Interview with Dr. Mohammed Saud Al-Badr, CEO, Saudi Chemical Company / AJA Pharmaceutical Industries

17 Dec Interview with Dr. Mohammed Saud Al-Badr, CEO, Saudi Chemical Company / AJA Pharmaceutical Industries

Three years into the Crown Prince’s Vision 2030 plan to reduce Saudi Arabia´s dependence on oil by diversifying its economy and developing sectors such as health, education, infrastructure, mining, entertainment and tourism. What changes have you seen since Vision 2030 was implemented and what benefits have you seen for the Kingdom?

 Dr. Mohammed Saud Al-Badr: We in the business sector have been talking about the need for change for a long time. For myself, I have been hearing about it for the last ten years at least. The aim of Vision 2030 is correct in that our economy cannot depend solely on oil. We cannot depend on only one resource. Diversification is important. We must create new industries for Saudi Arabia for it to have additional sources of income, and to take full advantage of the location of Saudi Arabia as a central place that connects Asia, Africa and Europe. There are lots of opportunities that can be taken advantage of to create new industries in Saudi Arabia. There are other countries that do not have the natural resources, or the young working population, yet they have a higher GDP (gross domestic product) than Saudi Arabia. Vision 2030 is putting things into action. It is the new way forward for the Kingdom. I believe that a good strategy is only as effective as efficient execution. Strategy and execution are both crucial.

Your company went through a similar process of diversification, particularly under your leadership. The company’s expansion into the pharmaceutical industry is an example of this. Can you tell us about this journey and what would you say prompted the move to diversify, and how did this benefit the company?

 Dr. Mohammed Saud Al-Badr: The company was established in 1972 and was primarily involved in civil explosive manufacturing. In 2001, when it was listed, Saudi Chemical also acquired SITCO Pharma (Saudi International Trading Company Limited). SITCO Pharma was established in 1991 as a pharmaceutical distribution company based in the Kingdom while Saudi Chemical was more of a regional company. In 2006 / 2008 the company established SINCO (Suez International Nitrate Company), an ammonium nitrate manufacturing company based in Egypt that supplies Saudi Chemical with raw materials. Almost 70 percent of the raw material that Saudi Chemical needs is ammonium nitrate. When I came into office we started the company AJA Pharma that specializes in pharmaceutical manufacturing. This is important to note because distribution is a limited activity, it’s primarily a logistics activity and limited only within Saudi Arabia, but with pharmaceutical manufacturing we can reach the whole world. What the business can achieve is limitless, and it is integral to the distribution business anyway. Since we have a good relationship with international pharmaceutical companies it was easy for us to get into pharmaceutical manufacturing. We already had a distribution and logistics company. There are eight thousand six hundred (8,600) pharmacies in Saudi Arabia. We thought of starting a distribution fleet so we could distribute non-pharmaceutical products that were sold in drug stores as well, like cosmetics and fast consumer goods. So we started CCCIL (Chemical Company for Commercial Investment Limited Company). 

 Now we are into the military explosives business also. We started last year. It is under Saudi Chemical Company. Just to avoid confusion, Saudi Chemical Company is the holding company, and under that there are five companies. One of them is Saudi Chemical Company Limited.

Talking about diversification, in the years to come, where do you see the most growth potential? Is it in pharmaceuticals or explosives manufacturing? What are your growth plans?

 Dr. Mohammed Saud Al-Badr: In Saudi Arabia and the region, there are plenty of good business opportunities. At the same time, with pharmaceuticals, it is a long term investment. With AJA Pharma we cover the entire Kingdom of Saudi Arabia, and we are now in the GCC countries (Gulf Cooperation Council) too. We are also shooting for European and American markets.

 To establish ourselves, we first look for an agent in each country. But in each country we must have a product, a product that is already registered in that country.

Standards are high in order to break into the international market. How does AJA Pharma rate in terms of international standards?

 Dr. Mohammed Saud Al-Badr: When we started AJA Pharma, we hired a German company called Glatt as a consultant. They are distinguished in this field. Most of the machines we use are of the highest German and European standards. When we started in the beginning, we did not have many products. We signed with international companies where we manufactured products for them. We have six of those international partners now, they are Novartis, Abbott, Roche, Gedeon Richter,  Servier, and Lundbeck from Denmark. In order to manufacture for these international companies we had to reach a very high standard. From the beginning we aimed to establish the factory based on European and U.S. FDA (Food and Drug Administration) standards. Once we are ready, we can have products registered in Europe. This is the easiest way to enter into this market: not to register the products in Europe, instead purchase the registered products from Europe or the United States. Afterwards, the authorities will come to inspect your factory and facilities and make sure that it complies with the standards. And since we are manufacturing for these European and American companies, we certainly fit their standards.

Looking at Saudi Chemical; the holding company, it has five companies under it. Which is the most valuable, and brings in the most revenue?

 Dr. Mohammed Saud Al-Badr: For the time being AJA Pharma is still in its inception phase. It has not reached its breaking point yet, perhaps next year. But with explosives, it is a specialized business and is profitable. The pharmaceutical distribution is vertical, so it also brings in large income.

The company is in expansion mode. You are growing in every sector that you are present in. You also raised capital recently. Could you share with us the motive behind this strategy?

 Dr. Mohammed Saud Al-Badr: Starting from today, our capital increased from SAR632 million to 843 million. For each three shares we give one share. So from the retained income we capitalized. We capitalized around 200 million.

 Now the advantage lies with the banks. They will make sure that the retained income will not be distributed, and it will remain in the company so the liability of the company in front of the lending institution will be stronger.

Q2 was a good quarter for you, net profit grew by 11 percent. You posted a 19% growth compared to the same period last year. Do you see this growth as  sustainable? What is your outlook for the rest of the year?

 Dr. Mohammed Saud Al-Badr: There is growth and profit. Since AJA Pharma started, we had three lines of product types: capsules, tablets and liquids. Now we have creams as well. We started production in the beginning as secondary packaging and then we moved back into primary packaging but to go through the complete line we need FDA approval. Once they approve each line, we will announce the production work, and then it will become operational. The pre-operation expenses will be recognized this year. But moving forward, the income from AJA Pharma, if you compare it with other businesses there has been growth.

One of the pillars of your expansion strategy is to build new partnerships with leading brands such as Novartis, Roche, and other prominent pharmaceutical companies. How do you select partners? And how do you reach out to potential partners and investors?

 Dr. Mohammed Saud Al-Badr: That is the strength of being in distribution for the last twenty years.  We have SITCO Pharma, and we have good relationship with international pharmaceutical principals. We built a mutual trust with thim

When you talk to potential investors or partners, do you sometimes encounter misconceptions about Saudi Arabia?

 Dr. Mohammed Saud Al-Badr: I have not really encountered anything like that. The good thing about business is that there are clear KPIs (key performance indicators). Everything else is irrelevant.

 It is obvious that Saudi Chemical is in growth mode and is expanding in the various sectors that it is present in such as pharmaceuticals and military explosives. Is the company open to further diversification and entering entirely new industries?

 Dr. Mohammed Saud Al-Badr: Yes we are. For example, in pharmaceutical distribution we are looking closely at online sales and digital pharma. We are ready to move into this kind of business. We know that the market dynamic is changing, so we are also adapting to this change.

 We have seen a big push for e-commerce so we are taking a closer look at online sales. Online sales also need logistics and distribution. It’s an end-to-end business, so we are preparing ourselves for this.

Traditionally a pharmaceutical company spends a significant amount of revenue on R&D (Research and Development). Do you foresee AJA Pharmaceutical moving more towards this field and actually becoming a developer of new drugs?

 Dr. Mohammed Saud Al-Badr: R&D is important for growth and business sustainability. I feel that it is our destiny. For instance, we are also in explosives where R&D is important, and we are developing some products there. With pharmaceuticals, we signed some agreements with universities. For example, when we opened our factory in Hail City we signed an agreement with a pharmaceutical college there. We now have training and joint research. It is something I see in the near future, us developing our own pharmaceutical products. We are on the way. We are also in discussions with KAUST (King Abdullah University of Science and Technology).

You have been in this industry for a long time. What is one thing that you want to achieve? Is there anything that you still aspire to?

 Dr. Mohammed Saud Al-Badr: I want to establish an international company that is based in Saudi Arabia. This is what I want to achieve.

Any final comments to the readers of Newsweek?

Dr. Mohammed Saud Al-Badr: Making money is the oxygen that we breathe but we don’t wake up every morning just to breathe. We are proud of the good things that we do to others. Breathing – in itself – is not the only mission that we have in life. The company has to make profit, but it also has to have a higher purpose – for humanity.