Lakshya Jain, Executive Director at Onyx Biotec, shares the company’s remarkable story of growth, innovation and resilience. From establishing advanced manufacturing units to focusing on export markets, Onyx Biotec is poised for significant milestones ahead.
Discover more about their journey and future outlook in the full interview.
Mubina Kapasi: Hello everyone and welcome to Smallcap Spotlight. Today we are going to be talking to a company that’s into the manufacturing or rather contract manufacturing of drugs and pharmaceuticals, that’s Onyx Biotec. I have with me Lakshya Jain, the whole-time director of the company.
Hi Lakshya, thank you so much for joining us today. Let’s start off by giving our viewers a sense of the journey of the company, what sort of started the journey, what inspired the gestation or the establishment of the company?
Lakshya Jain: So our company was started in 2009 by the first line of promoters in Baddi, Nalagar area. Seeing the market trend and the demand for locally grown manufactured drugs, that is the reason that they started with it in Baddi because Baddi had just been recently given a special economic zone area. So there were three partners that started it with two lines of manufacturing in 2010 and till 2023, so we have six lines of manufacturing in unit one. In 2023, we started another unit that is a dedicated dry powder injection and dry powder setup unit.
So this is the product that we are manufacturing, so this is called WFI, that’s a water for injection oil. So it’s categorized under small volume penetrals that are below 100 ml. So this water is used to mix this dry powder, which is an antibiotic and given intravenously to the patients.
So we started on this journey in 2010 and that time we had two lines for manufacturing WFI and by 2023, we have six lines of manufacturing WFI. So starting at a turnover of 2.2 CR in 2010, we’ve come up to 53 CR of this financial year and we are representing the second line of promoters. So we joined in 2016 when we got three more new lines in unit one and this is how we came into existence.
Mubina Kapasi: What have been the key milestones that you know you have faced while running Onyx Biotec and also more importantly the challenges that you face especially in the day-to-day operations?
Lakshya Jain: So as I’ve already told you in 2010, we started with two lines. Seeing the demand, we were one of the first players to manufacture sterile water for injection in the Baddi area. So seeing the demands, we’ve got two more lines by 2014 and by 2016, we got another line and in 2023, 2020, we got another line. So in 10 years, we’ve got six lines because of the increased manufacturing demand of this product and we are serving all the major customers like Aristo, Mankind, McLeod’s, Glenmark, Biological E and Sun Pharma. And we are the only authorized manufacturing vendors for Sun Pharma at their Devas plant. So the main thing that we give our customer is the quality and the timely delivery of the product, which I think is the main reason for which we’ve survived for 14 years in this market.
Mubina Kapasi: Now as a contract manufacturer, you cater to some of the biggest pharmaceutical companies in India. Could you share a little bit about the entire contract manufacturing market, the competition?
Lakshya Jain: Contract manufacturing, many companies have been doing it for a very long time. But due to increase in demand plus due to increase in demand of manufacturing capabilities, the drug authorities have become so strict that they want the latest technologies in the manufacturing of their products. So there is a guideline that is Schedule M that is being followed by every drug manufacturer. So with the upgradation of Schedule M, everyone needs to upgrade their plant so that the minimum compliances have to be followed. So when we came up with the new plant in 2023, we came up with the latest EU GMP guideline and latest Schedule M so that we could cater to today’s needs. So that we have the latest technology to manufacture the latest products with the best quality for our customers.
Mubina Kapasi: Different IPs and molecules keep going off patent. So how do you tap into these opportunities to further your business, your revenues?
Lakshya Jain: See, if we talk about molecules and IPs, these are the molecules that we’re manufacturing currently. They’ve almost been 30-35 year old molecules. So all the patents and the liabilities that they have were already finished. But it’s an easier market for us to tap rather than going into a molecule that is currently being held in a patent.
Because for a patent to get over, you need at least five to seven years. And to manufacture such a molecule, you need even a bigger manufacturing capability. So we’ve tapped into such a field that is already existing, but we’re bringing it with new technology and new machines so that the output is more and the efficiency and the quality remains the same.
Mubina Kapasi: To go back to the contracts that you enter into, the manufacturing contracts, could you explain their nature? Are they usually more long term?
Lakshya Jain: See, it depends. Now, for example, for Unit 2, we’ve got a loan license from Glenmark. Glenmark is a big name. So what they do is they will audit our plant first. They will see if our plant is up to the mark, if the product is okay to be manufactured at our plant. So after the audit is done, they send a compliance letter which has minor points or suggestions to upgrade so that the product that is being manufactured for them will have the best quality.
So once it is done, the compliance is done and everything in the contract is signed. So it goes for up to two to three years. But it is not like they’re going to forget for two to three years.
They’re going to audit our plant regularly. For instance, they can come after six months, they can come after eight months. So it all depends if your product quality is being maintained.
They will have to check. They will send a quality assurance person in our facility to see when their product is being manufactured. Is it being manufactured according to the guidelines? Is it being manufactured according to what they want? So it usually lasts for two to three years, but they will have checks in between so that they know that yes, the manufacturer that they’ve approved will give them the perfect quality.
Mubina Kapasi: You have your IPO of course, and part of the proceeds as we understand are going to go towards a plant in Solan. Could you share what kind of capacity or manufacturing expansion would this lead to for you?
Lakshya Jain: To answer this, so currently we’re doing two products. So that’s antibiotic injections and WFI. So if a manufacturer comes up to us, they will look for more products. They will look, what all do you have in the kitty? So currently we have two products. So now we want to expand on two or three more products such as LVP.
That’s called large volume parenterals. So large volume parenterals are basically in layman languages, when you go to the hospital, they will say, drip lagado. So that is what is called LVP.
So it is like glucose ki drip lagado, ya antibiotic lagao. So that is 100 to 500 ml. So we want to tap into that market so that once a customer comes to us, they will see that yes, they are doing LVP, they’re doing SVP.
So there’s a block of products that we’re doing, and they can see us as a manufacturer as their customer for three or more products. So we are focusing on getting a large volume of penetrals once the IPO funds are received.
Mubina Kapasi: And then we have the other part of the proceeds, which as we understand, are going to go towards a high speed carton packaging line. Is this something that you expect would contribute towards lowering your costs?
Lakshya Jain: Yeah, so what I’ll tell you first, what is high speed cartooning? So once you’re manufacturing this product, that is an injection, so we have to pack it along with this WFI. So all the big MNCs, what they’re doing is they’re getting this product manufactured from us in cassette form. This is single vial, they will get us manufactured in a cassette form.
For example, it is going to have a five vial cassette. So there’s a machine that automatically cuts these vials onto the packing line and automatically fills it with your injection, thereby minimizing human contact. You will require less manpower to pack it in the carton.
So all the customers from unit one, so what we’ve given them is a cassette form of WFI, which enables them to face their audits. For example, Mankind and McLeod, they’re going to face the US FDA audits. So there’s a major minimum requirement of getting the material packed automatically without the minimum use of human intervention.
So they will look out to a customer that will give them an automatic packing product. This is what we’re doing from unit one. And for unit two, the manufacturers that we’re looking for, they will see to it that if we have an automatic packing line or not, because this will indirectly help in increasing the capacity in the packing production capacity of the product.
Plus, it will also help to minimize human contact, thereby maintaining the quality of the product. So all the bigger customers that we’re tapping from unit two, they have a requirement. They want us to get into a high speed carton line so that the volume of product that they’re going to shift to our plant will be packed with the highest efficiency and the fastest in the minimum of time.
Mubina Kapasi: Do you have plans for international or global expansion? The US, of course, is a really big market, especially for Indian contract manufacturers. So any plans to tap into that market?
Lakshya Jain: So currently from unit one, we are already actually from both the units, we’re actually supplying and giving it to exports via merchant exporters. From unit two, we’re directly starting with exporting. In October 2024 only, we’ve got ourselves audited from DRC Congo. So the auditors from DRC Congo came to audit our plant, it was a three-day audit, to get our plant approved in their country. So slowly and steadily, we are doing it phase wise.
For example, first we’re tapping the African market in phase one. We’re going to go for Kenya, we’re going to go for Uganda, Tanzania and Congo. Then we’re going to move to CIS countries, that includes Uzbekistan, Kazakhstan, Turkmenistan, et cetera.
The third phase is going to be the EU GMP and MHR, that is for the UK. As you’re asking for USFDA, USFDA is definitely in the loop. But to reach there, you need to have the small country’s approval first, because it’s not a small thing for USFDA.
It’s a week-long audit, and the compliances and the checks are so stringent, that you need to take time to get your plant first audited by other countries so that you know what level they are on. So definitely it’s in the loop, and hopefully we should be doing it soon.
Mubina Kapasi: So right now you have around five big customers contributing to close to 62% of your revenues. Can we expect this contribution ratio to change?
Lakshya Jain: See, if you say 62% is the top five customers, obviously, we’re going to get it more. We’re having more bigger players coming in for unit two. We have a mankind audit almost there around the corner, plus we have a biological leak, plus our export that I’ve already sold.
So it is not going to be only five major customers that we are showing right now, it is going to be more than them, more than that. And I’m sure there are going to be more bigger customers to increase the capacity and the profit.
Mubina Kapasi: Now the government is boosting CDMO. It comes in the entire Make in India initiative. There’s a PLI as well for drugs manufactured in India. Have you participated in the PLI? Have you benefited out of it in any way?
Lakshya Jain: The PLI scheme is basically for your API, that is an active pharmaceutical ingredient. So what we’re doing is this is a finish, it’s called a finish formulation. So the powder in it is what is called API, that’s an active pharmaceutical ingredient. So for the companies that are manufacturing, the PLI scheme is basically for the people who are manufacturing APIs and KSMs, that’s called key starting materials for API.
So it is not for the ones who are doing it for the finish formulation. It’s basically for the one who is manufacturing the powder that is going to be used by a manufacturer for its finish formulation.
Mubina Kapasi: We’ve been looking at the company’s debt to EBITDA ratio. It’s a bit on the higher side. Could you elaborate on the strategy that the company has been using to mitigate such debt risks?
Lakshya Jain: We started with a unit in 2023. If you have a look before that, we were not in debt. So if anything, like you start a new business, you start a new shop or anything, obviously you get into a little debt. So that is the reason that it shows the ratio is higher. Thus, via this IPO, the main strategy is to reduce the debt of our lenders, so that we are equally in the market.
Can we know about any new products that the company might be working towards? As we discussed on the large volume credentials, so with large volume credentials, and as you know, the air quality right now, it’s so bad. So people are using respools. The respools are used for the, what do you call it? It’s used to get you fresh breath.
During respiratory problems, respools is a big thing. So we are thinking of getting into respools as well as LVPs from a unit one, so that we have a big kitty to serve our customers and the manufacturers.
Mubina Kapasi: We’ve just been observing your profit margins for the last couple of years. You know, it’s been fluctuating. So if you could share with us about what we can expect in terms of profitability in the future.
Lakshya Jain: So when we started with the manufacturing of unit two, that was in 2023, March last year. So for any good product, for any good manufacturer that has to come to you, you need a WHO GMP certificate. And that comes only if you have six months of minimum manufacturing product capability.
You put your product once you’re manufactured for six months. And if you have that data, only then you can approach a customer that, yes, my product that we’ve manufactured at my place is stable. So we were not able to do that for a year.
So we got a WHO GMP for unit two in April 2024. So you’ll see that the profit margins from April to now have increased because we’ve approached all the big customers that have lined up for us. We got a loan license from Glenmark.
We have Biological E. We have GALFA. And we have RPG Life Sciences. So to attract these customers, we needed a WHO GMP certificate.
That is a minimum requirement for any good plant. That is the reason that there’s a fluctuation in the profit margins. And yes, as we go on from now, we have, as I’ve already explained it to you, that we’re attracting more customers. So the profit margin will be stable and will be more in the future coming years.
Mubina Kapasi: What is your long-term vision for the company? And how do you see Onyx Biotec evolve over the next five to 10 years?
Lakshya Jain: So once we have our exports, we are going to go for, as we’ve already discussed, USFDA, hopefully in five years, because that is the minimum requirement for any good company to go for.
Plus, I want to see one of the biggest generating manufacturers in our area. And that will only help if we’re going to be profitable. And if we keep our consistency and quality, that will be maintained from our products.
Mubina Kapasi: That was the management of Onyx Biotec. Thank you so much for watching. And don’t forget that for more such interesting videos, all you have to do is hit the subscribe button on Smallcap Spotlight’s YouTube channel.