Amneal Pharmaceuticals: From Borrowing To Big-Time Success

By Suzanne Elvidge, Contributing Writer
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By Suzanne Elvidge

Bootstrapped. It’s commonly the nature of a start-up, and it not only fuels an entrepreneur’s work ethic but also leads to ulcers. Although now a company with sales of approximately $300 million and nearly 1,000 employees worldwide, it was only eight years ago the founders of Amneal Pharmaceuticals were bootstrapped … and feeling the pressure.

After earning their registered pharmacist degrees from Rutgers University and working in retail pharmacies, two high school friends, Chintu Patel and Jiten Parikh, decided in 2002 to venture into pharmaceutical manufacturing with the support of Chintu’s father, Kanu, and brother, Chirag.

“Our father was an industrial pharmacist and an Indian drug regulatory agency inspector,” explains Chirag, who joined the company formally in 2005, and is now the president, working alongside Chintu, who is the CEO. “He set up his own medical products business in India in the 1970s and 1980s before our family immigrated to the United States in 1987. I guess that means the pharma industry is in our blood.” Chirag, an entrepreneur with degrees in commerce and finance, worked for a number of Fortune 100 companies before creating two technology companies. Chintu has many years experience as a pharmacist with the former drugstore chain Eckerd Corporation.

“We decided on pharmaceutical manufacturing because this was the area we knew the best. We chose to start small with nutritionals since they weren’t highly regulated and thus provided an easier entry to the market,” explained Chintu.

The initial company was self-funded with an investment of $200,000 between the three cofounders and originally based in a 10,000–square-foot facility in Paterson, NJ. The company quickly outgrew this space and expanded to 40,000 square feet in the same building, which had previously been used by Biocraft and was already set up for manufacturing.

At first, there wasn’t much manufacturing going on, though it didn’t take long. Within the first few months of setup, the company had its first contract for bulk manufacturing.

Growth Through Acquisition
Up to this point, the company was still getting by on personal funding from the founders, including credit cards and second mortgages, but then the pressure kicked in. “The next step, moving from OTC to prescription, was going to be a big one, and we knew that it was a risk, but it was worth doing,” says Chintu. To expand, the company needed outside funding. So, Chirag came on board full-time and started to scout for money.

“We were fortunate that a family friend, who just happened to be a private equity investor, came in as the key ‘friendly’ investor,” says Chirag. This individual, who wishes to remain anonymous, made an initial investment of $7 million and has now become a long-term partner. Amneal received a total of approximately $100 million in funding from this investor between July 2005 and 2010.

This injection of cash enabled Amneal to move into prescription manufacturing, starting with a contract for folic acid tablets. The company then prepared its first ANDA (abbreviated new drug application) for metformin tablets, which was approved by the FDA in July 2006. To grow further, the company needed to create a brand and go directly to the market with OTC and prescription pharmaceuticals. This became possible in June 2007 through the acquisition of Akyma, a sales and distribution company based in Kentucky.

Growth through acquisition continued, with the purchase of KVD in December 2007, which brought liquid prescription drug technology and facilities. In June 2008, Amneal made its single largest purchase, that of Interpharm, which took the company from $64 million a year to just shy of $300 million in a little over two years.

The Challenge Of Integrating New Employees
Making an acquired company feel part of an existing company is a major challenge, from combining departments and reviewing policies to changing working practices and cultures and integrating people into a new work environment. This can be the stage where existing employees may feel pushed out by new ones or new employees may still feel a loyalty to the old owners and resent the changes. Whatever the issue is, it can lead to a lot of inefficiency and wasted productivity.

“It takes time to integrate a company — we accept that it’s most likely 12 to 18 months before people feel truly ‘Amnealian,’ yet we aim to keep as many staff members as we can and promote from within rather than bringing people in from outside,” says Chintu. As an example, when Amneal acquired Interpharm in April 2008, it took 18 months to integrate the company. Amneal retained about 370 of the 400 Interpharm employees after going through an intensive process of reinterviewing and rehiring for all posts.

Chirag and Chintu pride themselves on the personal touch and still think of the business as a family endeavor. “We try to encourage passion in our people and give them a feeling of ownership and responsibility, associated with personal accountability, from the 60 key people at the top down to the people on the shop floor,” says Chirag.

The company has already grown from about 25 people in 2005 to over 900 in 2010. And, a new challenge awaits as the company gets larger and its sites spread out across the United States and India. Chintu adds, “We will do all we can to maintain this approach and attitude as we grow — it’s important not to become arrogant or take people for granted.”

Strategies For Staying Competitive
The company that Chirag and Chintu have built has its headquarters and the majority of its facilities in the United States with support services, including a portion of the R&D and API manufacturing, in India. A key differentiator within the generics market is usually cost, especially with generics companies based outside the United States or Western Europe. Amneal’s manufacturing facilities in India do help the company reduce its baseline costs.

“Knowing the culture and region is also a driver — it is easier for me, as someone who was born there, to do business in India than in China, which is another growing region for API manufacturing. However, we do still need the U.S.-style skill sets. While India is the leader in creating the ‘me too’ generics, the high-end R&D and scale-up skills are found in the United States,” says Chirag.

Outsourcing can reduce costs, yet in API manufacturing, it also can increase the risk of contamination or counterfeiting. Amneal inspects its contractors once or twice a year. All batches of APIs, whether in-house or under contract, are tested before production, and the finished products are tested again after manufacturing. Other cost controls include ensuring that the entire process, from R&D through manufacturing to sales, is very efficient.

One example of a step toward reducing costs by improving efficiency has been Amneal’s use of new technology to submit for regulatory approval. In January 2007, Amneal filed one of the industry’s first three ANDAs using the eCTD (electronic common technical document) format, for bethanechol tablets, and received approval in November 2007, taking only 10 months and 10 days.

eCTD is an electronic format for NDAs (new drug applications), ANDAs, DMFs (drug master files), INDs (investigational new drugs), and BLAs (biologics license applications). This is now the FDA’s preferred format, and Amneal has seen its average approval time fall to 14+ months, with one approval taking as little as 8 months. The industry average is 26 months.

“We recruited and trained people in-house to develop our own internal pool of expertise,” says Chirag. “We also have introduced the quality by design [QbD] concept, which builds quality management into every step of the process, and have found that this has reduced the number of questions and requests for clarification that we get from the FDA. In fact, the FDA uses us as an example in their training.”

Amneal has margins of around 38%, which makes it competitive on cost with the top 10% to15% of the industry, but Chintu maintains that the company does not compete on price alone. “We entered the generics market relatively late, so we have focused on products that are niche or have been ignored by the larger companies. This late entry gave us the opportunity to watch other companies, and we have learned that competing just on cost is not a long-term strategy for success. We also have a diverse portfolio, and we are committed to high levels of customer service and support — this is reflected in the six customer awards we have received over the last two years.”

A Focus On Technology And Diversification
Amneal is the fastest-growing generics company in the United States, according to data from IMS Health, and has had 48 products approved to date. Chirag expects this to grow by 72 additional products approved over the next three to four years, with revenues topping $1 billion. So, where can the company go next?

Following its round of acquisitions, which has seen the company grow exponentially, the focus will be on organic growth and expansion of its pipeline. The “patent cliff” (the current wave of blockbuster patent expiries) is proving a challenge for the innovator companies, yet will be a major opportunity for Amneal, as high-value products lose their patent coverage and become available to generics manufacturers.

“We have taken a break to focus on integration, and the next group of acquisitions is likely to be driven by technology and diversification rather than a need for additional headcount or facilities,” says Chirag. “We are interested in speaking to people at all stages of product development and manufacturing, from APIs to packaging.” The company plans to acquire access to novel delivery systems, niche formulations, and new technology platforms through partnerships and joint ventures, in addition to complete acquisitions, and move into higher-value products rather than just simple “me too” generics.

Amneal’s product range currently includes solid, liquid, and gel capsule oral dosage forms, and high-potency products and nasal sprays. The company is looking to extend its offerings into depot, injectable, and transdermal delivery mechanisms through partnering and acquisition in order to accelerate its entry into these markets. The company’s core therapeutic area is pain, with about half of its products in this area, and it holds licenses for the manufacture of controlled substances in the United States, though its strategy is to grow across all therapeutic areas.

900 Nice Guys?
Generics is a very competitive industry, and Amneal’s approach is very much that of the “nice guys,” based on trust and respect — but, can this actually work in the real world, especially as the company grows? Chirag certainly thinks so. “Chintu and I have always focused on collaboration and cooperation; it’s ingrained in us because it is how we were brought up. We stay loyal to our customers and suppliers, but not without question. It doesn’t mean that we are afraid to negotiate.”

The company’s relationship with the FDA is also based on collaboration. “We maintain FDA-compliant cGMP at all our facilities, and we welcome FDA inspections, from GMP to pre-approval. In fact, we actually ask the FDA for suggestions, which makes us pretty unusual,” says Chintu. Over the eight years the company has been in business, Chirag reports that there have been no quality issues with the FDA.

“Nice guys don’t have to finish last; in fact, a team of 900 nice guys can survive and even thrive! It’s certainly working so far. And, while we have grown fast, we would never grow at the expense of quality or service,” concludes Chirag. And, for a company that had year-over-year growth in 2009/2010 of 61% (following 97% growth the year prior) and is the number one generics company in the United States in terms of prescription growth, it looks like it will continue to work.