got its board’s approval to invest
Rs70 crore to expand tablet manufacturing capacity. Ordinarily, the size of the investment would warrant little attention. But it becomes significant for a few reasons.
The expansion seems to part of APIL’s growth plans in India, riding on the back of an aggressive push by its parent AstraZeneca Plc into emerging markets. A recent conference by the firm gives some insights into what it seeks to achieve.
Emerging markets are expected to contribute around 70% of the drugs market growth between 2009 and 2014. The firm’s strategy is to grow its presence in the so-called Brazil, Russia, India, China, Mexico and Turkey markets, grow its involvement in smaller but high-growth markets and include branded generics in its portfolio.
AstraZeneca’s presence in India is relatively small, with APIL’s sales at Rs385 crore in 2009, up by 13.5% over the previous year. But there is potential for growth, given the size of population and economic growth. AstraZeneca believes profitability in developing nations can be quite attractive.
AstraZeneca’s presentation shows just four of its top 10 brands in emerging markets are present in India, much lower than other countries. APIL has said it will launch all global mega brands in India, without specifying when.
APIL has said it will invest significantly in the short term to support these plans. It has been expanding its sales force, too.
This and its capital expenditure plans, too, will put some pressure on its near term profitability. Eventually, as its product pipeline ramps up, both sales and profit growth will rise at a much faster rate, resulting in a better financial performance. Investors, however, will perhaps wait to see its plans unfold before giving a thumbs up. On Thursday, its price fell by about 3%.