Strong growth fuels ambition to expand at Neuland

Neuland is best known as a manufacturer of bulk active pharmaceutical ingredients, currently manufacturing around 1000 tonnes of API a year mainly for customers in the generics industry, as well as medicinal chemistry services, process development, analytical research and scale-up activities. But it has ambition to become an "end-to-end​" provider to the pharmaceutical industry, according to chairman and managing director Dr D R Rao, and that means branching out into drug discovery and development activities. The deal with Cato is a pivotal part of that strategy and involves setting up a contract research organisation (CRO) based in Hyderabad - Cato Research Neuland India - that will provide clinical trial services, data management, statistical analyses and regulatory expertise. It will focus initially on Phase II and III testing, with the ultimate aim to provide a full suite of services from Phase I to IV. The rationale behind the move, according chief operating officer Sucheth Rao, is that a broader portfolio of services will "de-risk​" and diversify the business and tap into the fast-growing clinical testing segment in India. At the moment there is not much sign of a slowdown in its core businesses. This week Neuland reported a healthy 17 per cent hike in quarterly revenues to 64 crore (around $15m), while an ongoing drive to boost manufacturing efficiencies lifted profit 30 per cent to 11.35 crores ($2.7m). That's a little shy of its revenue growth of 25 per cent in fiscal 2007, but in line with its performance in the same quarter of last year. Commenting on the results, Dr Rao said: "our product portfolio, financial strength, and demonstration of superior overall performance is reflected in our results and will continue to do so despite the tough​ market conditions​ and the weakening dollar​." He added that in addition to the move into contract clinical testing with the Cato JV, Neuland will subsequently address other areas such as formulation development and preclinical research. The value of the contract research in India is expected to approach $2bn by 2010, up from $1.2bn in 2006, according to data supplied by market research firm Frost & Sullivan. The company has already announced plans to double its manufacturing capacity with the construction of another manufacturing facility, having opened a new R&D facility in 2007. It has another R&D facility due to open within the next year.