Shilpa is a API provider of oncology molecules and other niche molecules. Much of the API provider’s revenues depends on the fortunes of the formulator whom he supplies. For ex: formulator may have FDA issues, plant upgradation, may decide to get out of some formulations etc which in turn affect the demand of Shilpa’s APis. To overcome this, Shilpa has decided to get into formulations of some of the molecules which may give it better control over the molecules to target.

Shilpa does not work with innovator/originator currently. Predictability is little less in generic business. Hence, Shilpa refrains from giving numbers.

This year there was more talk of First to Files (FTF). Shilpa will be filing its first FTF this year. Shilpa management feels it has the strength in molecules to file FTFs in its own name.

Shilpa has taken significant capex and investments last few years and the revenues will come from 2017-18. Shilpa has around 400 R&D engineers and has filed around 175 patents of which 75 have been filed last year. However, it can be that one molecule itself can have upto 5 – 10 patents.


PCA is a subsidiary of ICE Italy (was acquired by ICE). ICE manufactures cholic acid while PCA manufactures deoxycholic acid and its derivatives like ursodiol etc. Cholic acid is used for manufacturing deoxycholic acid. PCA also manufactures the API and is not into formulations. ICE and PCA over a period of 50 – 60 years have worked on only this molecules and have an edge over any other company (ICE controls 70% of the world’s cholic acid demand while PCA controls 45% of the world’s demand for deoxycholic acid) which primarily is in R&D and sourcing as it is naturally produced (ox bile, chick bile etc). ICE and PCA can increase prices of this molecule as and when required. Shilpa just provides the CRAMS for manufacturing of ursodeoxycholic acid where inputs, process, technology etc are provided by ICE only.

The current market for this API is 1500-2000 tonne which is around Rs.2500 crore in value terms. Currently, Shilpa has 200 tonne capacity while the JV will have a capacity of 400 – 500 tonne. There is a lot of shortage of this molecule worldwide. Shilpa has orders upto two years. However, due to supply constraints it is not able to fulfill the demand. ICE does not want to expand in Europe due to high costs and other issues. Scaling up will be easy for the company here and through JV their interest and longevity will be higher. Since ICE has 50% stake in the JV, the margins can be higher. It will be ICE’s only facility outside Italy. The reason for ICE to stick with Shilpa is trust. The benefit for Shilpa in the JV is it is de risking its major revenue source and freeing up capacity at its API plant for other business divisions. Shilpa also has contract for selling this API in few markets like India. Once this plant is functional, this will be a separate profit center for shilpa with limited bandwidth from Shilpa management (kind of self pilot mode).

The plant is a world class one and took almost two years for construction. The plant is in final stages of construction and will be ready in one – two month’s time. The company has already started working on exhibit batches and by June, 2016 the company will have 9 – 10 months of stability data after which it will file for DMF in Japan. This will start yielding revenues in FY17 but majority of it will come in FY18 after all the shifting has been done from the standalone API facility. It might happen that due to shortage of this molecule, Shilpa on standalone basis might continue to supply for few years.


Earlier, the vacated facility for manufacturing of ursodeoxycholic acid was proposed to be used for manufacturing of ARVs. However, due to less clarity on the issue of when the manufacturing of ursodeoxycholic acid will stop in standalone operations, the plan has been put on hold. If we start constructing a new block for ARV and all the transfer happens to Raichem soon, it will lead to idle capacities. The company will take a decision on this in short term (three to six months). Apart from the four molecules (QUAD), the company has also worked on few other molecules at R&D stage. Company has plans to go into formulation also in the long term for ARVs.


Shilpa Medicare has ventured into CRAMS with a Japanese pharmaceutical company to produce tranexamic acid. The company is dedicating an entire block for this arrangement, the construction for which is expected to be completed by December 2015. The total cost incurred on the capex was Rs.31 crore. The manufacturing of the exhibit batches will start from January, 2016 onwards. The capacity for this block will be 100 tonnes and can result in revenue of Rs.50 crore. However, it will have higher margins compared to the current arrangement with ICE as Shilpa will procure raw material directly along with the manufacturing process. Shilpa has also got license to sell it in few markets. Like ICE, the pharmaceutical company has expertise in the manufacturing of this molecule.

Shilpa’s management views this a stepping stone with relationship with Japanese Generic players. Shilpa is the only company whose API is registered in the Japanese markets. Establishing relationship generally takes a long time and they initially start with only small volumes and scale it up over longer periods of time. A few large oncology companies have also visited Shilpa’s facility. A lot of patience is required for working with Japanese partners and there is no room for short cuts. This can be a sustained model after 5-10 years and a separate revenue stream.

Unlike US, the Indian pharmaceutical companies except for Lupin haven’t been able to make a mark in the Japanese markets. Reva Pharma, a sister concern, is an official advisor for Indian Government for Japanese pharmaceutical companies. It has been instrumental in asking PMDA, the pharmaceutical regulatory authority of Japan to set up an office in India. Japanese market has very low generic presence which is expected to increase significantly going forward benefitting Indian pharmaceutical companies.


API Facility: The USFDA inspected the plant in March, 2015 and there have been few observations. However, none of them are related to data integrity, which has been a major concern for the pharmaceutical companies. The company has replied to these observations. The company has been regularly writing mails and following up with the authorities and expects an outcome by October/November (they sounded pretty bullish on securing an approval).

Formulation Facility: Shilpa’s Jadcherla formulation facility was inspected by USFDA recently. The management was expecting the inspection after January, 2016 but an ANDA getting into bio-equivalence/ later stage of ANDA approval triggered the inspection. The inspection happened over 10 days and there were nine 483 observations. However, there are no data integrity issues. Shilpa has responded to these observations and is expecting FDA approvals for this plant latest by around June 2016 after which it is expecting to get ANDA approvals one by one. Shilpa Medicare has shared these observations with its customers and they are confident of us getting the approval soon. Many of the issues related to regulation are because of lower level employees taking short cuts. Shilpa has taken many steps to address this including hiring an ex-FDA inspector (who charges USD 280,000 annually) consultant to visit the plant and give inputs and training.

Shilpa has got approval from Brazilian, Mexican and EU authorities (that Slovenian approval was for whole of EU). Argentinean regulatory approval has also been triggered and they might come for inspection.

As per the management, USFDA is trying to categorize pharmaceutical companies into various grades and the grades will decide the frequency of USFDA audit going forward


The company has 20 DMF filings in the US markets. The same molecules have been filed in the EU market as well. The company has a hybrid approach for development of new molecules – sometimes our R&D employees find a molecule lucrative, sometimes customers approaches us and few of the times the top management finds a molecule to work on. Shilpa is even working on few molecules which have expiry in 2025 – 2027 or are currently undergoing clinical trials. The key here is non-infringing patent and being able to tie up with formulator. In APIs Shilpa has a lot of strength in few of the molecules where it can impact the prices of it. However, the company does not have a philosophy of gaining market share by reducing the prices. Competitive intensity of a particular molecule decides the step taken to manufacture it. If it’s a competitive molecule, R&D people start from the scratch and work from N – 5 and N – 4 stage to reduce cost while in not so competitive molecule we go back to just N – 2 stage as well. China is expected to be the biggest oncology market in the medium term. In US, out of every 10 new molecules being approved by USFDA, seven are in oncology. Few molecules which were discussed:

  • Capacetabine: Shilpa have expertise in this molecule and have expanded our capacity from 600 – 700 kg/month to 2500 kg/month. Even the batch size has been increased to 25 kg. Post the expansion, Shilpa will have 25% of the world’s capacity. Although, the prices have come down from USD 650 – 700 per kg to USD 450 per kg, Shilpa will make decent profits and benefit from increase in volumes. We have also filed ANDA for it in our own name. Sun has approval for Capacetabine in EU market but it is not doing well.
  • Gemcetabinie: Intas had completed expansion at its plant last year. So they took less quantities from Shilpa in FY15. As many finished dossiers have entered the market, production has fallen from 3 tonne to 1 tonne. Capecetabine is expected to make up for this.
  • Bortezomib: Shilpa is expected supplying to many formulators as it has a patent for the molecules under which it works (stability) even in some specific temperatures.
  • Imatinib Mesylate: This will be the next big molecule for the company after capecitabine. Company has an edge in this molecule.
  • Ambroxol: Shilpa also wants to diversify into non-oncology molecules. They have expanded capacities in this molecule from 60 tonne per annum to 240 tonne per annum. The capex for the expansion was around Rs.30 crore. Although, the molecule has lot of competition and is not difficult to manufacture, they have lot of experience in it, more filings and better quality. The market for this molecule is expanding. Other companies are decreasing the price while they are increasing it.

On being asked about the molecules which they are currently working on (taken from Karvy report and company’s website) have a market size of more than USD 5 billion, he replied that we also are working on bigger molecules than the ones mentioned. Post approval from USFDA, we might have to increase capacities for the US market. We had won a case against Bristol Myers Squibb for a molecule called Dastinib despite our telling them that we wont be launching in the domestic market. We work at various levels to ensure that our process and molecules are non-infringing. Pfizer had also launched a case against us for a molecule. However, after we told them that we won’t be launching that molecule in the Indian markets, they withdrew it.



We have filed 13 ANDAs as on date. Out of these 13, 5 have been filed in our name while 8 have been filed by the partner. The marketing arrangement for this filing is:

  • Own filing: We incur the R&D costs and tie up with the partners at various stages of development of the molecule. If we tie up at the beginning of development of molecule, we will have lower profit share while if we tie up after the filing of ANDA, we will have higher profit share. Out of the 5 filings, it is a mix of both. We have a marketing arrangement with the partners where they sell our products in the US market. We will be filing our first FTF this year in our name. Typical cost of filing a ANDA is Rs 5 – 6 crore plus litigation costs. Going forward, we will try to file new molecules in our name. Shilpa had filed its first ANDA in its own name in Dec 2013. Seems capacetabine and imatinib have been filed in Shilpa’s name.
  • Filing in partner’s name: Here we work on CRAMS basis (cost plus profit). R&D expenses, litigation cost etc are incurred by the partners. The main purpose of this model is to hedge our API supplies also. For off patented molecules, we tie up with 3 – 4 formulators while for FTFs we exclusively tie up with just one formulator (the company has filed for FTF through its partners). The partners chosen are good in marketing and have capability of garnering good market share.

The company currently has one line for manufacturing tablets and one for injectable at it formulations plant. The company has fully tied up for its existing lines for manufacturing of tablets and injectables. The company is constructing one more line for tablets and one for injectable at its formulations plant, the cost for which is expected to be Rs.30 – 40 crore. The construction for the new lines is expected to be completed by December – January. In oncology, there has been gradual shift towards tablets from injectables. The company is also planning to build third dry powder injectable line at its existing facility. The total capex for the line is expected to be Rs.200 crore. We might go for another expansion in three to four years which along with the dry powder line will cost around Rs.450 crore. For third or future lines, the company might tie up for innovators also. It will be first such dry power line for oncology products in India. The company might go for equity dilution for the capex in near to medium term.

For formulation facility, the company has tied up with new customers. In FY16, the company has plans to file five ANDAs (one in its own name and four in the partner’s). The company is not looking to file for biosimilars currently due to high cost involved (USD 15 million) as well as lack of clarity from the regulatory authorities. However, there seems to be some clarity emerging from the regulators and the company might plan to go for its manufacturing in the long term.


Company has filed or planning to file five dossiers for the five ANDAs it has filed in the US in its own name in European market too. The approval from the US regulators usually takes less time of around one year as compared to more than two three years for the US markets. The company’s partners are filing for formulation drugs in Mexican and Brazilian markets.

Going ahead formulations will be major revenue generator for Shilpa. The Jadcherla plant is being setup with advanced machinery which will have lesser chances of recalls. Shilpa had made investments of around Rs.250 crore in this facility. Shilpa Medicare has got a strong IPM department which will help decide which molecules to pursue.


Shilpa does not like to take too much debt. As per the management, then focus will be on re-paying debt instead of thinking of new ideas. Besides, having cash in the bank, helps Shilpa to fund new R&D proposals. Hence all the capex will be funded with mixture of debt, equity and internal accruals. Equity dilutions might be done at good valuations (most probably for future capex). The company has a philosophy of funding big capex with a mix of internal accruals, debt and raising more equity.


As per the management, Shilpa does not have problem of retaining top talent. The R&D head has been working with Shilpa for more than 20 years. There is a bit of attrition of lower levels like chemists. However, top level R&D scientists continue to stick with Shilpa. Most employees get between 15-30% hikes every year. They are given a free hand in R&D projects without too much politics from management. One of the reasons is that Shilpa management likes to keep cash in bank instead of being in debt. It can fund these small R&D proposals easily and not make them wait for funding. Shilpa is thinking of ESOP incentives for retaining top talent. Salary is in line with the best in the industry. Sometimes people leave at 3x salary. However, this has no impact on Shilpa. They file a patent at initial stages for the idea on feasibility analysis. This prevents the new company from filing patents for these ideas once the chemists leave.


Shilpa is keen to fund smaller companies (startups) with good people and good technology. This requires management with VC kind of mind setup. This will keep company abreast with new technologies and new ideas like Nano technology etc and new drug delivery systems (NDDS). This NDDS will help Shilpa in future projects through launch of its own formulation through them.

MAIA Pharma: Shilpa funded initially round and now there was another round of dilution which Shilpa did not fund at around four times the valuation at which Shilpa had invested (that is why you see lower holding of Shilpa). They are filing a 505 b (2) and Shilpa will be providing API too.

INM Technologies: It is working on nano technology and Dr Phani with 75 research papers is leading the company. The company is based out of Bangalore.

Shilpa has funded Rs.8-10 crore last year in these ventures and is looking to fund the same amount in next 2-3 years. The company has philosophy of funding new ideas with good technology and not spend too much money on a single idea.

Loba continues to be in red and seems to be a mistake committed by the management. There are lot of regulations in the market and management is trying to make it self sustainable.


  1. All revenues are in USD and thus not exposed to Euro depreciation
  2. Admired Alembic and Torrent apart from Natco
  3. No targeted R&D/sales ratio. Everything based on requirements

Most of current molecules are injectables in oncology. But after 5-6 years most expiring molecules are Orals