Insight on Management
How did the business begin, and have you grown at a consistent rate for a technology business?
When I explained my business model to Mr. Thyagarajan, he said that it will take you twice the amount of time, and thrice the amount of money you envisage to begin the business. I don't think he went so much into the technology, but he went more into the perception of what it takes to establish a business, and his own judgment of how long businesses take to establish. So I told him I just want to do this well. This was in the year 2000. He otherwise liked the plan and said it was good. So that's how it began.
The first business plan was to be a product company in the supply chain space, but restrict ourselves to the supply chain space, and be a product company. The clarity that existed then and continues to exist now and the consistent thought was that we will never be a general IT services company. It was the worst time to start a technology business in 2001 because tech businesses globally had crashed. Well, the Shriram Group didn’t really put seed capital. I have been a supply chain guy. I’m still a great fan of supply chain. I absorb that subject very well. The first product was in supply chain, and it was a very simple warehouse management system, which was sold in Malaysia. It will plug on to an ERP. See those products exist not in our system any longer, because they are commoditized products. See price pressure comes in so unless you stay ahead of the curve, when you are doing something very unique and different, you are not going to be able to command a premium. The first client was won because of my personal credibility, with the Temasek Group, than on the credibility of the company. After a few years we said, okay, it’s not going to be easy in the warehouse space because it was commoditized. From there we went to the production floor because that’s a least – a lesser penetrated area. From there on we said, listen, I think this is not enough. We need to move to developed markets. So we were originally only in Asia-Pacific. Then we said we will have to move to developed markets. That’s how we found the idea of building a product for the pharma industry.
Analytics must be an important business for you?
We also do analytics and we do submissions. But we don’t do data capture. The number of people you require in data capture will be about 10 times of what you would require in analytics. So let’s say the way I data capture for a clinical trial in India is different from how it is done in other countries. Now, all the data collected has to get into a common format. So you will have to do manual intervention at different points of time. You will be very surprised that pharma companies are talking about using lot of data analytics. There is also use of the word big data because data from other sources is engineered to make inferences with data from social media.
Today pharma companies want to track websites to understand what people are saying about the drugs and it is mostly because of the adverse events created by a social media event. For example, if it is reported on social media that the drug consumed created side-affects, if not already stated, then the lawsuits that can follow are expensive and time consuming. Let's take – say a company ABC has manufactured a drug – and I take that drug for a particular therapeutic problem. If I continuously have a stomach ache or headaches that become very serious then the propensity to report it on social media today is very high. This is where companies want social media also integrated in the analytics stack.
What makes Take Solutions a serious player in the pharma industry as a technology vendor?
We do the regulatory filings for companies and it is a service. Our product PharmaReady does this for our clients. So what the pharma company sees is the value addition we do in terms of making a regulatory filing easy. We use the data to draw inferences on how a particular clinical trial is going and then you use the data to make regulatory submissions. Cumulatively today we have done more than 200,000 regulatory submissions across 29 countries. … This is typical engagement with a pharma company. It's not necessary for a pharma company that you must buy and own PharmaReady.
The life science business is not new for Take. But, why this emphasis to rebrand this business as a separate subsidiary, with Navitas, in January? Are you looking at inorganic opportunities?
Yes, we started our life sciences business somewhere in 2005. In 2010, we had an excellent overall EBITDA (earnings before interest, taxes, depreciation, and amortization) of 23-24 per cent. However, as parts of our SCM business started getting commoditised our margins suddenly started tapering off. In 2012/13, our EBITDA reduced to 15 per cent. That is when we decided to do a drastic overhaul. During the end of last financial year and during a large part of the current financial year, we walked away from Rs 220 crore worth of business. It was not easy. It upsets shareholders, it upsets the board, it upsets your employees. You keep touching a lot of volume, but if you are basically going off, it's not a profitable growth.
So, we said, let’s go back to profitable growth. We set ourselves a goal, saying that by 2016/17, we will be back at 24 per cent EBITDA. We will be able to do that with the help of the life sciences business, where we have a competitive advantage and an edge in the marketplace. A large part of our investment is going into life sciences and we think it’s a growth opportunity. It’s an industry where outsourcing is just taking off. What most players do today is still largely in-house.
Now on acquisitions. Do we want to bulk up? Yes. But for that, it will not be that easy. These are very specialised areas. We won't buy a company for revenues. Sometimes, when we examine a company, we may like the company, but we don't like the (asking) price. If we like the price, there is something in the company that you don't like at all. If both are okay, then you still have to look at the cultural aspect of whether it's going to be a fit or not. So, as a small company, we have our own challenges of making acquisitions work. We've done a few in the past. The last one we did was in January 2011, more than four years ago. While we are keen on inorganic opportunities, everything has to be right. Organically itself we will grow easily by 18-20 per cent every year. The focus, however, is on profitable growth.
How has the slump in the clinical trial industry affected business?
We are not witnessing a slump in the global clinical trials industry. On the contrary, we are seeing a surge. If this question is to specifically address the situation in India, we are currently not participating in the Indian clinical trials market. We are monitoring the developments closely and are well prepared to participate in the Indian market when the situation warrants it. In fact, we are very well branded in the Indian market due to our flagship software portfolio, PharmaReady, that enables regulatory document management, document and submission publishing (electronic and paper), submission registration, tracking, and management as well as other content management solutions. We have also been very busy implementing drug safety systems, CAPA, QMS, and Track & Trace systems for our customers in India and the region. We are well poised in mind and market share to partner with our customers in their clinical trials area when the opportunity resurfaces in India.
Are Indian companies and MNC pharma utilising pharmacovigilance services?
Yes, it is mandatory for all companies without exception to be accountable for safety, adverse reactions or any other issue relating or subsequent to the launch of a drug. This accountability is a necessity and not an option.
What technologies do you see as futuristic in the areas that you serve?
We are already working on the next generation of cloud-based regulatory IT tools that will radically change the way regulatory information is managed in the next several years. Technologies that would help support data transparency and collaboration as well as predictive analytics will drive the future. Real world evidence and outcomes based treatments will increasingly become the norm, and there will be a surge in the design of new and novel clinical trials that will produce more effective and safe drugs and procedures aimed at personalised medicine.
We are currently engaged in pilot exercises aimed at analysing Drug-ADR (Adverse Drug Reaction) co-occurences for a more effective and timely signal detection and management methodology. Upon scaling across several thousand drugs, this data could also be utilised for drug-drug interaction analysis, off-label usage of drugs, substance misuse, unmet clinical needs and better design of clinical trials and patient recruitment strategies and several more use cases. We are encouraged by the initial findings and hope to scale this platform using the Hadoop infrastructure and launch specific B2B and B2C solutions and services.
What role do you see technology providers such as yours playing in the life sciences industry in the future? What would/ does make you indispensable?
Navitas is not a mere technology company. It is a business enabler that has the ability to view the niche domain it operates in differently, thus delivering better outcomes for the pharma/ biotech industry in the form of lowered costs and faster time to market.