A REPORT

ON

INDUSTRIAL VISIT TO

ALKEM LABORATORIES LTD., SIKKIM

Submitted To:

Mr. Eugene A Reuben Submitted by:

2015

ANMOL CHOWDHRY 14DM042

ANURAG GARG 14DM046

RUCHI AGGARWAL 14DM168

SABIR RAHIM 14DM169

SAFIUDDIN SYED 14DM170

SAGAR DESHMUKH 14DM171

SAHIL CHATTWAL 14DM174

SAHIL VOHRA 14DM175

SAKSHI TULI 14DM176

Alkem Laboratories Ltd.

TABLE OF CONTENTS

INTRODUCTION....................................................................................................................................................................3

COMPANY DETAILS...............................................................................................................................................................4

a) The Indian Pharmaceuticals Market:.......................................................................................................................4

b) Alkem Laboratories Ltd.:..........................................................................................................................................4

c) Basic Product Information:.......................................................................................................................................4

d) The Alkem Sikkim Plant:...........................................................................................................................................5

e) Financial Status:........................................................................................................................................................6

HR PRACTICES:......................................................................................................................................................................7

MANUFACTURING PROCESS:...............................................................................................................................................8

Vials Process:....................................................................................................................................................................8

Tablet Manufacturing:.....................................................................................................................................................8

Dispensing.............................................................................................................................................................9

Granulation.........................................................................................................................................................10

Compression........................................................................................................................................................10

Coating................................................................................................................................................................11

Inspection and Packing.......................................................................................................................................12

THE ALKEM SUPPLY CHAIN.................................................................................................................................................12

Suppliers:....................................................................................................................................................................12

Distribution and Logistics:..........................................................................................................................................12

PROMOTIONAL STRATEGIES:.............................................................................................................................................13

OBSERVATIONS AND LEARNING OUTCOMES:...................................................................................................................15

SIKKIM-A LAND OF OPPORTUNITY:....................................................................................................................................16

CONCLUSION......................................................................................................................................................................17

REFERENCES........................................................................................................................................................................17

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Alkem Laboratories Ltd.

INTRODUCTION

As part of the curriculum for the PGDM course offered by the Birla Institute of Management Technology (BIMTECH), students are required to visit an industry where they learn about the different challenges faced by real life professionals in managing different areas of businesses like Marketing, HR, Finance and Operations. This helps the students to obtain an insight about the working of these industries and appreciate the efforts of managers in these industries.

We were taken to Sikkim for the Industrial tour, where there were six different industries to be visited by different groups of students. The industry allotted to us was Alkem Laboratories Ltd. which is a generic pharmaceuticals manufacturer. This report presents our learnings from the industrial trip and other information about the company and the advantages of Sikkim as a tax holiday zone.

We have found the visit to be quite interesting, beneficial and knowledgeable. We have tried our level best to prepare an effective & creditable report.

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Alkem Laboratories Ltd.

COMPANY DETAILS

a) The Indian Pharmaceuticals Market: The Indian pharmaceuticals market has characteristics that make it unique. First, branded generics dominate, making up for 70 to 80 per cent of the retail market. Second, local players have enjoyed a dominant position driven by formulation development capabilities and early investments. Third, price levels are low, driven by intense competition. While India ranks tenth globally in terms of value, it is ranked third in volumes. These characteristics present their own opportunities and challenges.

b) Alkem Laboratories Ltd.: Established in 1973 and headquartered in Mumbai, India, Alkem began operations as a health care marketing company. Alkem has since grown to become India’s seventh largest pharmaceutical company with sales revenues exceeding USD 500 million with a CAGR of 16% over the last five years.

Alkem, one of the India’s leading generic and specialty pharmaceutical companies, is a significant player in the branded drugs and generic drugs space. With a wide ranging presence across acute and chronic therapeutic segments with substantial brand share in the Central Nervous System, Gastro-intestinal, Anti-diabetic, Anti-osteoporosis, Anti-malarial, Cardiovascular, Immunosuppressant, and Nutraceutical segments, Alkem leads the Indian market in the Anti-infective and Pain Management segments.

c)Basic Product Information: Alkem’s success is highlighted by its leadership in the Anti-infective and Pain Management segments. Of its portfolio of 800 brands, 3 brands, Taxim (Cefotaxim), Clavam (Amoxicillin + Clavulanic Acid), and Sumo (Paracetamol) are ranked among the top 25 brands in India, while 14 feature among the top 300 brands in the Indian market. Alkem was the first Indian company to develop, manufacture & market the following products in India:

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Alkem Laboratories Ltd.

Anaestrazole

Cefotaxime + Sulbactam

Satranidazole

Ceftriaxone + Tazobactam

Cefixime + Clavulanic Acid

Alkem has also diversified into the health foods area with the following products:

Jeevan prash – a tasty, Low Calorie & sugar free chyawanprash

Blocal – Low Calorie Sweetner

Salt Substitutes, Fat Substitutes and Sucralose based products – Jams, Cookies, Jelly,

Juices & cakes (Calorie Conscious and Diabetics), Cholesterol free edible Oil.

SALES BREAKUP

Chronic Segment Acute Segment

d) The Alkem Sikkim Plant: The manufacturing facility at Sikkim was built in the year 2007 and is located at Kumrek, Central Pendam, Rangpo, East Sikkim. The Sikkim plant has two separate and distinct manufacturing blocks namely:

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Alkem Laboratories Ltd. - General Block (G – block) equipped for formulation of Non-Penicillin / Non- Cephalosporin products

- Cephalosporin block (C – block) equipped for formulation of dry powder injectables and tablets

The production at Sikkim caters to the domestic business.

Average monthly production at Sikkim plant is about 70 lakh injections and 38 crore

tablets.

e) Financial Status: The following is information on the financial status of the company:

Negligible Debt; Major Project Cost and Expansion Programs met out of Retained Earnings

Low borrowing Cost, Interest Cost progressively becoming nil, Net Income generated on the Interest Front

Owns substantial Properties and Tangible Assets Liquidity:

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Alkem Laboratories Ltd. o Accumulated Cash Reserves and Surpluso Surplus available for Expansion, R&D and M&A Activity

Alkem Labs is considering plans to launch an IPO to raise between Rs. 3000 crores to Rs. 4000 crores which if finalised could potentially be one of the biggest offerings in the pharma space in a long time. The likely timeline for the IPO is around the second half of FY15 and a proposed equity dilution of around 25% would value the company anywhere between Rs. 12000-Rs16000 crore rupees. Merchant bankers are learnt to have been shortlisted by the company.

HR PRACTICES:

The following are some of the HR practices of the company we learned on the Industrial Trip:

Employees are hired on both permanent and temporary basis. Employees up to executive level are paid overtime and from executive level are given

paid leaves in return for overtime. Managers are mentors rather than just supervisors. All new joiners undergo an induction program that comprises of classroom, research,

production and sales insights combined with on-the-job training. This helps the new recruits get acclimatized to the realities of the industry, company and business unit.

As a part of the induction program, employees are made familiar with Alkem business operations and culture.

They are provided an insight into the company's values, vision, culture and strategy rounded off by training in social sensitivity, multiple functions and field sales. This holistic induction enables employees to understand the realities of the corporate world and learn things faster and derive the most benefit from the shortest possible time.

Regular training hours are offered and constant investments are made in the employees’ development to keep them at the top of their abilities.

Training programs are tailored according to individual needs and the courses people take depend on their skills, experience and areas of interest.

Applications are accepted online and through employee referrals. There are one year increments for workers on a grade basis

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Alkem Laboratories Ltd. MANUFACTURING PROCESS:

Vials Process: The process starts with the Vial Decartoning which is the first stage in the vial filling process. The vial are removed from the cartons and transferred to the washing area where the vials are cleaned to remove solid impurities which can affect the medicines purity. After washing the vials the solid impurities are removed such as dust etc. and the vials are ready for sterilization process which will remove the bacteria’s and the impurities which a human eye cannot detect. After sterilization the filing process takes place. At Alkem two types of products are filled in the vials.

Powder Medicine

Liquid Medicine

After the product is filled in the vials the vials are capped with a rubber cap which protects the medicine from bacteria’s and solid impurities. Last and final step is the sealing of vials with an Aluminum cap which holds the cap tight and avoids the rubber cap from coming out.

Tablet Manufacturing: The manufacturing of tablets is a complex multi-stage process under which the starting materials change their physical characteristics a number of times before the final dosage form is produced. Firstly the raw material is obtained from the ware house unit. They calculate the exact amounts required for production of one batch of tablets and deliver accordingly into the production unit by the pass box. The raw material, before entering is tested by Quality Control and checked if it is suitable for production.

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Alkem Laboratories Ltd.

Production begins once the raw materials enter the production unit. The entire production procedure can be divided into five stages. They are:

Dispensing Granulation Compression Coating Inspection Packing

Dispensing Dispensing is the first step and the most critical in pharmaceutical manufacturing; as during this step, the weight of each ingredient in the mixture is determined according to dose. Dispensing may be purely manual by hand scooping from primary containers and weighing each ingredient by hand on a weigh scale, manual weighing with material lifting assistance like Vacuum transfer and Bag lifters, manual or assisted transfer with automated weighing on weigh table, manual or assisted filling of loss-in weight dispensing system, automated dispensaries with mechanical devices such as vacuum loading system and screw feed system. Issues like weighing accuracy, dust control (laminar air flow booths, glove boxes), during manual handling, lot control of each

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Alkem Laboratories Ltd. ingredient, material movement into and out of dispensary should be considered during dispensing.

Granulation Granulation is the process of formation of grains. In simple terms it is the process of mixing of active ingredient with the excipients so that particles accumulate to reach a stage where there is uniformity and no voids in the material. Granulation provides homogeneity of drug distribution in blend which is the next step after particle size reduction and blending. Drying is important to keep the residual moisture low enough to prevent product worsening and ensure free flowing properties. The commonly used dryer includes Fluidized - bed dryer, Vacuum tray dryer, Microwave dryer, Spray dryer, Freeze dryer, Turbo - tray dryer, Pan dryer, etc.

Compression The compression is done on a compression machine. There are two types of compression, Automatic and Semi-automatic. The automatic machine has 45 stations and is controlled by PLC, whereas in the semi-automatic machine, there are 27 stations. Also the weight of tablet (depth of fill) and the thickness are to be adjusted manually. The blend is added into the hoppers. It then flows into the die bore. The amount of blend is adjusted by the feed frame (bronze colored) based on our weight setting. The punches (upper and lower) are fixed onto a turret. When the powder is pressed in between the two dies, it forms a tablet.

After the preparation of granules (in case of wet granulation) or sized slugs (in case of dry granulation) or mixing of ingredients (in case of direct compression), they are compacted to get final product. The compression is done either by single punch machine (stamping press) or by multi station machine (rotary press).

Each tablet is made by pressing the granules inside a die, made up of hardened steel. The die is a disc shape with a hole cut through its centre. The powder is compressed in the centre of the die by two hardened steel punches that fit into the top and bottom of the die.

The punches and dies are fixed to a turret that spins round. As it spins, the punches are driven together by two fixed cams - an upper cam and lower cam. The shapes of the two cams determine the sequence of movements of the two punches. This sequence is

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Alkem Laboratories Ltd. repeated over and over because the turret is spinning round, this process is done to prevent and protect errors in production.

Common stages occurring during compression

Stage 1: Top punch is withdrawn from the die by the upper cam

Bottom punch is low in the die so powder falls in through the hole and fills the die

Stage 2: Bottom punch moves up to adjust the powder weight-it raises and expels some powder

Stage 3: Top punch is driven into the die by upper cam

Bottom punch is raised by lower cam

Both punch heads pass between heavy rollers to compress the powder

Stage 4: Top punch is withdraw by the upper cam

Lower punch is pushed up and expels the tablet

Tablet is removed from the die surface by surface plate

Stage 5: Return to stage 1

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Alkem Laboratories Ltd. Coating

Many tablets today are coated after being pressed. Although sugar-coating was popular in the past, the process has many drawbacks. Modern tablet coatings are polymer and polysaccharide based, with plasticizers and pigments included.

Coating is performed for the following reasons:

1. Controlling site of drug release2. Providing controlled, continuous release or reduce frequency of drug dosing3. Maintaining physical or chemical drug integrity4. Enhancing product acceptance and appearance

Inspection and Packing In Inspection, the tablets are checked for any damages or deviations from the productions. There is a conveyor belt on which tablets will be flowing. The people inspecting would check for any dark spots, breakage etc. and would reject them. They are also passed through metal detectors, which would check if any metals have entered the tablets from the machine walls. Then the finished dosage is sent again for testing to the Quality Control Unit. Finally the packing is done.

THE ALKEM SUPPLY CHAINAlthough very intricate and developed, the information on the supply chain of Alkem Labs was intentionally not explored in detail by the guide. The following is the information provided by the professional guide during the trip:

Suppliers: Alkem has very good relations with different suppliers and has good bargaining power on the price at which they source their raw material. Most of the raw material is sourced on credit and since the plant is located at a comparatively remote location, a good amount of material is ordered in advance.

Distribution and Logistics: Since the inception of Alkem, it has put in a lot of effort and planning in building up a robust distribution network system. Today, they have one of the largest logistic network distribution set up in India covering the entire length and breadth of the country. Distribution Channel starts from manufacturing units. In this the products are

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Alkem Laboratories Ltd. manufactured in factories and various plants across India and packaging is done in the plant itself. Various lots of packed material are then sent to the central warehouse where the further distribution is carried forward. Here there is a carrying and forwarding agent which takes the material from warehouse to various stock agents. Their work is to give clearances and send to the concerned agents. Consignee agent takes order for consignments and delivers it to the stockist. There are around 5500 stockists for Alkem which cater to over more than 1.6 lakh retail outlets. These outlets then help in further distribution of Alkem products to consumers and customers. They cover almost 250,000 retail pharmacies in India.

PROMOTIONAL STRATEGIES:

Alkem Laboratories Ltd is mainly a generic drug maker. Now, the scope of promotion and advertising is limited for such a firm, who is producing medicines whose substitutes are available in the market. The main focus of Alkem is cost reduction to be competitive in the market, a strategy it has successfully followed through the years by following highly efficient production techniques.

So, even though the Television and radio promotions of Alkem are practically nonexistent, there are various other ways through which Alkem promotes its products.

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Alkem Laboratories Ltd. Relations – The founder of Alkem Shri Samprada Singh has always been a highly

respected figure in the Indian pharmaceutical industry. The main values that he instilled in the firm were of building long term relations through commitment and values. Alkem makes it a point in maintaining long lasting relationships with all those that are associated with the firm. That includes its distributors, suppliers, hospitals and doctors. Alkem has made it a point to have solid relations with hospitals and doctors across the nation who then prescribes their medicines to the patients. Doctors majorly influence the buying decision of medicines. This way Alkem not only secures a regular demand for its products but also builds a solid name for its product which is crucial in the long run.

Articles and interviews – The top executives and health experts associated with Alkem regularly write articles in health magazines and dailies relating to latest health and pharma-industry trends. They also give interviews in various business news channels thereby strengthening the company name and brand.

Online promotions – Various websites like medindia.net, poulvet.com etc., shows the list of Alkem products that the general public can refer to while purchasing the products.

Website – Through its own user friendly website, Alkem promotes its products and services by providing detailed information.

Charts – Alkem provides charts of its medicines, products and disease information to various chemists and doctors.

Agreements - Alkem Laboratories enters into various sorts of licensing arrangements and agreements in order to explore market opportunities and draw maximum value out of it. For instance, Alkem Laboratories entered into a licensing agreement with Cooper Surgicals a business unit of The Cooper Companies, Inc. for the Medscanc cytobrushes for women's healthcare markets.

Marketing Alliances- Alkem encourages marketing partnerships and product acquisition and hence they enter into different marketing alliances to enhance their presenceSome of these are:

Karo Bio - Sweden Gnosis - Switzerland

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Alkem Laboratories Ltd. Oculus - The Netherlands Reyon - South Korea Cargen - South Korea Hor Phag - Switzerland

OBSERVATIONS AND LEARNING OUTCOMES:When we visited the manufacturing unit, we made the following observations:

In the vial filling process no. of defective pieces is only 1 in 15 minutes. Outsourcing of material takes around 30 days. In a shift of 8 hours there are 65000 – 70000 pieces of production. Auditing is done by government and WHO. Checking of material is done 3-4 times before final sending – 2 times manually and 2

times by machines. This Alkem plant has revenue of 3000 crores from which 2500 crores are from domestic

market and 500 crores from imports. There is a different dress code for different teams like blue for manufacturing team,

yellow for quality assurance teams and white for visitors.

The main observation was focused on the adherence to Alkem’s quality standards which is the responsibility of its dedicated Corporate Quality Assurance (CQA) team. The team(s) charter includes enforcing a standardized common quality system across the organization to ensure consistency, effectiveness and efficiency during the manufacture of its products.

CQA focuses on:

Establishing quality standards Ensuring Quality by Design Developing processes to achieve those standards Monitoring to ensure compliance (internal audits) Upgrading technology standards Training personnel on quality aspects Packaging control

While observing the manufacturing process, we were also shown some of the key management measures that Alkem maintains at all its locations such as:

Providing a positive working environment for employees.

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Alkem Laboratories Ltd. Protecting the consumer’s interest at every step of the process by maintaining quality. Clean and lean manufacturing processes adopted. Promoting a growth culture in the organization by a good policy framework. Enhancing growth and profitability of the organization by adopting new methods and

technology.

Visits to manufacturing firms are useful for us to understand the nuances and realities of the shop floor, which in itself is a rare exposure. By visiting the shop floor we got to understand the risky conditions in which workers work, the people management challenges involved in managing workers apart from getting hands-on technical knowledge. Such an experience helped students who visited Alkem to figure out management from core from time to people, from environment to social and hence growth holistically.

Though an industrial visit is an integral part of learning to most of the graduate students, on a post graduate level it is very essential for us to learn how we need to act as a manager when we are employed in the industry. An industrial visit provides us with a tool which will eventually help us realize challenges and opportunities in several sectors of management such as Human resources, finance, marketing, operation etc.

SIKKIM-A LAND OF OPPORTUNITY:

In India, units setting up shop in the north-east and in specified backward states do not have to pay any direct taxes for the first five years. They also enjoy a 25 percent deduction on direct taxes from the fifth to the 10th year of operation, according to government information.

The deduction allowed is 25 percent of profits for 10 years. For units located in the north-eastern region and in specified backward states, the deduction allowed is 100 percent for first five years and 25 percent for the next five years.

The objectives of these exemptions can be explained as:

1. Generation of additional economic activity;2. Promotion of exports of goods and services;3. Promotion of investment from domestic and foreign sources;4. Creation of employment opportunities;5. Development of infrastructure facilities.

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Alkem Laboratories Ltd. Sikkim which is the least populous state in the country has attracted pharma investment upwards of many crores. There is minimal interference by the state government. Also there is low cost in labour, power and overall cost of manufacturing. The main attractiveness lies in the multitude of tax benefits it offers. The inclusion of Sikkim under the Centre's 'North East Industrial and Investment Promotion Policy, 2007' in April 2007 did the trick. As part of this, all new units as well as existing units which go in for substantial expansion in Sikkim will be eligible for incentives for a period of ten years from the date of commencement of commercial production. There's 100% excise duty exemption on finished products manufactured there, 100% exemption on income tax, capital investment subsidy of 30% on the investment in plant and machinery, interest subsidy at 3% on working capital loan and even reimbursement of 100% insurance premium. On the top of it all, Sikkim also offers attractive freight subsidy. So this Tax Holiday Zone provides a lot of incentives and profit to Alkem Laboratories.

CONCLUSION

Industry visits sensitize students to the practical challenges that organizations face in the business world. Industrial visits also give greater clarity about various management concepts for students as they can practically see how these concepts are put into action.

We are grateful to the college for providing us with the opportunity to experience the working of a manufacturing industry and we would like to affirm that we have had a good learning experience about the challenges and opportunities in several sectors of management such as Human resources, finance, marketing, operation etc.

REFERENCES

https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Pharma%20and%20Medical %20Products/PMP%20NEW/PDFs/778886_India_Pharma_2020_Propelling_Access_and_Acceptance_Realising_True_Potential.ashx

http://www.alkemlabs.com/about-us http://en.wikipedia.org/wiki/Mixing_(process_engineering)#Solid-solid_mixing http://starpharm.listedcompany.com/processes.html

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Alkem Laboratories Ltd.

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