Description
Ranbaxy
Laboratories, India's
largest pharmaceutical
company, has
taken
on global
majors
as it seeks to
dominate
the
generics
market.
N
Chandra Mohan
reports
on the
company's
strategy
to
make it to the
world's
big five in
the
business
24
Corporate Profile
S
even years after Dr Parvinder
Singh, the founder of Ranbaxy
Laboratories passed away, his
scions have quietly re-asserted
control on the family firm, after letting pro-
fessionals run it in the interregnum. A mid-
January announcement made by the com-
pany, stated that Dr Brian Tempest, until
recently chairman, would continue to stay
on as chief mentor and vice-chairman. And
Parvinder’s eldest son Malvinder Singh
would take charge as CEO and MD. The
change of guard was one more reason for
interest to remain high in the country’s
largest pharmaceutical company.
Naturally, the big question is where will
Ranbaxy
Laboratories, India's
largest pharmaceuti-
cal company, has
taken on global
majors as it seeks to
dominate the
generics market.
N Chandra Mohan
reports on the
company's strategy
to make it to the
world's big five in
the business
THE CHANGE OF GUARD: New CEO & MD Malvinder Singh (left) with Dr. Brian Tempest
The Challenges of
Going Global
corporate profile ranbaxy.qxp 28/306 10:07 AM Page 24
25
Malvinder take Ranbaxy? Will he carry for-
ward his father’s vision or have one of his
own? Malvinder himself answers that by
stating that Ranbaxy has realised pretty
much of what his father had envisioned. Dr
Singh wanted it to become a research-
based international pharmaceutical compa-
ny with revenues of $1 billion and the
development of a new chemical entity.
Ranbaxy’s international drive was kicked
off during his lifetime itself and the compa-
ny now serves customers in 125 countries
with manufacturing facilities in nine coun-
tries.
With sales of $1.2 billion in 2005, the
company earns 80 per cent of its revenues
outside India. By supplying cheaper ver-
sions of patented AIDS drugs, companies
like Ranbaxy have forced global giants
making these drugs to slash prices. This
giant, whose business is making cheaper
knock-offs or generic versions and flooding
the world market after the patents expire,
now aims to hit $2 billion in sales in 2007
and $5 billion by 2012. It also wants to
become one of the top five generic compa-
nies. Towards this end, Ranbaxy is pursu-
ing a ‘handful’ of acquisition opportunities
in US and elsewhere, as Malvinder
informed Reuters during the recent World
Economic Forum Annual Meeting at Davos
in January 2006.
To realise sales of $5 billion, having a
major presence in the US is imperative.
Ranbaxy entered the US way back in 1995
and has targeted this market to account for
half its revenues — an objective that is
close at hand with $350 million revenues
in 2005. Branded drugs worth $55 billion
are expected to go off patent in the US
alone by 2010, which can boost
Ranbaxy’s exports manifold. Obviously,
the US remains a “key priority”, felt its
new MD and CEO, who significantly
added, “we need to gain critical size
through acquisitions”, in his media interac-
tions at Davos.
Ranbaxy’s assault on the US market,
however, is far from easy. One of the most
daring legal challenges in recent times was
its challenge of US drug major Pfizer’s
patents on a drug that reduces cholesterol
— marketed as Lipitor — that has annual
sales of $12 billion. Pfizer has a monopoly
on this drug at least until 2009 but
Ranbaxy wanted this protection overturned
so that it could launch a generic version. In
December 2005, however, the US District
Court ruled against the Indian MNC. The
company will certainly appeal as its chal-
lenge holds out the prospect of earning
$800 million from the generic version.
Its US ambitions also were pressured by
STRIVING TO ACHIEVE SUPERSTAR STATUS IN THE GLOBAL GENERICS BUSINESS: Technicians at work in a Ranbaxy laboratory
corporate profile ranbaxy.qxp 28/306 10:07 AM Page 25
26
CORPORATE PROFILE
the continuing price erosion in the intense-
ly competitive generics market where
some drugs sell for five per cent of the
price of their branded counterparts.
Ranbaxy’s US sales plunged by 22 per cent
and impacted on Ranbaxy’s global sales
that remained flat at $1.2 billion while net
profits dropped by 62 per cent to $154 mil-
lion in 2005. This erosion is bound to force
the company to diversify sales to Europe
and Japan that is the world’s second
largest pharmaceuticals market.
These developments triggered a free fall
in its scrip in Indian bourses by over 60 per
cent in 2005. For a sense of perspective in
end-January 2006, the scrip was trading
on the National Stock Exchange at Rs
393.20 (approximately $8.7) per share. In
contrast, in January 2005, its average
monthly price was as high as Rs 1,120.30.
The Ranbaxy scrip lagged behind the boom
in India’s benchmark indices in a big way.
The re-assertion of family control over the
company after a gap of seven years
occurred under these circumstances.
Back to Dr Singh’s vision, it is not so
well known that he often expressed his
preference for greater professionalisation in
running Ranbaxy. Although the promoter
family controls more than 32 per cent
shares, he stonewalled demands to induct
his sons onto the board, as he believed
they had to earn that right through merit.
Dr D S Brar was his chosen successor to
take forward what he had in mind for the
company, and the latter was MD and CEO
of Ranbaxy till he abruptly quit in
December 2003.
T
his drive for professionalism continued
with Tempest succeeding Brar as MD
and CEO. This was also when Malvinder
entered the board, besides being promoted
as president (pharmaceuticals). No assess-
ment of Brar’s (and Tempest’s as well)
tenure as Ranbaxy’s CEO would be com-
plete without taking into account their role
in the internationalisation of Ranbaxy.
Dr Singh had the overarching vision but
Brar implemented it, including the pioneer-
ing decision to set up shop in China in the
1990s. It was Brar who stated that
Ranbaxy’s strategy would be dictated by
its US strategy.
Malvinder clearly has a tough act to fol-
low. But to be fair to him, there is simply
no a priori basis to infer that he is not up to
the job. Or that he would not carry forward
Dr Singh’s vision. The real issue is what
best serves Ranbaxy’s interests as a com-
pany. In this regard, there is a tension
between two regimes in the history of
Ranbaxy — between the ancien regime
represented by the founder Dr Bhai Mohan
Singh, Dr Parvinder Singh’s father, and
the modern one inspired by Dr Singh and
his chosen successors like Brar. Both are
alive ‘n kicking in their own ways despite
the demise of Dr Singh.
Ranbaxy’s future clearly depends on
which of these regimes the young promot-
er will align with. As is well known,
Dr Singh in his lifetime had to fight many
Malvinder Mohan Singh, the new CEO &
MD of Ranbaxy Laboratories, spoke at
length to N Chandra Mohan on his com-
pany's plans for the future. Excerpts:
On the Lipitor judgement's significance:
Lipitor's largest market is America,
our most important market. The US cur-
rently accounts for 35-40 per cent of our
global sales at present. We have a strong
and robust intellectual property rights
case. In the US market, the successful
generic challenge to Lipitor will have
exclusivity for 180 days. This system is
an incentive to generic companies to
challenge patents. It will open significant
opportunities for Ranbaxy to produce an
affordable product for the people.
On Ranbaxy's growth engines:
Besides the US, the other growth
engines are the European Union. Our
basic focus is to strengthen our front-
end business in the US, Japan and EU.
We have a long-term strategy that we
are working on for the Japanese market
— the second largest pharmaceuticals
market in the world that has a low
generics penetration. We have increased
our stake from 10 per cent to 50 per
cent in joint venture with Nippon
Chemiphar Co Ltd.
On his father's vision of a research-
based international pharmaceuticals
company:
We have already realised that vision.
We are research-based as our R&D
expenditures are in the region of $100
million. We are international as we have
ground operations in 46 countries and
manufacturing operations in seven,
besides catering to customers in 125
countries. And we are 100 per cent in
pharmaceuticals. Ranbaxy seeks a lead-
ership position in all its key markets.
On looking out for big-ticket acquisi-
tions:
We are open to big-ticket acquisitions.
We are looking at prospective candi-
dates. The question is what will it pres-
ent us? Size? Technology? Distribution or
reach? Ranbaxy is already among the top
10 leading generic companies in the
world. If we are to soon improve our
position to the top 5, such an acquisition
is definitely part of our plans.
“WE ARE OPEN TO ACQUISITIONS”
On the Web
Ranbaxy Laboratories: www.ranbaxy.com
corporate profile ranbaxy.qxp 28/306 10:08 AM Page 26
boardroom battles to exorcise his father’s
influence, including adapting to the brave
new world of product patents and trans-
forming Ranbaxy into a research-based
international company. The ancien regime
was content with reverse-engineering
patented drugs while Dr Singh realised that
this was no more possible as India one day
would be a signatory to WTO’s trade-relat-
ed intellectual property rights (TRIPS)
agreement.
T
o his credit, Malvinder so far has cho-
sen to take forward his father’s vision
as the biggest challenges lie ahead for
Ranbaxy. Coping with the transition to a
products patent regime effective from
January 1, 2005 is not going to be easy.
To survive, it would have to plough
resources into R&D, patent its molecules
and develop novel drug delivery systems
which lead to proprietory ‘platform tech-
nologies’. Ranbaxy arguably is in a better
position to meet these challenges as it is
already one of the top 10 generic compa-
nies in the world and has a war chest of
$150 to $250 million for acquisitions to
fortify its presence abroad and become one
of the world’s top five generic companies.
To become a truly research-based com-
pany, however, Ranbaxy must move up
the value curve (see box) and take a crack
at evolving its own drugs that can one day
be patented. Admittedly, that task looks
onerous as global drug majors invest hun-
dreds of millions to produce a drug while
the total R&D resources at the command
of Ranbaxy are no more than $100 million
at best. There is, therefore, no escape from
forging joint ventures and alliances with
global majors to participate in drug devel-
opment. At present, the company has an
alliance with GlaxoSmithKline for develop-
ing new drugs.
“We plan to go in for more alliances for
expanding our new drug development pro-
grammes and are already in talks with a
few multinational companies,” admitted the
new CEO and MD of Ranbaxy. All eyes will
therefore be on the success of its first
foray into developing an original anti-malar-
ial drug, which is currently in Phase 2 trials
and could be approved by 2008. When
Malvinder successfully implements
Dr Singh’s vision for a new chemical entity,
perhaps then the decks will be truly cleared
for the young scion to evolve an overarch-
ing vision of his own for Ranbaxy.
27
CORPORATE PROFILE
INDIA'S pharmaceutical giants like
Ranbaxy Laboratories Ltd, Reddy's
Laboratories and Wockhardt, among oth-
ers, are making moves to secure a bigger
global presence, especially in markets like
the US. Having developed a capability to
reverse-engineer patented drugs,
because the previous patents law in India
protected only processes not products,
they have trained their sights on the glob-
al generics market. The strategy is simple
enough: Wait patiently for drugs to go off
patent and then flood the world market
with cheaper generic versions. Ranbaxy's
revenues from the US generic business
thus are expected to rise to $1.2 billion
by 2008.
In the generics business, margins are
wafer-thin due to competitive conditions
in the developed markets. They improve
with branded generics and keep improv-
ing as one moves up the value chain to
finally making patented drugs. Despite
such constraints, however, Ranbaxy is
moving up the value curve: from bulk
drugs and intermediates to generics and
conventional dosage forms. Then on to
value-added and branded generics and
later to new drug delivery systems.
Moving up such a curve improves the
bottomline as margins on bulk sub-
stances and intermediates do not exceed
10 per cent but go up to 100 per cent or
more for new drug discoveries.
The last-mentioned is the Holy Grail
for Big Pharma but Ranbaxy does not
have resources to produce new drug dis-
coveries pegged at $800 million per drug.
There is no choice but to plough more
resources into R&D and form strategic
alliances with MNCs. Ranbaxy has had
earlier alliances with Eli Lilly and its cur-
rent development of an anti-malarial
drug, Rbx11160, could be an exemplar
for the future as the financial risk was
absorbed by a Geneva-based non-profit
organisation, Medicines for Malaria
Venture.
MOVING UP THE VALUE CURVE
Ranbaxy’s growth spurt
* 9 months Apr-Dec. Indexation based on annualised figures for 9 months ended 31.12.98 $1=Rs45 approximately Source: Annual reports
R
s
.
B
i
l
l
i
o
n
corporate profile ranbaxy.qxp 28/306 10:08 AM Page 27
doc_639146372.pdf
Ranbaxy
Laboratories, India's
largest pharmaceutical
company, has
taken
on global
majors
as it seeks to
dominate
the
generics
market.
N
Chandra Mohan
reports
on the
company's
strategy
to
make it to the
world's
big five in
the
business
24
Corporate Profile
S
even years after Dr Parvinder
Singh, the founder of Ranbaxy
Laboratories passed away, his
scions have quietly re-asserted
control on the family firm, after letting pro-
fessionals run it in the interregnum. A mid-
January announcement made by the com-
pany, stated that Dr Brian Tempest, until
recently chairman, would continue to stay
on as chief mentor and vice-chairman. And
Parvinder’s eldest son Malvinder Singh
would take charge as CEO and MD. The
change of guard was one more reason for
interest to remain high in the country’s
largest pharmaceutical company.
Naturally, the big question is where will
Ranbaxy
Laboratories, India's
largest pharmaceuti-
cal company, has
taken on global
majors as it seeks to
dominate the
generics market.
N Chandra Mohan
reports on the
company's strategy
to make it to the
world's big five in
the business
THE CHANGE OF GUARD: New CEO & MD Malvinder Singh (left) with Dr. Brian Tempest
The Challenges of
Going Global
corporate profile ranbaxy.qxp 28/306 10:07 AM Page 24
25
Malvinder take Ranbaxy? Will he carry for-
ward his father’s vision or have one of his
own? Malvinder himself answers that by
stating that Ranbaxy has realised pretty
much of what his father had envisioned. Dr
Singh wanted it to become a research-
based international pharmaceutical compa-
ny with revenues of $1 billion and the
development of a new chemical entity.
Ranbaxy’s international drive was kicked
off during his lifetime itself and the compa-
ny now serves customers in 125 countries
with manufacturing facilities in nine coun-
tries.
With sales of $1.2 billion in 2005, the
company earns 80 per cent of its revenues
outside India. By supplying cheaper ver-
sions of patented AIDS drugs, companies
like Ranbaxy have forced global giants
making these drugs to slash prices. This
giant, whose business is making cheaper
knock-offs or generic versions and flooding
the world market after the patents expire,
now aims to hit $2 billion in sales in 2007
and $5 billion by 2012. It also wants to
become one of the top five generic compa-
nies. Towards this end, Ranbaxy is pursu-
ing a ‘handful’ of acquisition opportunities
in US and elsewhere, as Malvinder
informed Reuters during the recent World
Economic Forum Annual Meeting at Davos
in January 2006.
To realise sales of $5 billion, having a
major presence in the US is imperative.
Ranbaxy entered the US way back in 1995
and has targeted this market to account for
half its revenues — an objective that is
close at hand with $350 million revenues
in 2005. Branded drugs worth $55 billion
are expected to go off patent in the US
alone by 2010, which can boost
Ranbaxy’s exports manifold. Obviously,
the US remains a “key priority”, felt its
new MD and CEO, who significantly
added, “we need to gain critical size
through acquisitions”, in his media interac-
tions at Davos.
Ranbaxy’s assault on the US market,
however, is far from easy. One of the most
daring legal challenges in recent times was
its challenge of US drug major Pfizer’s
patents on a drug that reduces cholesterol
— marketed as Lipitor — that has annual
sales of $12 billion. Pfizer has a monopoly
on this drug at least until 2009 but
Ranbaxy wanted this protection overturned
so that it could launch a generic version. In
December 2005, however, the US District
Court ruled against the Indian MNC. The
company will certainly appeal as its chal-
lenge holds out the prospect of earning
$800 million from the generic version.
Its US ambitions also were pressured by
STRIVING TO ACHIEVE SUPERSTAR STATUS IN THE GLOBAL GENERICS BUSINESS: Technicians at work in a Ranbaxy laboratory
corporate profile ranbaxy.qxp 28/306 10:07 AM Page 25
26
CORPORATE PROFILE
the continuing price erosion in the intense-
ly competitive generics market where
some drugs sell for five per cent of the
price of their branded counterparts.
Ranbaxy’s US sales plunged by 22 per cent
and impacted on Ranbaxy’s global sales
that remained flat at $1.2 billion while net
profits dropped by 62 per cent to $154 mil-
lion in 2005. This erosion is bound to force
the company to diversify sales to Europe
and Japan that is the world’s second
largest pharmaceuticals market.
These developments triggered a free fall
in its scrip in Indian bourses by over 60 per
cent in 2005. For a sense of perspective in
end-January 2006, the scrip was trading
on the National Stock Exchange at Rs
393.20 (approximately $8.7) per share. In
contrast, in January 2005, its average
monthly price was as high as Rs 1,120.30.
The Ranbaxy scrip lagged behind the boom
in India’s benchmark indices in a big way.
The re-assertion of family control over the
company after a gap of seven years
occurred under these circumstances.
Back to Dr Singh’s vision, it is not so
well known that he often expressed his
preference for greater professionalisation in
running Ranbaxy. Although the promoter
family controls more than 32 per cent
shares, he stonewalled demands to induct
his sons onto the board, as he believed
they had to earn that right through merit.
Dr D S Brar was his chosen successor to
take forward what he had in mind for the
company, and the latter was MD and CEO
of Ranbaxy till he abruptly quit in
December 2003.
T
his drive for professionalism continued
with Tempest succeeding Brar as MD
and CEO. This was also when Malvinder
entered the board, besides being promoted
as president (pharmaceuticals). No assess-
ment of Brar’s (and Tempest’s as well)
tenure as Ranbaxy’s CEO would be com-
plete without taking into account their role
in the internationalisation of Ranbaxy.
Dr Singh had the overarching vision but
Brar implemented it, including the pioneer-
ing decision to set up shop in China in the
1990s. It was Brar who stated that
Ranbaxy’s strategy would be dictated by
its US strategy.
Malvinder clearly has a tough act to fol-
low. But to be fair to him, there is simply
no a priori basis to infer that he is not up to
the job. Or that he would not carry forward
Dr Singh’s vision. The real issue is what
best serves Ranbaxy’s interests as a com-
pany. In this regard, there is a tension
between two regimes in the history of
Ranbaxy — between the ancien regime
represented by the founder Dr Bhai Mohan
Singh, Dr Parvinder Singh’s father, and
the modern one inspired by Dr Singh and
his chosen successors like Brar. Both are
alive ‘n kicking in their own ways despite
the demise of Dr Singh.
Ranbaxy’s future clearly depends on
which of these regimes the young promot-
er will align with. As is well known,
Dr Singh in his lifetime had to fight many
Malvinder Mohan Singh, the new CEO &
MD of Ranbaxy Laboratories, spoke at
length to N Chandra Mohan on his com-
pany's plans for the future. Excerpts:
On the Lipitor judgement's significance:
Lipitor's largest market is America,
our most important market. The US cur-
rently accounts for 35-40 per cent of our
global sales at present. We have a strong
and robust intellectual property rights
case. In the US market, the successful
generic challenge to Lipitor will have
exclusivity for 180 days. This system is
an incentive to generic companies to
challenge patents. It will open significant
opportunities for Ranbaxy to produce an
affordable product for the people.
On Ranbaxy's growth engines:
Besides the US, the other growth
engines are the European Union. Our
basic focus is to strengthen our front-
end business in the US, Japan and EU.
We have a long-term strategy that we
are working on for the Japanese market
— the second largest pharmaceuticals
market in the world that has a low
generics penetration. We have increased
our stake from 10 per cent to 50 per
cent in joint venture with Nippon
Chemiphar Co Ltd.
On his father's vision of a research-
based international pharmaceuticals
company:
We have already realised that vision.
We are research-based as our R&D
expenditures are in the region of $100
million. We are international as we have
ground operations in 46 countries and
manufacturing operations in seven,
besides catering to customers in 125
countries. And we are 100 per cent in
pharmaceuticals. Ranbaxy seeks a lead-
ership position in all its key markets.
On looking out for big-ticket acquisi-
tions:
We are open to big-ticket acquisitions.
We are looking at prospective candi-
dates. The question is what will it pres-
ent us? Size? Technology? Distribution or
reach? Ranbaxy is already among the top
10 leading generic companies in the
world. If we are to soon improve our
position to the top 5, such an acquisition
is definitely part of our plans.
“WE ARE OPEN TO ACQUISITIONS”
On the Web
Ranbaxy Laboratories: www.ranbaxy.com
corporate profile ranbaxy.qxp 28/306 10:08 AM Page 26
boardroom battles to exorcise his father’s
influence, including adapting to the brave
new world of product patents and trans-
forming Ranbaxy into a research-based
international company. The ancien regime
was content with reverse-engineering
patented drugs while Dr Singh realised that
this was no more possible as India one day
would be a signatory to WTO’s trade-relat-
ed intellectual property rights (TRIPS)
agreement.
T
o his credit, Malvinder so far has cho-
sen to take forward his father’s vision
as the biggest challenges lie ahead for
Ranbaxy. Coping with the transition to a
products patent regime effective from
January 1, 2005 is not going to be easy.
To survive, it would have to plough
resources into R&D, patent its molecules
and develop novel drug delivery systems
which lead to proprietory ‘platform tech-
nologies’. Ranbaxy arguably is in a better
position to meet these challenges as it is
already one of the top 10 generic compa-
nies in the world and has a war chest of
$150 to $250 million for acquisitions to
fortify its presence abroad and become one
of the world’s top five generic companies.
To become a truly research-based com-
pany, however, Ranbaxy must move up
the value curve (see box) and take a crack
at evolving its own drugs that can one day
be patented. Admittedly, that task looks
onerous as global drug majors invest hun-
dreds of millions to produce a drug while
the total R&D resources at the command
of Ranbaxy are no more than $100 million
at best. There is, therefore, no escape from
forging joint ventures and alliances with
global majors to participate in drug devel-
opment. At present, the company has an
alliance with GlaxoSmithKline for develop-
ing new drugs.
“We plan to go in for more alliances for
expanding our new drug development pro-
grammes and are already in talks with a
few multinational companies,” admitted the
new CEO and MD of Ranbaxy. All eyes will
therefore be on the success of its first
foray into developing an original anti-malar-
ial drug, which is currently in Phase 2 trials
and could be approved by 2008. When
Malvinder successfully implements
Dr Singh’s vision for a new chemical entity,
perhaps then the decks will be truly cleared
for the young scion to evolve an overarch-
ing vision of his own for Ranbaxy.
27
CORPORATE PROFILE
INDIA'S pharmaceutical giants like
Ranbaxy Laboratories Ltd, Reddy's
Laboratories and Wockhardt, among oth-
ers, are making moves to secure a bigger
global presence, especially in markets like
the US. Having developed a capability to
reverse-engineer patented drugs,
because the previous patents law in India
protected only processes not products,
they have trained their sights on the glob-
al generics market. The strategy is simple
enough: Wait patiently for drugs to go off
patent and then flood the world market
with cheaper generic versions. Ranbaxy's
revenues from the US generic business
thus are expected to rise to $1.2 billion
by 2008.
In the generics business, margins are
wafer-thin due to competitive conditions
in the developed markets. They improve
with branded generics and keep improv-
ing as one moves up the value chain to
finally making patented drugs. Despite
such constraints, however, Ranbaxy is
moving up the value curve: from bulk
drugs and intermediates to generics and
conventional dosage forms. Then on to
value-added and branded generics and
later to new drug delivery systems.
Moving up such a curve improves the
bottomline as margins on bulk sub-
stances and intermediates do not exceed
10 per cent but go up to 100 per cent or
more for new drug discoveries.
The last-mentioned is the Holy Grail
for Big Pharma but Ranbaxy does not
have resources to produce new drug dis-
coveries pegged at $800 million per drug.
There is no choice but to plough more
resources into R&D and form strategic
alliances with MNCs. Ranbaxy has had
earlier alliances with Eli Lilly and its cur-
rent development of an anti-malarial
drug, Rbx11160, could be an exemplar
for the future as the financial risk was
absorbed by a Geneva-based non-profit
organisation, Medicines for Malaria
Venture.
MOVING UP THE VALUE CURVE
Ranbaxy’s growth spurt
* 9 months Apr-Dec. Indexation based on annualised figures for 9 months ended 31.12.98 $1=Rs45 approximately Source: Annual reports
R
s
.
B
i
l
l
i
o
n
corporate profile ranbaxy.qxp 28/306 10:08 AM Page 27
doc_639146372.pdf