Mankind Pharma’s Founders Map Growth Plan After Pulling Off Major IPO
Juneja brothers eye a spot among top three sales leaders by focusing on expansion into bigger cities and selling more medications for chronic diseases.
Rajeev Juneja recalls his first day in the pharmaceutical industry in 1984. He was 19 and had dropped out of college to work as a representative for the generic drugmaker that he had cofounded with his family. His older brother Ramesh’s instructions were clear: Leave the house by 8:30 a.m. and don’t come back before 10 p.m. Rajeev was to network with staff at a medical college near the family home in the northern Indian city of Meerut. “For the first two days, I didn’t have the courage to meet any doctor,” he says. His confidence slowly improved and he started shadowing other reps to see how they interacted with doctors and presented promotional materials.
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Fast forward to 2023 and Ramesh, 68, is chairman and Rajeev, 58, is vice chairman and managing director of Delhi-based Mankind Pharma. In May, they staged the biggest IPO of the year so far, by value, when Mankind debuted on the BSE (formerly Bombay Stock Exchange) and the National Stock Exchange, fetching 43.3 billion rupees ($715 million) for its existing shareholders, including the Junejas, who sold some of their stock. Mankind’s shares have surged 62% since then to trade at more than 1,700 rupees for a market cap of over 700 billion rupees (as of late September). Ramesh, Rajeev and other family members own the bulk of the company. Their wealth has soared 64% to $6.9 billion over the past year, thanks partly to the listing, putting them at No. 29 on India’s 100 Richest list.
Nishanth Radhakrishnan for Forbes Asia
Source: Iqvia
Investor confidence in the company’s prospects is due in no small measure to the brothers’ goal to break into the ranks of the top three pharmaceutical companies (by domestic sales) in India. Today, the three largest are local firm Sun Pharmaceutical Industries, founded by billionaire Dilip Shanghvi, followed by AbbottIndia, a subsidiary of U.S.-based Abbott Laboratories, and then another domestic firm, Cipla, controlled by billionaire Yusuf Hamied. (Torrent Pharmaceuticals, the No. 8 player, owned by billionaire siblings Sudhir and Samir Mehta, is reportedly in talks with private equity firms to make a bid for Cipla; neither firm responded to requests for comment.)
Today, Mankind ranks No. 4 in revenue in the domestic market for branded generic drugs and No. 3 in volume terms, according to U.S. analytics firm Iqvia. Branded generics, or off-patent medications that are sold under a proprietary name, accounted for 96% of the Indian pharma market in value terms in the year to March 31, 2022, Iqvia says. With more than $1 billion in annual revenue and a 15,000-strong sales force, the Juneja brothers are mapping a plan to take on the top three.
“It will be a tall claim to say that we want to be the No. 1 pharma company in India,” says Ramesh in a July interview alongside Rajeev at the company’s headquarters in an industrial area of Delhi. “But we can definitely achieve No. 3 or No. 2 in the next few years,” he predicts, while declining to give a revenue target.
Mankind has 25 factories that make more than 1,000 products across 36 main brands to treat pain and infections as well as cardiac ailments and diabetes. It also offers its own homegrown brands of consumer-healthcare products such as condoms, pregnancy tests and acne treatments. The company has six R&D centers and employs more than 600 scientists.
Mankind’s growth has come from being an outlier, says Purvi Shah, research analyst at Mumbai-based Kotak Securities. While its peers are largely focused on selling to the U.S. and to specialists in India’s big urban centers, Mankind gets 97% of its revenue from the domestic market, where it targets GPs in smaller cities and rural areas, although it’s making rapid inroads into metros (the remaining 3% comes mostly from the U.S., Bangladesh and Sri Lanka). Another major differentiator is price. Mankind’s top 50 brands cost 20% less than those of its three closest competitors, according to a June report by Kunal Dhamesha, a Mumbai-based healthcare research analyst at Macquarie Research. According to Mankind, over 80% of doctors in India prescribe its drugs.
“We have saved medicine costs for thousands of customers over the years,” claims Ramesh. He says the company keeps prices low by maintaining reasonable margins and controlling costs. Mankind also benefits from economies of scale because of its high volume, says Shrikant Akolkar, vice president at Mumbai-based institutional brokerage Asian Markets Securities.
Mankind has shifted strategy over the past few years in order to tackle the top three. This has involved targeting specialists in India’s biggest cities; selling more chronic medications, which are prescribed for long periods, compared with acute medications, which are meant for short-term use; and beefing up its consumer-healthcare division. “Disease patterns are changing and there are more lifestyle diseases now, like diabetes and cardiac, cardiovascular and respiratory diseases,” says Rajeev. “So we have also changed our approach.”
India’s pharma market was valued at 1.9 trillion rupees ($22 billion) in the year to March 31, 2022, and is expected to grow at a CAGR of 10%-11% between then and fiscal 2027, according to Iqvia. More than a third of the total comes from chronic medications. Within that segment, the market for cardio drugs is expected to grow at a CAGR of 12%-13%, and medications for neurological conditions at 11%-12%, over the same period. Mankind had a 4.4% share of the highly fragmented domestic pharma market as of end-August.
Analyst Shah says moving into the top three “is not an impossible goal.” But Mankind faces challenges. If it wants to become bigger, faster, it needs to make a big push on acquisitions, she says, and watch out for any regulatory disruptions. In August the government proposed that doctors prescribe only unbranded generics. These so-called trade generics are cheaper than their branded counterparts and could undermine profits at companies such as Mankind. However, the proposal has since been suspended. Only 2% of Mankind’s fiscal 2023 revenue came from trade generics, according to Shah. Another potential snag is price controls: The government caps the cost of certain medications it deems essential. As of Dec. 31, 2022, some 17% of Mankind’s drugs were on the list, which is periodically revised.
Not that any of that is affecting the company’s performance. Mankind’s net profit surged 66% in the first quarter ended June 30 to 4.9 billion rupees, supported by an 18% gain in revenue to 25.8 billion rupees. The results are a turnaround after net profit fell 10% in the year ended March 31 to 13.1 billion rupees, despite a 12% gain in revenue to 87.5 billion rupees, undermined by higher raw-material costs as well as expenses related to the acquisition of the domestic formulation brands of Panacea Biotec, a unit of Delhi-based Panacea Biotec Pharma, for 18.1 billion rupees.
Shah says Mankind remains vulnerable to high input prices because it is “not fully backward integrated,” meaning it must rely on suppliers for some raw materials. Analyst Dhamesha predicts that Mankind’s net profit will double to 26 billion rupees by fiscal 2026, as the share of revenue from chronic medications, which are more expensive than other drugs, increases to more than 40% from 34%, boosting operating margins.
BY THE NUMBERS
Mankind has one of the largest pharma sales forces in India. It gets most of its revenue from acute medications, but the share from chronic drugs, which are more expensive, is rising.
Sources: Mankind Pharma, Macquarie Research
Rajeev Juneja, vice chairman and managing director of Mankind Pharma.
Nishanth Radhakrishnan for Forbes Asia
Mankind spent 8.3 billion rupees in fiscal 2023 to expand manufacturing capacity and upgrade infrastructure. Ramesh says it plans to add three more factories this year. The company has increased its salesforce by about 3,000 over the past three years, which gives it one of the largest networks in the country, according to Macquarie Research. It has also created specialized sales teams to target the country’s top 3,000 hospitals and their critical-care departments.
However, the chronic space is getting crowded, warns Akolkar. “Everyone is adding medical reps and everyone is getting into therapy areas like cardiac and cardiovascular,” he says. “Continuing this kind of growth may be difficult.” In response, Rajeev notes that Mankind’s revenue from chronic medications grew 14% between fiscal 2021 and 2023, faster than the chronic segment as a whole, which grew at a CAGR of 12% in the same period, according to Iqvia. He claims 87% of the cardiologists Mankind approaches prescribe its products.
Ramesh says the other big growth driver will be the consumer-healthcare business, which boasts four over-the-counter products that the company says are No. 1 (by sales) in the markets for condoms, pregnancy tests, acne treatments and emergency contraception. “Consumer brands make up only 8% of our business but they give us so much brand recognition,” says Rajeev. “But this is a tough space,” he adds. “Ninety percent of brands fail.” He declined to give a forecast for the division, but Macquarie Research says its revenues are growing at a 10%-11% CAGR.
Over the past two years, Mankind has made acquisitions to support both the chronic-medications and consumer-healthcare businesses. As well as the Panacea Biotec deal, it agreed to license a heart-failure medication from Switzerland-based Novartis. It also acquired a skincare line and an inhaler brand from Hyderabad-based Dr. Reddy’s Laboratories, and a majority stake in Delhi-based health and wellness brand Upakarma Ayurveda. Other than the Panacea Biotec purchase, the cost of the acquisitions was not disclosed.
Another boost to the company’s prospects was its public offering, giving it access to equity financing. However, two days after the listing, Mankind notified the stock exchanges that India’s Income Tax Department was “conducting a search at some of the premises/plants related to the company and some of its subsidiaries.” Mankind said in the filings that it was responding to queries raised by tax officials, and that there was no impact on its operational performance. The search concluded in May and the company says results have not been released. The tax agency did not respond to requests for comment.
Analysts say Mankind’s stock benefits from being the only listed large-cap pharma that is a pure domestic play. “There’s a premium for domestic players like Mankind because the Indian market has good visibility and high predictability of revenue,” says Akolkar. “It’s not subject to the pricing pressures and regulatory challenges associated with the U.S.,” he says.
Asked about exports, Rajeev is ada-mant. “Our focus will always be domestic,” he says. “If we create a complex, difficult-to-manufacture and differentiated product, then there is a benefit in exporting.” He adds: “Otherwise it’s just a commodity and we don’t want to compromise on profitability.” There is plenty of room for growth at home, where per-capita spending on pharmaceuticals is $16, compared with $100 in other emerging markets and $650 in developed countries, according to data from Iqvia and Macquarie Research.
Ramesh Juneja, chairman of Mankind Pharma.
Nishanth Radhakrishnan for Forbes Asia
The pharma journey for the Juneja family began in 1974, when Ramesh, second of five siblings and the oldest of three brothers, started as a sales rep with a small drug company in Delhi after graduating with a science degree from Deva Nagri College in Meerut. A year later he became a regional sales rep for Mumbai-based Lupin, controlled by the Gupta family, now the No. 7 firm in the market.
He resigned from Lupin in 1983 and with Rajeev, another brother, Greesh, their sister Prabha Arora, and an external partner, set up pharma company BestoChem, at which Rajeev started his career. In 1995, Ramesh, Rajeev and Prabha’s husband, Prem Kumar Arora, left BestoChem and invested a combined 5 million rupees to launch Mankind, a company they had incorporated four years earlier. Greesh remains a director at Delhi-based BestoChem, which is unlisted.
Mankind began with 25 reps selling painkillers and antibiotics, then a decade later moved into diabetes and hypertension pills. In 2007, it launched a line of condoms called Manforce, its first homegrown consumer-healthcare brand. The same year, private equity firm ChrysCapital, based in Mauritius, took an 11% stake for 850 million rupees, valuing Mankind at 7.7 billion rupees. It sold the shares in 2015 to U.S.-based PE firm Capital International Group for a 14-fold return. Three years later ChrysCapital bought a 10% stake at double the 2015 valuation. It sold a 2.5% holding in the May IPO but retained 7.5%. Capital International also sold shares in the IPO but still has 6%.
“When we first invested in 2007 it was more of a call on the entrepreneurial ability of Ramesh Juneja,” says Sanjiv Kaul, partner at ChrysCapital. The second time the focus was on the next generation, led by Rajeev, he adds. “While Ramesh Juneja continues to play a father role, Rajeev is the right man, at the right place, at the right time,” he says. Ramesh comes into the office for five to six hours a day but leaves day-to-day management to Rajeev and the younger generation, which includes Prem’s son Sheetal, 47, CEO; Ramesh’s son Arjun, 37, chief operating officer; and Rajeev’s son Chanakya, 27, director of technology.
Ramesh tries to keep the family’s success in perspective. “Your feet should always be on the ground,” he says. “We started from the bottom of the pyramid, everything we did was for survival.”
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