In an interaction with Ashish Maheshwari, Managing Director, Balaxi Pharmaceuticals Ltd

We are targeting a strong global presence over the next five years by using a judicious mix of manufactured and outsourced supply chains to emerge as the leader in branded, IPR-driven pharma products in global frontier markets; elucidates Ashish Maheshwari, Managing Director, Balaxi Pharmaceuticals Ltd

For FY22, Balaxi Pharmaceuticals’ EBITDA and PAT witnessed strong YoY growth of 23.6 per cent & 25 per cent, respectively. What factors have contributed to your outperformance?  

In FY22, Balaxi has demonstrated solid execution and showcased the inherent strengths of its business model. We have achieved 21 per cent revenue growth to Rs 279 crore, EBITDA expanded 24 per cent to Rs 55 crore, and profit after tax inched higher by 25 per cent to Rs 48 crore. We maintained our zero-debt, cash surplus balance sheet position while return on equity increased to 54 per cent. This performance signifies value delivery in a tough operating environment that was marked by the continuing impact of the global pandemic, geopolitical upheavals, inflationary trends, and supply chain bottlenecks.  

While Angola business continues to be a cash cow, we are now starting to see the results of our efforts in the Latin America (LATAM) markets. In FY22, Guatemala & Dominican Republic have started contributing more significantly while other countries with similar demand dynamics are also positioned for operating launch. Within these markets, we are seeing improved offtake of high-value products while the contribution from branded medicines increased to 30 per cent in FY22. Our portfolio covers a wide range of products across therapeutic areas and dosage forms, aligned with the demand patterns & supply gaps in specific countries. 

Going forward, we will continue to pursue our strategy of targeting leadership in difficult-to-enter markets and have drawn out a roadmap to grow rapidly in other high-potential countries in Latin America, Africa & the rest of the world over the next few years.  

Currently, Angola is a predominant market for Balaxi Pharmaceuticals. What are your plans for geographical diversification, particularly in other Latin American markets?  

We have established a large & comprehensive product portfolio in the Angolan market over the years and our brand is deeply entrenched locally. We have also seen a strong scale-up in operations in Guatemala and the Dominican Republic, both of which have a substantially larger healthcare demand framework compared to Angola.  

Going forward, we aim to capture incremental market share in existing geographies by continuing to pursue various opportunities by leveraging our market leadership and investment in physical assets. We are at various stages of expanding our presence in Honduras, El Salvador, Nicaragua, Chile, and Ecuador in the Latin American region as well as Zambia & Central African Republic in the African continent. We will also pursue opportunities in several other regions globally based on market assessment. Our focus is on offering a comprehensive product portfolio to fulfill consumer demand in these regions. Overall, we are targeting a strong global presence over the next five years by using a judicious mix of manufactured and outsourced supply chains to emerge as the leader in branded, IPR-driven pharma products in global frontier markets.  

With inflation leading to a rise in input costs along with supply chain challenges, what measures are you implementing to safeguard profit margins?     

Over the years, we have developed asset-light, long-term supply chain engagements with our sourcing countries – India, China & Portugal. This enables us to maintain diversified and risk-hedged product supplies, giving us effective pricing power in our established markets. Rising freight rates and other related costs remain an ongoing issue but having said that, such escalation has been well-absorbed by the business while the strength of the product profile as well as market position is seen by our ability to pass on the rise in costs to our end channel partners. We have also increased the contribution of branded products to our sales portfolio. These initiatives are reflected in our operating margins that have remained stable during a tough operating environment. 

Can you throw some colour on why Balaxi Pharmaceuticals is gradually moving its business model from being ‘asset light’ to ‘asset right’? Also, what are your future Capex plans?  

Balaxi is setting up an EU GMP-compliant pharma manufacturing unit near Hyderabad with capacities to produce general oral solid dosage (OSD) and liquid injection formulations. We are targeting the demand for high-quality products in semi-regulated Latin American markets. The production will allow full backward integration of the supply chain and is expected to start by June 2024. 

We expect to deliver favourable RoI on the capital expenditure with a quick scale-up in volumes. This will be driven by the immediate replacement of outsourced supplies with in-house production, servicing the demand from our established markets. Compliance with quality will entail higher efficacy of the product, greater acceptance in our core markets, and enhanced profit margins. This will also provide stronger control over the manufacturing ecosystem, improved regulatory processes, and reduced time-to-market for new launches. In essence, this opens up several new market opportunities globally.  

Presently, what are your top three strategic objectives?  

Currently, we have 620 product registrations with an operating presence across Angola, Guatemala, Dominican Republic, and Honduras. We have created efficient local supply chains with investments in 37 warehouses and a fleet of owned vehicles. We expect to capture market share incrementally in existing geographies.  

We are also looking to enhance our market presence on a wider canvas by foraying into other Latin American and African countries as well as CIS markets, replicating the established & differentiated business model that has worked for us to date.  

We are investing in an EU GMP-compliant manufacturing setup that will enhance the efficacy of the product, leading to greater demand, supply chain integration, control over schedules, and profit margins.   

We will focus on an ideal mix of branded and generic medicines, maximising returns in key geographies, eventually targeting a strong global presence in a larger portfolio of frontier markets over the next five years. 

Overall, we expect to create substantial long-term value for all our stakeholders by executing our plans and establishing an Indian multinational company with a strong on-ground presence in key geographies providing affordable healthcare to a large population base in frontier markets.