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CHAPTER 1; OVERVIEW OF DIVI’S LAB

1.1: INTRODUCTION TO DIVI’S LAB

Established in the year 1990, with Research & Development as its prime fundamental, Divis

Laboratories focused on developing new processes for the production of Active Pharma

Ingredients (APIs) & Intermediates. The company in a matter of short time expanded its

breadth of operations to provide complete turnkey solutions to the domestic Indian

pharmaceutical industry.

With five years of experience, expertise and a proven track-record of helping many

companies with its turn-key and consulting strengths, Divis Laboratories established its first

manufacturing facility in 1995.

Built on a 500 acre site at Hyderabad (Unit-I). the plant comprises of 13 multi-purpose

production blocks and has space for further growth and expansion.

Divis Laboratories set up its second manufacturing facility at Visakhapatnam (Unit-II). in the

year 2002 on a 350 acre site. The site has 14 multipurpose production blocks.

Both the facilities are primarily engaged in the manufacture of:

Active Pharmaceutical Ingredients (APIs) & Intermediates for Generics

Custom Synthesis of API's and Advanced intermediates for discovery compounds for

pharma giants

Building blocks for Peptides

Building blocks for Nucleotides

Carotenoids

Chiral ligands

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Complete cGMP guidelines are complied with in both the plants. Our Unit-1 at Hyderabad

was successfully inspected by the US FDA during September 2000, in April 2004 and in

February 2008. Our Unit-2 at Visakhapatnam was successfully inspected by the US FDA

during November 2006 and in April 2009. Divis also undertakes FTE/Contract Research on

process development for discovering new compounds for leading MNCs across the world and

partners with them for the supply of APIs. The company is global in its outlook and

benchmarks its quality standards to the best in the world.

VISION AND MISSION

A Vision To Excel

To maintain leadership in custom synthesis of APIs and Intermediates for health care

and life sciences industry and to be one of the top companies world-wide in the

domain. To develop generic APIs for the late life cycle needs of the Industry.

A Mission To Serve

To be a good corporate citizen and not only add value in our core competency areas of

Pharma but also serve the community at large through social, educational and

environmental initiatives that would establish strong foundations for a better

tomorrow.

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1.2 COMPANY PROFILE

Divi operates from its Headquarters and Registered Office at Hyderabad. The company has

four multi-purpose manufacturing facilities with all support infrastructures like Utilities,

environment management and safety systems.

Divi is engaged in manufacture of generic APIs, custom synthesis of active ingredients for

innovator companies and other specialty chemicals like peptides and nutraceuticals. The

company constantly reviews its policies and procedures to adhere to conformity to the various

regulatory approvals for its manufacturing facilities and its

Commitment to IPR.

Business Areas

The product portfolio of the company comprises of two broad segments:

Generic APIs (active pharma ingredients) and Nutraceuticals and

Custom Synthesis of APIs, intermediates and specialty ingredients for

innovator pharma giants.

The company operates predominantly in export markets and has a broad

product portfolio under generics and custom synthesis. Business has been

growing decently across both these segments & is broadly equal distributed.

R&D Centers

The company has 4 Research Centers with the well defined functional focus on

custom synthesis, contract research for MNC companies as also future generics

involving processes like route design, route selection, establishing gram scale process

and structural confirmation, process optimization, impurity profile, pilot studies,

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prevalidation batches, validation of process and transfer of technology to Plant, review

efficiency of processes and ongoing process.

Regulatory Filings/Approvals

Divi has triple Certifications ISO-9001 (Quality Systems), ISO-14001 (Environment

Management Systems) and OHSAS-18001 (Occupational Health and Safety systems)

for its manufacturing facilities and adheres to cGMP and standard operating practices

in its manufacturing/operating activities and these certifications are renewed from time

to time. All the manufacturing sites have been inspected by US-FDA, barring the

recently implemented DSN SEZ Unit which expects an inspection next year. Divi has

a total of 37 drug master files (DMFs) with US-FDA and 204 EDMFs and 16 CoS

(Certificates of Suitability) with various European Union authorities. Divi has filed a

total number of 8 patents for generic products.

Subsidiaries:

The company has two wholly owned subsidiaries for marketing its nutracutical

products and greater reach to customers within this region.

Divis Laboratories (USA) Inc. New Jersey, USA.

Divis Laboratories Europe AG Basel, Switzerland.

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1.3: MILESTONES

1990 Divis Research Center (DRC) established.

1991-

1993

DRC successfully develops several commercial processes for

intermediates and bulk actives and supplies to manufacturing majors.

1994 Divis Research Center changes its name to Divis Laboratories Limited to

reflect its growing area of operations and its plans to enter the

manufacturing sector in the following year.

1995 Manufacturing Facility (Unit-1) at Choutuppal near Hyderabad starts

operations.

1997 SGS-Yarsley of U.K certifies Divis Laboratories as ISO-9002 compliant.

1999 European Directorate gives a "Certificate of Suitability" (CoS) for

Naproxen produced at Divis Laboratories.

2000 US-FDA inspects Divis Laboratories successfully SGS-Yarsley of U.K

awards Divis the ISO 9001 Certification SGS International AG of

Switzerland awards Divis the ISO-14001 Certification (for its efficient

Environment Management Systems).

2001 BVQI of London awards Divis the OHSAS-18001 Certification (for its

Occupational Health and Safety Management Systems).

2002 Divis commences the setting up of its 2nd Manufacturing Facility (Unit-

2) at Chippada near Visakhapatnam.

2003 Divis opens a new research center christened "DRC-Vizag" for

fundamental research in selected niche business core segments.

2003 Went for IPO and listed on stock exchanges BSE, NSE and HSE.

2004 US-FDA inspects the Choutuppal (Unit-1) for a second time. No 483.

2006 US-FDA inspects the Visakhapatnam(Unit-2) for the first time.

2008 Third US-FDA inspection for Choutuppal(Unit-1).

2008 KFDA inspects the Visakhapatnam(Unit-2) for the first time.

2009 KFDA inspects the Visakhapatnam(Unit-2) for the second time.

2009 US-FDA inspects the Visakhapatnam(Unit-2) for the second time.

1.4: KEY PEOPLE

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Dr Murali K Divi, Chairman and Managing Director

Dr. Divi holds a doctorate degree in Pharmaceutical

Sciences from Kakatiya University, Warangal. He is a

member of American Institute of Chemical Engineers,

American Chemical Society, American Cosmetic Society

and American Pharmaceutical Association. He has

extensive experience of over 30 years in the Active

pharmaceutical ingredients industry.

Dr. Divi has considerable expertise in implementing and managing bulk fine chemical

manufacturing facilities conforming to GMP/ US-FDA standards. He has led R&D

teams and developed efficient processes for speciality chemicals, pharmaceutical

intermediates, herbicides and rodenticides and custom synthesis.

Mr N. V. Ramana, Executive Director

Mr. Ramana is a graduate in chemistry from Osmania

University, Hyderabad and is a Member of American

Chemical Society. Mr Ramana has over 20 years of

experience in Pharmaceutical Industry and handled varied

functions in the active pharmaceutical ingredients industry

including Custom Manufacturing and Contract research.

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Mr Madhusudana Rao Divi, Director (Projects)

Mr. Rao Divi is a post-graduate in Structural Engineering

from Mysore University and had executed several off-shore

and on-shore construction projects in India and abroad. Mr

Rao Divi is in-charge of material procurement, project

implementation and production planning.

Mr. Kiran S Divi, Director (Business Development)

Mr. Kiran S Divi is a Bachelor of Pharmacy from College

of Pharmacy, Manipal and was involved in understanding

the markets in USA on active ingredients and intermediates

for about two years before joining the Board. He is Director

(Business Development) and supports export marketing

development by Dr.Murali K. Divi and N.V. Ramana.

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1.5: MANAGEMENT TEAM

Name Designation

Chandra S Divi General Manager

G Hemanth Kumar General Manager

G Suresh Kumar Director

K Satyanarayana Director

Kiran S Divi President & Director

L Kishore Babu Chief Financial Officer

L Ramesh Babu Chief Information Officer

M Ramesh Babu Chief Technologist

Madhusudana Rao Divi Director – Projects

Murali K Divi CEO

Murali K Divi Chairman & Managing Director

N V Ramana Executive Director

P Srinivasa Rao Chief Technologist

P V Lakshmi Rajani Co. Secretary & Compl. Officer

P V Lakshmi Rajani Secretary

R Ranga Rao Director

S Devendra Rao General Manager

S Ramakrishna General Manager

S Vasudev Director

Y T S Prasad General Manage

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1.6: PRODUCTS

Generics

Divis manufacture API's (Active Pharma Ingredients) for the Generics. As a company

Divis understand that sustained development is not possible without respecting IPR.

Divis takes great care to ensure that its products or processes do not infringe valid

patents.

Divis is actively involved in developing alternate, patent non-infringing processes for

APIs, for the inventors to manage late life cycle and leading generic drug

manufacturers.

Intermediates

Divis supplies advanced intermediates for generic APIs that are already out of patent,

as also for APIs which are about to enter generic status shortly. Here again, Divis has

tie-ups with both original inventors and generic API manufacturers.

Protected Amino Acids

Divis has built up a strong base in the manufacture of BOC, FMOC and CBZ

protected amino acids, the protecting reagents themselves, peptide condensing agents,

totally synthetic, natural and novel unnatural amino-acids and oligopeptides.

Divis has invested heavily in knowledge, equipment and man-power to expand in this

technology area which is sophisticated, challenging and of course rewarding.

Currently, Divis is a major manufacturer of protected amino-acids.

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Chiral Synthesis

Divis has an established and proven expertise in stereo selective synthesis using chiral

ligands, high yield resolutions using chirally active resolving agents, recovery of

resolving agents and ligands, recycling of undesirable isomers, resolutions involving

enzymes and manufacture of novel ligands like binol, binap and so on.

Carotenoids (Synthetic) and Nutraceuticals

Divis has succeeded in developing multistep total synthesis of important carotenoids

like Apocarotenal, Betacarotene, Lycopene, Astaxanthin, Canthaxanthin etc.

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1.7: MARKET TREND OF DIVI’S LAB

Divis Research Center (Divis Laboratories Ltd) starting as a Research Center and focused on

developing new process for the production of Active Pharma Ingredients and Intermediates in

India, reported its financial results for the quarter ended 30 JUNE, 2013.

Investment highlights

E-13 JUNE-12 % Change

MONTHS JUNE-13 JUNE-12 % CHANGE

NET SALES 5171.50 4695.10 10.15%

PAT 1747.10 1673.80 4.38%

EPS 13.16 12.61 4.38%

EBITDA 2506.00 2322.00 7.92%

The company’s net profit increased to Rs. 1747.10 million against Rs. 1673.80 million in the

corresponding quarter ending of previous year, a increase of 4.38%. Revenue for the quarter

rises by 10.15% to Rs. 5171.50 million from Rs. 4695.10 million, when compared with the

prior year period. Reported earnings per share of the company stood at Rs. 13.16 a share

during the quarter, registering 4.38% increase over previous year period. Profit before

interest, depreciation and tax is Rs. 2506.00 millions as against Rs. 2322.00 millions in the

corresponding period of the previous year.

Expenditure

Break up of Expenditure Rs. Million

Q1 FY14 Q1 FY13

BREAK UP OF EXPENDITURE RS. MILLION

Q1 FY14 Q1 FY13

Cost of Material Consumed 2838.90 1725.70

Depreciation & Amortization Expense 208.80 174.80

Employee Benefit Expenses 530.30 484.50

Other Expenditure 894.50 686.90

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cost of material63%

deprecia-tion and amortiza-tion ex-pense

5%

employee benefit expense12%

other expenditure20%

break up of expenditure

Latest Updates

Exports constituted around 90% of gross sales during the year as against 89% in the

previous year. Exports to advanced markets comprising Europe and America

accounted for 77% of business.

Divi’s well distributed products range, some of the components of the business is

given below:

PARTICULARS 2012-13 2011-12

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PARTICULARS 2012-13 2011-12

Exports 90% 89%

Imports (% of material consumption) 41% 39%

Largest Product 17% 19%

Top 5 Products 48% 51%

Top 5 Customers 45% 46%

Exports in $ terms 79% 82%

Exports in Pounds 16% 14%

Exports in Euro 5% 4%

CHAPTER 2: OVERVIEW OF SWOT ANALYSIS

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2.1: INTRODUCTION TO SWOT ANALYSIS

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis

(alternatively SWOT Matrix) is a structured planning method used to evaluate the Strengths,

Weaknesses, Opportunities, and Threats involved in a project or in a business venture. A

SWOT analysis can be carried out for a product, place, industry or person. A SWOT analysis

is a simple tool to help it work out the internal and external factors affecting its business. It is

one of the most commonly used business analysis and decision-making tools. A SWOT

analysis helps organization to:

Build on strengths (S)

Minimize weakness (W)

Seize opportunities (O)

Counteract threats (T).

To get the most out of a SWOT analysis, organizations need to conduct it with a particular

business objective in mind. For example, a SWOT analysis can help it to decide if they should

introduce a new product or service or change its processes.

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A SWOT analysis is often part of strategic planning. It can help to better understand its

business and work out what areas need improving. It can also help to understand its market,

including competitors, and predict changes that it will need to address to make sure their

business is successful.

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2.2: USES OF SWOT ANALYSIS

A SWOT (strengths, weaknesses, opportunities and threats) analysis looks at internal and

external factors that can affect business. Internal factors are organization’s strengths and

weaknesses. External factors are the threats and opportunities.

Strategic planning, brainstorming and decision making

A SWOT analysis is a useful tool for brainstorming and strategic planning. It will get

more value from a SWOT analysis if organizations conduct it with a specific objective

or question in mind. For example, organization can use a SWOT analysis to help it to

decide if and how it should:

take advantage of a new business opportunity

respond to new trends

implement new technology

Deal with changes to your competitors' operations.

Building on strengths

A SWOT analysis will help organization to identify areas of business that are

performing well. These areas are its critical success factors and they give its

competitive advantage to business.

Identifying these strengths can help it to make sure that organization maintain it so it

doesn’t lose competitive advantage. Growing business involves finding ways of using

and building on its strengths.

Minimising weaknesses

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Weaknesses are the characteristics that put business at a disadvantage. Conducting a

SWOT analysis can help it to identify these characteristics and minimise or improve

them before they become a problem. When conducting a SWOT analysis, it is

important to be realistic about the weaknesses of business so organization can deal

with them adequately.

Seizing opportunities

A SWOT analysis can help it to identify opportunities that business could take

advantage of to make greater profits. Opportunities are created by external factors,

such as new consumer trends and changes in the market.

Conducting a SWOT analysis will help to understand the internal factors (business's

strengths and weaknesses) that will influence its ability to take advantage of a new

opportunity. If business doesn't have the capability to seize an opportunity but decides

to anyway, it could be damaging. Similarly, if they have the capability to seize an

opportunity and don't, it could also be damaging.

Counteracting threats

Threats are external factors that could cause problems for business, such as changes to

the market, a competitor's new advertising campaign, or new government policy. A

SWOT analysis can help it to identify threats and ways to counteract them, depending

on its strengths and weaknesses.

Addressing individual issues

Organization can conduct a SWOT analysis to address individual issues, such as:

staffing issues

business culture and image

organizational structure

advertising

financial resources

Operational efficiency

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2.3: BENIFITS AND LIMITATION OF SWOT ANALYSIS

BENIFITS

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it

involves a great subjective element. It is best when used as a guide, and not as a prescription.

Successful businesses build on their strengths, correct their weakness and protect against

internal weaknesses and external threats. It needs to keep a close watch on their overall

business environment and recognize and exploit new opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in following manner-

It is a source of information for strategic planning.

Builds organization’s strengths.

Reverse its weaknesses.

Maximize its response to opportunities.

Overcome organization’s threats.

It helps in identifying core competencies of the firm.

It helps in setting of objectives for strategic planning.

It helps in knowing past, present and future so that by using past and current data,

future plans can be chalked out.

Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to view

circumstances as very simple because of which the organizations might overlook certain key

strategic contact which may occur. Moreover, categorizing aspects as strengths, weaknesses,

opportunities and threats might be very subjective as there is great degree of uncertainty in

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market. SWOT Analysis does stress upon the significance of these four aspects, but it does

not tell how an organization can identify these aspects for itself.

There are certain limitations of SWOT Analysis which are not in control of management.

These include

Price increase;

Inputs/raw materials;

Government legislation;

Economic environment;

Searching a new market for the product which is not having overseas market due to

import restrictions; etc.

Internal limitations may include-

Insufficient research and development facilities;

Faulty products due to poor quality control;

Poor industrial relations;

Lack of skilled and efficient labour; etc

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CHAPTER 3: SWOT ANALYSIS OF DIVI’S LAB

3.1: STRENGTHS

It has four Research & Development centers. Each plant has its own R&D center.

Divi’s R&D has evaluated more than 500 product opportunities and developed

processes for more than 200 products, out of which 80 are already at commercial

scale.

R &D facilitates in Optimizing production efficiency and economy of scale without

sacrificing quality and Development of environment friendly effluent and/or waste by

products.

Processes, systems, operations and decisions are aligned to ensure that the end product

is of high quality. Divi’s has all the equipment required to monitor and ensure the

production of quality products.

Cost competitive and faster delivery structure.

Transparency in operation

Strong ties with innovator companies and currently partners with 20 of the Top 25

global pharmaceutical companies

DIVI has the strongest CRAMS model in India

DIVI has the strongest balance sheet, with almost zero debt and a strong stream of

positive cash flow.

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Strong financials

14000 skilled workforces

 Largest distribution networks-2500+skilled field force.

Increasing liberalization of government policies.

Efficient technologies for large number of generic drugs.

 Strong brand image.

Certificatation

Divi has triple Certifications ISO-9001 (Quality Systems),

ISO- 14001 (Environment Management Systems) and

OHSAS-18001 (Occupational Health and Safety systems)

Divi has a total of 37 drug master files (DMFs) with US-FDA and 204 EDMFs and 16

CoS (Certificates of Suitability) with various European Union authorities. Divi has

filed a total number of 8 patents for generic products.etc.

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3.2: WEAKNESSES

Lack of experience to exploit efficiently the new patent regime.

Stricter registration procedures.

Alternatives are easily available.

Low or NO switching over costs for the customers.

Large amount of money spent for research and development.

Higher employee cost

More expenditure on power fuel

The economic slowdown during the past years had a large impact on DIVI’s custom

synthesis revenues.

Projects are likely to be costly.

3.3: OPPORTUNITIES

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Growing income

Growing attention to health.

Globalization.

New therapy approaches.

New diagnoses and new social diseases.

Saturation point of the market is far away.

Ageing of the world organization.

To drive growth, DIVI is working on over 20 generic opportunities, which are likely

to unfold gradually in the coming years.

More exports in European and American countries.

3.4: T HRE A TS

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High entry costs in new markets

High costs of sales and marketing.

High competition in the market.

Competitors have a similar product

High costs of discovering new products, Few discoveries

REFERENCE

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www.divislabs.com

www.business.qld.gov.au

Annual report of divi’s lab 2012-13

www.moneycontrol.com