Message from Saharsh Davuluri, Vice Chairman & Managing Director

We are investing in building stronger capabilities in R&D, as we have identified that as a strategic priority for driving the next phase of growth. While our systems have always been strong and we continuously work towards further strengthening them, we are now investing in digitising key processes across functions.

Dear Readers,

It is my pleasure to report that Neuland delivered another year of solid growth. This is especially commendable as our internal targets, set well before the COVID-19 outbreak, were realised despite the economic and social challenges triggered by the pandemic. Equally satisfying is the fact that both the GDS and the CMS verticals have contributed to the growth momentum. While there are certain areas where we could have achieved better results, the overall strong performance demonstrated against considerable headwinds provides good reason to look to the future with, confidence.

GDS Business

In the GDS business, formed collectively by our Prime and Specialty APIs, growth was led by our ability to scale up products that command a strong market position. We commercialised Unit III in the year under review thereby augmenting our manufacturing capacity. With two APIs currently being shipped to certain markets from Unit III, the manufacturing extension has also given us the headroom to accommodate higher volumes for other molecules in Unit I and II. These measures have enabled sustainable product scale-up and, along with the focused efforts of our sales team, driven customer acquisition.

In the Prime segment, comprising mature APIs which typically face high competition, growth was largely attributable to the key molecules of Levetiracetam, Mirtazapine and Labetalol. Our Specialty segment includes specialised, high-value APIs, which generate higher margins due to the complexities involved in their manufacturing. Multiple molecules, including Deferasirox, Dorzolamide, Entacapone and Ezetimibe, led the growth momentum in the Specialty segment and contributed to higher profitability.

Going forward, our strategy remains to offer high-quality products at competitive prices through product lifecycle management. This will enable us to deepen our engagement with existing customers as well as reach out to new customers. Led by the expertise of our R&D team, we are also focusing on bringing differentiated products to the market. By emphasising on a quality-led portfolio, wherein our products have an edge for their technological complexities, instead of a quantity-led one, we will be able to better serve the specific needs of customers. The addition of Sugammadex, Elagolix, Semaglutide to our portfolio is consistent with our approach of growing our differentiated offerings. These measures, even as we foray into new markets while deepening our penetration in existing geographies, should position the GDS business for sustained growth.

CMS Business

The CMS business continues to drive our overall revenue momentum, this growth being attributable to both commercial as well as development products. Further, we witnessed growth in scale-up projects and higher projects coming up for validation. As of March 31, 2021, we have 78 active CMS projects in our portfolio, with 17 of them in the commercial stage, 20 in the development phase and the remaining extending from early clinical trials to Phase 3.

Neuland Laboratories Limited has stayed focused on building the CMS business. We have the expertise to advance our customers’ product from the initial stage of its development, where new chemistry and processes play an important role, to collaborating across late-stage development and commercialisation, where successful technology transfer and ramp-up in scale is pivotal. Understanding our customers’ challenges and working as an extension of their own R&D division, our CMS business aids faster research and commercialization at lower costs. Our robust pipeline of projects endorses the confidence that we have secured for our contract development and manufacturing capabilities.

In recent years, we have witnessed an increasing number of late-stage projects entering our pipeline. This is a favourable trend for Neuland as late-stage projects have a relatively low-risk failure and a short commercialisation cycle vis-à-vis projects in the early development phase. Moreover, when it comes to commercialisation, global innovators prefer to go with an outsourcing partner who has also been involved in the development phase as it eliminates the need for technology transfer. The extensive knowledge gained by the outsourcing partner along the development cycle also makes product commercialisation more seamless and simpler. During the year, we have made significant progress with 4-5 late-stage projects which are expected to get commercialised by our customers in the next 12-24 months. This underpins our capabilities in commercialising products consistently and efficiently with the highest level of quality and also fuels our growth potential.

We continue to pursue the right kind of opportunities to further grow our CMS business. In this regard, our long-term strategy has been to partner with emerging biotech companies. As per data from IQVIA, emerging biotech companies accounted for more than two-thirds of late-stage pipelines in 2018, up from 52% in 2003. This reflects the innovation shift from large biopharmaceutical players to small and medium-sized enterprises. Further, emerging biotechs are often limited by in-house resources, infrastructure, or expertise, and thus actively looking at externalising R&D and product commercialisation. Our reputation of being a reliable outsourcing partner will hold us in good stead to partner with these biotech companies and thereby grow our revenues.

Outlook

Neuland has consistently grown over the past few years. We are a larger and more diversified entity with balanced contribution flowing in from our GDS and CMS businesses. Most importantly, we are investing in building stronger capabilities in R&D, as we have identified that as a strategic priority for driving the next phase of growth. While our systems have always been strong and we continuously work towards further strengthening them, we are now investing in digitising key processes across functions. Further building on our strong fundamentals through these efforts support an exciting growth trajectory going forward.

While capacity creation allocations are happening from a long-term perspective, we also remain laser-focused in pushing the envelope for operational excellence. This is manifested across our investments in product lifecycle management to improve yields and lower costs for our key molecules. Additionally, we are strengthening our Project Management Team to expedite smooth scale-up of projects and developing techniques like Quality by Design (QBD) to ensure that the highest quality standards are embedded in our processes and products.

As I write this letter, the world is managing the widespread effects of COVID-19. While Neuland remains vigilant and is not complacent about the ongoing uncertainty, we are confident that we are managing the evolving situation well and taking the right actions to deliver on the expectations of our customers while ensuring the health and safety of our people. Factoring in the learnings from the past, we will rise to meet the immediate challenges and harness the growing opportunities to create long-term value for our people, customers, shareholders and communities.

Thank you for joining us in our quest for a better future. Please stay safe.

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