Dishman PharmaceuticalsDishman Chemicals and Pharmaceuticals, the Ahmedabad-based leading player in the contract research and manufacturing services (Crams) space, is expecting growth of about 20% in the segment starting next fiscal.

Crams refers to the outsourcing of activity to make active pharmaceutical ingredients (API) or the drug itself.

According to V V S Murthy, chief financial officer, 2009-2010 was flat due to inventory rationalisation by innovator companies, and the buyout of Belgian firm Solvay, with which Dishman has a Crams agreement, by US-based Abbott Labs.

“Rationalisation of inventory post the economic slowdown is easing. Most pharma giants are looking to curb costs, and will increasingly look towards outsourcing to India,” says Murthy.Cost of manufacturing in India is said to be 60-65% cheaper than the US and 50-55% cheaper than the EU.

Another factor that would help Dishman grow will be revenues from Japan and US. Murthy estimates revenues from Japan, where the company made an entry a few months ago, to be a minimum of $10 million by March 2011, while those from the US, where it is eyeing contracts, to be between $10 million and $15 million by March 2012.

All these revenues would be from Crams, which is the Rs 1,062 crore company’s key business. It currently constitutes around Rs 777 crore.

An analyst from a brokerage firm in Ahmedabad says order inflows from Solvay were limited this year due to the buyout and would get better this year.

“The contracts that Dishman has with Novartis, AstraZeneca and Sanofi Aventis would add to the revenues.” Research analyst Bhavin Shah, from Dolat Capital Market, says Dishman has benefited by mainly catering to innovator pharma companies, rather than generic firms, and this has led to long-term orders and higher revenue visibility.

Crams is seen as a high-growth area, with estimates pegging India’s portion at $1.1 billion, which is less than 3% of the global pie.