Piramal Enterprises may be the most unusual contract manufacturer out there. Besides making drugs for other companies and selling over-the-counter products in India, it does its own drug development and owns a big stake in India's cellphone market as well as a piece of a transport lender.
The Indian company is what has been pieced together by Ajay Piramal, who sold his branded generic drug business to Abbott Laboratories ($ABT) for $3.7 billion in 2010. Some of the company's shareholders wanted him to pay the windfall out in a dividend and just stick to contract manufacturing, but Piramal wants to create a branded drug company, he tells Bloomberg.
That is easier said than done, he explained to the news service. It is tough to convince shareholders of that strategy when you are plowing money into drug trials and no revenue is being returned. "There's no valuation for a company doing drug discovery," he said. "It's only looked upon as a cost on the revenue line."
The Mumbai-based company will talk with regulators and review trial data this quarter before deciding whether to spend the money needed to take its lead candidate to late-stage trials, he told Bloomberg. It has two other treatments for tumors in early trials. The company has already decided against pursuing treatments for infectious diseases and will focus on cancer and diabetes instead. He is in talks with some of the companies for which Piramal manufactures drugs about long-term partnerships to help pay for the expense of developing new treatments.
In the meantime, the company has seen its valuation rise on its contract manufacturing and its other investments. Last year it paid $635 million to buy Decision Resources Group; the healthcare research consulting firm was expected to bring in $160 million last year producing specialized information for pharma companies.
Piramal Enterprises will soon sell its stake in Vodafone's Indian operation, for which it expects to earn as much as 20%. It also fends off regular interest from companies wanting to buy its consumer health business. The company chairman keeps it because, he said, it is growing at 25% a year. "We didn't put all our eggs into pharmaceuticals because drug discovery is too risky for a company like ours," he tells Bloomberg. "And we felt confident we could create value by going into new areas."
- read the Bloomberg story