Journal of Case Research
Global Strategy for Growth: A Case of Ranbaxy Laboratories
Padmanabha Ramachandra Bhatt1
“Personally, I feel that companies who constantly innovate to provide better products and services and who can offer superior value propositions to the consumer are the ones likely to command more respect globally than others”2 Malvinder Mohan Singh, CEO and MD, Ranbaxy Laboratories Ltd Indian pharmaceutical industry was worth of $ 8 billion in 2006 and had been growing at an average rate of 8–9 %. The industry was highly fragmented with more than 20,000 registered units and 30% of market was controlled by top ten companies and the rest of 70% by small companies. The Global pharmaceutical industry was estimated at $ 600 billion in 2006. Indian pharmaceutical industry has become more innovative and enterprising with more investment in R&D especially since the WTO agreement was signed. Ranbaxy Laboratories Ltd. was India’s largest pharmaceutical company with revenue of US $ 260 million in the domestic market and $ 1.3 billion in the global market in 2006. In the domestic market Ranbaxy enjoyed a share of 5.1% with nine brands in the Top 100 list in 2006. It is one of the largest ANDA (Abbreviated New Drug Application) filers with US FDA ( United States Food and Drug Administration). The company’s offices have spread over 49 countries with employment of 12,000. It is one of the ten generics players in the world. Three-forth of Ranbaxy’s revenue comes from international sales, with the US alone accounting for almost one third. The range of products covers a wide band of therapies with a total over 5000 SKUs (Stock Keep Units) globally. Ranbaxy’s vision was “To become a research based international pharmaceutical company”.
Padmanabha Ramachandra Bhatt, Ph.D., Visiting Professor, Universiti Utara Malaysia Email: firstname.lastname@example.org
Ranbaxy’s World, December, 2007
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Journal of Case Research
Ranbaxy Laboratories Limited
Ranbaxy was founded by Ranjit Singh and Dr. Gubax Singh in Amristsar to distribute Vitamin A and anti-tuberculosis drugs to Japanese Pharmaceutical companies in 1937. The company set up a manufacturing unit in Okahla in 1961, in collaboration with Lepatit, an Italian Pharmaceutical company to produce the patented drug chlorophenicol for typhoid. Later Ranbaxy bought the company in 1967. The company went public in 1973 to establish an Active Pharmaceutical Ingredients (API) manufacturing plant at Mohali, Punjab. When Drug Price Control Order (DPCO) was enacted in India in 1970, the prices of all drugs were stipulated by the Government. As a result, the prices had fallen for all drugs. The company had then started exporting bulk drugs (APIs) to Malaysia, Thailand, Srilanka, Middle-East and Singapore in 1975. In Malaysia, it established a joint venture to manufacture and distribution of formulations. API plant was set up to manufacture antibiotics/antibacterial at Taonsa in India in 1987.
Parvinder Singh (1993-1999)
Ranbaxy Pharmaceutical Ltd had remained as a small company under Bhai Mohan Singh till 1990. Parvinder Singh wrested the control of the company from his father Bhai Mohan singh in 1993. He was a doctorate in chemistry from the University of Michigan. He joined the company to help his father in 1967. He was a visionary and a forward looking CEO. When Indian Patent Act (1970) came into exist in India, Parvender Singh exploited the opportunities of new patent act to manufacture formulations and generics. The act abolished the product patents for all pharmaceutical and agricultural products and process patents were permitted for 5-7 years. He had invested heavily in setting up a plant in Mohali to manufacture bulk drugs. Parvinder Singh was always ahead of others in the industry. He wanted to make Ranbaxy a global company. He adopted global strategy through acquisition in US, UK and India. He set up a state-of-the-art Research and Development Centre at Gurgaon, India. R & D acted as an engine of growth for the company. In the R & D Centre, he established Chemical Research, Pharmaceutical Research, Fermentation Research, Novel Drug Delivery System (NDDS), and
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Its brand cefran was the market leader in China. The joint venture helped Eli Lilly to increase its market share of cefactor in USA whereas Ranbaxy was befitted in acquaintance of stringent regulatory requirements of Food and Drugs Administration (FDA) in the USA. anti inflammatory and metabolic disorders segments. Ranbaxy sourced cheap cefactor intermediates to Eli Lilly and Eli Lily in turn marketed cofactor as branded product. Bhai Mohan Singh’s initial strategy was to focus on Active Pharmaceutical Ingredients (API). He has adopted global strategy through joint ventures and acquisition to achieve sustainable growth. He abandoned top-down policy pursued by his father Bhai Mohan Singh. Ranbaxy has entered the US market and operated through two
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. Ranbaxy set up a joint venture with Eli Lilly with 50-50 partnership to manufacture products of international quality in India in 1993. The joint venture manufactured antibiotics. Sri Lanka and Nepal. cardiovascular and other drugs and marketed all over China. Ranbaxy was benefited in terms of technology and Eli lilly got the advantage of low cost manufacturing. He introduced management by self control in the company to facilitate all members of the company to participate in the decision making process.Journal of Case Research
New Drug Discovery Research (NDDR). Later Ranbaxy has increased its stake in RGCL to 70%. He set up a stretch target of sales of US $ 1 billion to be achieved by 2004. Cardiovasculars. Nutritional & GI Tract segment in Thailand and India. The company focused on Urology. analgesics.When Parvinder Singh took over the reign. He formed a joint venture Ranbaxy Guangzhou China Ltd (RGCL) in China in 1993 and started manufacturing bulk drugs and formulations in 1995 ( see Table 7). It acquired Thai Pharmaceutical Company Unicher in 1995 and formed Ranbaxy Unicher Co. the strategy was shifted to manufacture generics which were off-patents drugs. anti-infectives. UK. Parvinder Singh made far reaching changes in the company. Ltd (RUCL). Haematinics. It has a strong presence in Antiinfectives. and Latin American countries. The joint venture manufactured Lily’s products and marketed in India. Parvinder Singh established a global alliance with Eli Lilly to manufacture and market cefactor in US in 1994. RUCL was importing more than 50% of the products manufactured in India. respiratory. Parvinder Singh looked forward to set up international business in USA.
world class generics. In 1990s. A manufacturing unit was set up in Sungai Petani. It wanted to move up from low-margin bulk pharmaceuticals to high margin branded formulations. US and Vietnam. He acquired another company Rima Pharmaceuticals. The acquired centre was given full responsibility of profit and loss of the company. Malaysia. Ranbaxy was successful to market branded formulations as it has received approval from Medicines Control Agency (MCA) for many branded generics. openness. European market is attractive because of aging population and high health costs forcing the goods to open the generics market. His basic strategy was to keep the acquired units as profit centres which helped Ranbaxy to keep acquired firms self sufficient. in US and UK. the semisynthetic pencillins maker to sell generics products in Europe. the over the counter drug manufacturer in 1995 ( Table 7). scaling up and commercialization of APIs. Parvinder Singh wanted to exploit huge potential in Europe and keeping that in mind.Journal of Case Research
subsidiaries Ranbaxy Pharmaceutical Inc( RPI) and Ohm Laborataries Inc. Kedah to cater the need of Malaysia and Singapore market. The regional managers were given high degree of autonomy. In Malaysia it set up Ranbaxy Malaysia Sdn Bhd (RMSB) as a joint venture between Ranbaxy and Malaysian shareholders in 1984. India. However. Nigeria. Later it has increased its stake in RNSB to 55%. Ohm Laboratory had exceptional FDA approval record. Also the acquisition process did not adversely affect the managerial culture. China and other developing countries. self motivation and positive attitude. There was immense opportunity to sell generics in Europe. Ranbaxy focused on formulations rather than branded products because of stiff competition from other major players in branded generics. he set up a subsidiary namely Ranbaxy UK Ltd to sell its branded products in 1996. Ranbaxy’s manufacturing strength has been established in the field of process development. In UK. Ranbaxy’s effort was to sell formulations under its own brand name. The first tier consisted of senior managers and second tier regional managers and the third country managers. China. The major markets for branded generics are Russia.
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. and branded generics. He had adopted three tier organizational structures. It set up world class manufacturing facilities in seven countries viz. Ireland .
The company has changed its financial year to January. CSI. Ranbaxy has come up with three new chemical entities (NCEs) in the area of asthma. the company made a significant improvement to ciprofloxacin. it had out-licensed a NCE. One entity for malaria has entered Phase II of clinical trials. Parvinder Singh’s 80 year old father in 1999. South Africa MCC. In 2002. Bhai Mohan Singh commented after the
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. urology and malaria. a Bayer patented drug which cut the required dosage to once a day against several times a day as needed for Bayer’s drug. The molecule was aimed at mainly for the under developing countries.December from April-March with effect from January 1999. It later out-licensed the technology to Bayer for $ 65 million and also earned royalties on resulting sales. Europe. It rationalized the whole product portfolio in domestic and foreign market to achieve the target of US$ 1 billion by 2004. UK MCA. Parminder Singh set up manufacturing facilities in each region to manufacture drugs at low cost. he established a strong base for the company. These were at various stages of clinical development. and superiority. efficacy. and Africa. and Australia TGA.Journal of Case Research
Ranbaxy’s Manufacturing facilities were approved and audited by international regulatory agencies like US FDA. Asia-Pacific and Latin America and North America. Devinder Singh Brar was appointed as CEO and Managing Director by Bhai Mohan Singh. Before his death. Parvinder Singh made significant value addition to products efficacy or delivery in its NDDS program. codenamed RBx2258 (for treating the enlargement of the prostate gland in people above 50 years). measured in terms of safety. Ranbaxy’s international operations were spread over four regions viz. India and Middle East. to Germany’s Schwarz Pharma for further development and clinical trials.The company dropped those products the sales of which yielded low margins. Bhai Mohan Singh did not consider Paravinder Singh’s son Malvinder Mohan Singh for CEO as Malvinder Singh was very young and did not have maturity to become CEO of the company.
Devinder Singh Brar (1999-2004)
Paravinder Singh died of cancer in July 1999. For example. But Schwarz Pharma had to abandon trials in late phase II due to a lack of desired results.
He used low cost manufacturing facilities to manufacture the anti-AIDS drugs and sold directly to consumers to capture the market. He argued that Ranbaxy has come of age and could manufacture and market quality product independently in Indian and overseas market. The company entered Consumer Healthcare which was thriving business in India. the company’s brand for Isotretinoin capsule in the U S market which has market size of US $ 540 million. D S Brar found that there was a huge market potential for anti-AIDS drugs in India. It has garnered a market share of only 1% against a market share of 80 % enjoyed by Geneva Pharmaceuticals of Switzerlands and Tava of Israel.
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. Ranbaxy gained a market share of 8% for Sotret. Ranbaxy Branded Products Division. Garlic Pearl and Gesdyp. 552 million in 2003. Pepfiz. He continued to follow the global strategy of Parvinder Singh. “Brar will ensure the professionalism inculcated in the company by Parvinder Singh and take the company to new heights”. Its another product Ceftin accounted one third of Ranbaxy’s total sales in U S. D S Brar has envisioned ‘Vision Garuda’ of achieving a target revenue of US $ 5 billion by 2012. nevirapine. He wanted to reiterate Ranbaxy “a research based international pharmaceutical company”. D S Brar launched generic blockbuster antibiotic Augmentin in the U S Market in January 2002. He felt that Eli Lilly’s 50-50 partnership was no longer required for the production of the drugs in India. The company launched four brands viz. abacavir and indinavir in the Indian market. Ranbaxy wanted to launch anti-AIDS drugs lamivudine.7 million HIV positive patients in India. D S Brar took a major decision to pull out of its Indian joint venture with Eli Lilly. It had also got approval from US FDA to make and sell a generic version of Pfizer’s antifungal drug Diflucan. Revital. The business turnover of these products was Rs. His first acquisition was German generic business Bayer in 2000. There were 3. a marketing arm of Ranbaxy which marketed exclusive company owned branded products had launched another branded generic product Sotret.Journal of Case Research
appointment of D S Brar as CEO. 70% of revenue should come from International business. The market was dominated by Cipla and GlaxoSmithcline who did aggressive marketing for the drug.
Thomas & Friedman
Brian W Tempest (2004-2005)
D S Brar exit in July 2004 after completing his five year tenure and Dr.Journal of Case Research
During 2003. He made an alignment with Geneva-based Medicines for Malaria Venture (MMV) and developed synthetic peroxide anti-malarial drug RBx 11160. “The best companies are the best collaborators”3. New Drug Discovery Research ( NDDR) and alliance management as the key growth engines in R & D. Becham and Fisons. Tempest has 32 years of experience with 4-5 companies such as Glaxco Holidays. He was a doctorate in Chemistry from Lancaster University. The US market for Isotretinoin was $ 6 million in 2003. D S Brar identified two focus areas viz. The company acquired the generics business of RPG Aventis Life Sciences in France to increase the market in Europe. December 2007
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. Tempest followed the path of D S Brar. G D Searle. Ranbaxy would be responsible for activities from optimization of lead components to generation of a development candidate. “I feel immense pride and honour to lead Ranbaxy. This was not available to generic players and even the originator itself.
Ranbaxy World. The company received US FDA approval for manufacture and maketing of Isotretinoin of 30 mg strength in June 2003. 2004 to December 31. representing 42% of the company’s global turnover. After taking over as CEO. Ranbaxy Laborataries and GlaxoSmithKline Plc (GSK) have entered into collaboration for drug discovery and clinical development covering a wide range of therapeutic areas. GSK would complete the development. Brian W Tempest (57 years) was appointed as CEO and MD from July 05. 2007. Ranbaxy’s business operations in the US had widened with revenue of US $ 412 million. He was more of a operations person rather than a strategist and visionary. GSK has also got the responsibility of commercialization of the product. Tempest said. Once a compound has been selected as development candidates. The company had obtained 24 approvals from US FDA in 2003.
Avesthagen commended on the collaboration.4 Ranbaxy had signed another collaborative Research agreement with Avestha Gengraine Technologies Pvt Ltd (Avesthagen) in the area of NDDR. The Middle East. Rashmi Barbhaiya. CIS. Europe. Kasim Mookhtiar. left the company in 2003. North America. “Avesthagen’s vision has been to promote new drug discovery and support and enable our Indian Pharma companies to reach and address the needs of the people of the global markets. R & D who had held this position since April 15. Dr.Journal of Case Research
India’s truly global organization. “With the rapid growth of new drug discovery research at Ranbaxy. ……Ranbaxy would endeavor to be at the forefront in delivering the India centric advantages to the advanced and developing countries of the world”. There is a formal mechanism to reward employees for new ideas. We are glad to partner with Ranbaxy in ths endeour and look forward to a very fruitful relationship”5. opportunities exist for collaborative work. R & D President said “This collaboration provides an avenue to Ranbaxy to leverage its discovery and early product development strengths and gain access to cutting edge technologies”7. Africa. Patell. Vice President NDDR. Dr. showing an increase of 43%. It has launched a project called CRUSOE that
Business source Premier Business source Premier 2004 6 Business source Premier 2004 7 ISI Emerging Market In India-Ranbaxy. Dr. The sales of company was the highest in USA (US$ 426 million) followed by BRIC countries (US$ 305 million) and Europe (US$ 192 million) in 2004 (Exhibit 1). Asia Pacific. R & D Ranbaxy said. President. 2003
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. Avesthagen was the first India’s discovery based bio-technology and bioinformatics company. 2002. The company spent US $ 75 million in R & D in 2004. Dr. The company invested in training and development needs of its employees through tailor made programmes and extensive workshops. Founder and CEO. Dr Tempest himself took charge of R & D with separate heads for NDDR and NDDS and generic Drugs Developments reporting to him directly. We are glad to avail of Avesthagen’s quality R & D services in cutting edge technology to augment our capacity so that our current needs can be met in a timely manner”6 The company wanted to climb up the value chain to increase
revenues from dosage forms sales. Dosage forms marketing operations are structured through India. Rasmi Barbhaiya. Latin America & Canada.
“We have restructured our domestic operations to focus on high growth segments. Infection. only strong players in terms of research and technical capabilities can survive. Malvinder Singh. Malvinder Singh wanted to enhance the business in India. During the first half of 2007. Urology.Asia and CIS Ranbaxy said. the company launched three NDDS based formulations viz. but encouraged via contests. Regional Director -India Region of the company was appointed as an additional Director of the company with effect from January 1. Niftran. He has rationalized the product portfolio and focused on speciality-oriented therapies. employee’s suggestions are not only captured.5% in 2006. In-licensing and
Ranbaxy World. said. It has culminated into rapid market share gains and now with the number one position in the domestic market. He focused four disease segments viz. Under this project. Due to our strong marketing capabilities coupled with new product successes. we intend to secure this leadership position in the coming months and years through attracting human resources & retaining talent. Our dedicated and well trained Urology team helps deliver prompt therapeutic solutions to the Urologists and supporting specialists”8. In the new patent regime. Senior Vice President and Regional Director. Commenting on the company’s performance in Urology segment. December 2007 Ranbaxy World. In Urology segment in India. Ranbaxy crossed US $ 1 billion in revenues. 2004 and number two in the company.Journal of Case Research
works on improving operational efficiencies. Tempest had lent his support to Malvinder Singh in his India business. Senior Vice President & Regional Director. By February 2004. Sanjeev I Dani. Inflammation/ Respiratory and Metabolic disorders in his New Chemical Entities (NCE) pipeline. Eligard and Roliflo9. Sanjeev Dani. Asia & CIS. December 2007
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. our performance has been buoyant in recent years. Ranbaxy was the third largest filer of ANDAs (150) with US FDA in 2004. Ranbaxy. With India becoming signatory to the WTO and introduction of the Patent Product regime. Brian Tempest used to spend two-three days in a week visiting labs and talking to scientists. Expressing his delight at this development. “Ranbaxy has identified Urology as a focus area and as result launched superior therapeutic options for the specialists ……. Ranbaxy is leader and enjoyed a market share of 12. the Indian market will be an attractive option for introduction of research-based products.
generics. The combine sale was US $ 80 million in 2006.A in Romania to serve the European market efficiently and cost effectively in 2006. particularly in our key geographies”11. December 2007
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. Europe. Its market was growing at the rate of 31% in USA in 2006 (Figure 2). This means that one out of every ten medicine packs being sold in Romania is currently being
Business source Premier Ranbaxy World. President. We will continue to fortfy our global presence. “Romania now becomes the third largest market for us in terms of revenue. Global Pharmaceutical Business. He understood that in order to be competitive. Malavinder Singh who joined the company in 1998 had worked in different projects such as Information Technology. Malvinder Mohan Singh also wanted to take Ranbaxy to a new height. Expressing his delight with progress of the company. Malvinder Singh said. He bought a US midsized generic company Mutual Pharmaceuticals for US $ 300 million and five other global companies. He ensured right doctors to be covered by sales representatives. lifecycle brands and global licensing. It has a market share of 42% in the developed countries (Figure 1). He raised another US $ 440 million through a Foreign Currency Convertible Bond (FCCB) offering. After the acquisition. On the completion of the transaction. in terms of volume exceeds 10%. He had taken shareholder’s approval to raise US$ 1. Peter Burema. Like his father. We are committed to developing our operation here as strategic hub for Europe and the CIS.2 billion in debt. His strategy was to focus on US. He improved fiscal discipline in the company.
Malvinder Mohan Singh (2005-2008 )
Tempest retired in June 2005 and Malvinder Mohan Singh became CEO and MD. it was renamed as TerapiaRanbaxy and became the largest generic player in Romania.5 billion in equity and US $ 1. The coverage ratio has gone up from 30% to 70%. and emerging markets.Journal of Case Research
launching innovative products remain our prime focus areas”10. a company needs to be strong in the domestic market. Malvinder Mohan Singh acquired Terapia S. “Our combined market share. said.
December 2007 Ranbaxy World. It reinforces our position by expanding our portfolio in a key market that is exhibiting strong growth potential. Malvinder Singh after the acquisition of Be-Tabs said. Ranbaxy is vertically integrated in production and research. The company made nine mergers and acquisition amounting to a value of US 450 million to expand its presence in emerging and profitable markets such as Romania and South Africa in 2006.6 billion in 2006 (Exhibit 3). It had a partnership with Zenotech Laboratory Ltd in India to strengthen oncology therapy and bio-generics in 2007. December 2007
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. It had marketed 11 oncology products as generic formulations in the US and Canada. To strengthen the vertical integration capabilities and fermentation capacities. December 2007 14 Ranbaxy World. He acquired another Be-Tabs of South Africa for US $ 70 million in 2006. He outlicensed Ranbaxy’s Statin molecule to Pharmaceutical Product Development Inc (PPD). an API manufacturer at Malanpur near Gwalior and a strategic stake of 15% in Kerbs Biotechnicals in India and Jupital Biosciences Ltd. The company’s return of net worth was 13. Ranbaxy can take advantage of Terapia’s strong R&D and manufacturing infrastructure as also their highly skilled senior management team.8 billion in 2006 (Exhibit 3).2% in 2006 (Exhibit 2). Ranbaxy entered the fast growing Oncology therapeutic segment in the NDDR agenda. we believe that this investment and partnership provides a strong platform for us to leverage these opportunities”14 Malvinder Singh said. It made a net profit of US $ 3. The company made an impressive performance by increasing its sale to US $ 40. “Having worked with Zenotech for almost two years. a company specializing in the development and manufacture of peptitude products. PPD will have an exclusive worldwide licence to develop.
Ranbaxy World. it acquired Cardinal drugs.Journal of Case Research
manufactured by Terapia Ranbaxy”12. Malvinder Singh’s strategy was to focuss on out-licensing. The move will help us to provide effective disease management solutions in support of the government/s objective to make health care affordable to a wider cross-section of the population”13. in-licensing and NDDS. “The acquisition results in considerable synergies and further strengthen Ranbaxy’s foothold in South Africa. a leading contract research organization.
The Audit function is headed by Vice President who reports directly to the CEO and the Audit Committee. 20. The company also launched the first Atorvastatin under the brand name Storvas in Malaysia. Ranbaxy entered into an agreement with Senetek PLC.Journal of Case Research
manufacture and market Ranbaxy’s Statin for the treatment of dyslipidemia. As of December 2006. trademarks and automated manufacturing equipments for proprietary disposable auto-injector technology. Malvinder Singh continued to focus on NDDS and in-licensing as strategic areas for future growth of the company. Revital is a powerful brand of Ranbaxy which has a market share of 72% in India. Ranbaxy holds US FDA approvals for 121 ANDAs and 76 ANDAs are pending for approvals.4 billion in sales for 200515. December 2007
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. The success of Sotret 30 mg led to growth in the overall prescription market share for the product from 21% to 25. to purchase patents. Ranbaxy received 10 approvals and filed 28 ANDAs including 1 PEPFAR (The US President’s Emergency Plan for AIDS Relief) ANDA for approval by the US FDA.5 % in 2006. 10. The company also received a milestone payment from PPD Inc for the completion of the Phase I clinical studies. Global Consumer Healthcare registered a sales of US $ 35 million globally and US $ 19 million in India. Ranbaxy had a strong Internal Audit function with accreditation of ISO 9001-2000 certificate. the company launched 5. Ranbaxy set up a Global Quality Assurance team which ensures quality manufacturing process across all locations. NDDS has developed proprietary “platform technologies” and contributed 9% to the turnover of Indian business. The in-licensing products were Synasma (Doxophylline) and Trambax ( Tramadol Flash Tabs). Ranbaxy launched blockbuster anti-cholesteremic Simvastalin 80 mg and Pravastatin 80 mg in the US market with a 180 days marketing exclusivity which has captured 56% market share during 180 days exclusivity period in 2006. During 2006. chlolestrol lowering drugs account for $ 32. 40 mg strength of Simvastatin. In 2006.
Ranbaxy World. In the post exclusivity period.
Under NDDR mission. They found an opportunity to buy Ranbaxy because of its low cost production and research facilities to save on costs and drive growth (see Exhibit 4 for comparison). Daiichi Sankyo acquired over 51% stake in Ranbaxy Laboratories Ltd at Rs. its shareholders and the employees. The proposed transaction is also in line with Daiichi Sankyo’s goal of becoming an innovator
Ranbaxy World. cost competitiveness and human capital”16. he wanted to discover and develop novel therapies that meet large unmet medical needs and transform Ranbaxy into a respected international research based pharmaceutical company.Journal of Case Research
“It is an encouraging sign that Indian companies today are more convinced about their global strength of world-class quality.
Acquisition by Daiichi
Ranbaxy was facing many issues such as poor financial position.
In June 2008. The new entity can create better market coverage by producing low cost manufacturing. Daiichi Sankyo. 737 per share. In order to maintain its
growth and market position. Malvinder Singh sold out his stake of 34. With Ranbaxy’s pool of scientific. Daiichi lacked the low-cost expertise and looking for a low cost generics company. no major R&D breakthroughs.Malavinder singh Malvinder Singh gave the strategic direction for the company to move from the generics to New Drug Delivery System (NDDS) to New Drug Discovery Research (NDDR).8% to Daiichi Sankyo. Ranbaxy has spent Rs. technical and managerial resources and talent the new entity can enter a new orbit to chart a higher trajectory of sustainable growth in the medium and long term in the developed and emerging markets. cutting-edge technology. increasing price wars and stiff competition in the generics market. The new entity is a significant milestone in the Ranbaxy’s mission of becoming a research-based international pharmaceutical company. Ranbaxy needed an influx of fresh funds and Malvinder Singh was looking for a partner to tide over the financial and other issues. December 2007
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. second largest and an innovator company in Japan wanted to manufacture low cost generics because of Japan government’s new policy of helping the aging population by low cost generic substitution for branded drugs. As the company moves into a next level of growth it would benefit the organization. 428 crore on R&D in 2007 to move up to the value chain.
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global company. Thus the creation of new entity would synergize to serve people globally in terms of low cost drugs. long-term competitive advantage. Ranbaxy’s R&D capabilities of low cost manufacturing and Daiichi Sankyo’s competency of innovation will provide the new entity with a sustainable.
Tax and Amortization Profit after Tax Return on Capital Employed Return on Net Worth
Source: Annual Report 2006
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.5 13.4 13.3 10.6 30.Journal of Case Research
Exhibit 1: Sales of Ranbaxy Laboratories by Key Market-2004
Sales in US$ in Million 426 192 50 26 73 305 31 45 217 12
USA Europe UK Germany France BRIC Countries Brazil Russia(Including Ukraine) India China Source: Annual Report 2004
Exhibit 2: Key Parameters of Ranbaxy
Particulars EBIDTA to Sales PAT to Sales ROCE RONW Earnings Per Share(Fully diluted)
EBIDTA PAT ROCE RONW
% % % % Rs.0 18.2
2005 7.3 13.
Earnings before Interest.6 06.2 20.1 29.9
2004 20. depreciation.0 5.2 5.5 08.
3 4.2 18.0 170.2 3.7 105.05 8.6 13.5 3.0 17.3 3.0 6.0 10.2 13.9 6.4 2.87 24.2 3.3 2.9 17.3 16.0 5.0 8.1 4.6 1.2 1.3 6.1 2. of Employees 15.00
Source: Annual Report 2005
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.6 2.9 1.1 5.6 11.9 3162.8 1.3 3.0 7.9 5.9 22.7 8.9 3156.5 6.84 7.2 13.4 869.8 2.5 131.4 10.90 6.4 3.68 22.4 3.0 8.2 1.1 1.9 63.5 1.9 21.1 9.6 6.80 1.5 1.1 6797 2004 36.0 1.3 170 28.2 1.6 6.7 1.8 1.3 2.6 1.6 3.7 136.3 1.3 4.8 9.2 3.9 1.9 21.8 8.5 4.6 12.2 1.8 1.5 2.2 1.1 24.1 1.3 1.9 3.4 1.0 2.9 1158.0 3.1 4.4 2.0 2.8 24.7 6.020.00 2006 40.5 869.8 1.7 9.0 7.7 8.4 2.4 3.8 6424 2002 28.8 7.00 5.3 3.3 26.3 1.00 9.71 6297 2003 35.3 4.4 2.9 24.2 1.4 7195 2005 35.0 3. billions 1999 Results for the year Sales Index Exports Index Gross Profit Index Profit before Tax Index Profit after tax Index Equity Dividend( in Rupees) Index Equity Dividend (%) Earnings per share(Rs.5 4.2 4.6 1.8 1.8 129.7 75 15.5 1.2 2.8 1.5 7.0 1.3 13.166.3 170 42.0 16.7 1.0 170.9 9.1 1.4 1.00 12.3 2.8 2.1 2.2 149.1 2.2 3.0 1.0 6.4 2.9 4.0 7.4 2.3 3.6 6.9 10.9 100 21.3 2.5 9.) Year-end Position Gross Block+ Index Net Block Index Net Current Assets Index Net Worth Index Share Capital Reserve & Surplus Book value per share(Rs.1 10.2 3.6 5784 2001 20.1 24.6 2434.0 1.7 75 17.) No.3 1.7 23.8 11.8 1.2 3.6 63.7 3.70 6.Journal of Case Research
Exhibit 3: Ranbaxy at a Glance
Rs.8 2.9 2.30 17.2 14.6 1.3 5347 2000 17.7 7.2 16.5 1.168.3 19.4 141.9 6.2 3.174.1 15.1 15.0 27.3 150 28.3 1.5 2.40 23.3 2.2 4.2 23.
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Figure 01: Global Market Mix 2006
others 9% Emerging 49% Developed 42%
Source: Annual Report 2005
Figure 02: Growth Contribution 2006
India 21% N.America 31%
Source: Annual Report 2006
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Net Sales Overseas sales Research and Development Operating Income Net income Assets Return on Equity Earnings per share Number of consolidated subsidiaries Number of employees
Source: Business World.35 18 8.2 0.1 0.0 0.2 3.8% $ 0.26 43 15.4 0.1 0.5 1.9 7.5 28.6 0. June 13.9 13.349 Ranbaxy Laboratories 1.3 1. 2008
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Exhibit 4: A comparison between Ranbaxy and Daiichi Sankyo
(US$ in billions) Daiichi Sankyo 8.8% $ 1.
PHASE 1 TRIALS: Conducted on 20-100 healthy volunteers to prove safety. during which solubility. distribution. metabolism. and if satisfied gives its approval. toxicity (quality of safe doses). IND FILING: Company files an application for an investigational new drug (IND) with the FDA.000 Identifying & validating targets: this involves developing the concept of how a new drug can treat a disease. NEW DRUG APPROVAL FILING: FDA reviews information. are tested even as the potency and activity are maintained. elimination) are observed via tests in labs and in animals. converting Hits into ‘Leads’ calls for further refinement in the compound. Sales and marketing cost can take the entire cost of exercise right from drug discovery to development to as much as $450 million. all through the life of the drug. These are the ‘Hits’. Compound that should be pursued further are short listed.000 to 5. odds of success drop to 1:5 PHASE 2 TRIALS: 100-300 persons suffering from the disease are treated.
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.000 patients in a bid to verify previous trials. Serious reactions can result in drug withdrawal. Screening: compound that have desirable potencies and that react encouragingly are pulled out.Journal of Case Research
Exhibit 5: Discovery Process and Stages of Drug Development
DISCOVERY PROCESS Period: upto 6 yrs Cost: Roughly $ 60 million Odds of drug reaching market: 1: 10. metabolism etc. absorbtion. Once molecules enters clinical trials. STAGES OF DRUG DEVELOPMENT Period: upto 12 years Cost: upto $200-250 million Odds of drug reaching market: 1:200 Pre-clinical trials: toxicity and pharmacokinetics (absorption. POST-MARKETING SURVEYS: Companies have to conduct continuous surveillance once drug hits market. If it feels molecules isn’t yet ready for market. This filing includes results of pre-clinical trials and the plan for human clinical trials. may call for phase 4 trails. Considered by many companies as the stage to opt for licensing agreement. PHASE 3 TRIALS: involves between 1.
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1977 1983 1985
1987 1988 1990 1991 1992 1993
. Ranbaxy’s second pharmaceutical marketing division. Inauguration of FDA approved. with its exports reaching an all time high of Rs. a manufacturing facility in the US. makes Ranbaxy the country’s largest manufacturer of antibiotics/antibacterials Ranbaxy’s Toansa plant gets US FDA approval Ranbaxy is granted US patent for Doxycyline New state-of-the-art facility for Cephalosporins set up at Mohali US patent granted for Cephalosporins Company enters into an agreement with Eli Lilly & Co of USA for setting up a joint venture in India to market select Lilly products Company enters into an agreement to setup a joint venture in China Ranbaxy (Guangzhou China) Limited Ranbaxy enunciates its corporate mission ‘to become a Research based International Pharmaceutical Company The new Research Centre at Gurgaon.(near Delhi).Journal of Case Research
Source: BUSINESS TODAY Ocotber 13 2002. 10. starts functioning Production start-up at the modern APIs plant at Toansa (Punjab).000 million. at Ranbaxy’s US subsidiary Ohm Laboratories Inc.
Exhibit 6: Ranbaxy Laboratories in Historical Perspectives
YEAR 1961 1973 DESCRIPTION 1994 Company Incorporated Ranbaxy goes public A multipurpose chemical plant is setup for the manufacture of APIs at Mohali in India Ranbaxy’s first joint venture in Lagos (Nigeria) is setup A modern dosage forms facility at Dewas (MP) in India goes on stream Ranbaxy Research Foundation is established Stancare. Ranbaxy Laboratories Limited crosses a sales turnover of Rs. state-of-the-art new manufacturing wing. becomes fully operational Established Regional Headquarters in London (UK) and Raleigh (USA) The Fermentation pilot plant at Paonte Sahib is commissioned Ranbaxy’s GDR listed in Luxembourgh Stock Exchange Acquisition of Ohm Laboratories. 5.
Ranbaxy acquires Bayer’s Generics business (trading under the name of Basics) in Germany Ranbaxy forays into Brazil. fastest growing company in the US Ranbaxy files IND for an Anti-bacterial Oxazolidine-RBx-7644 Ranbaxy launched Cefuroxime Axetil post approval from USFDA for 125mg. first approval granted to any generic company for this product Ranbaxy receives permission from DCGI to conduct Phase-I clinical trials for RBx 7796 (Anti-Asthma)
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. Ranbaxy files IND application for Asthma Molecule RBx-7796 after successful completion of preclinical studies. with products under its own name. the largest pharmaceutical market in South America and achieves global sales of US $ 2. Germany and Ranbaxy sign an agreement where Bayer obtains exclusive development and worldwide marketing rights to an oral once daily formulation of Ciprofloxacin. 500mg Tablet. 1999 Bayer AG.Journal of Case Research 1998
Ranbaxy enters USA. 250mg. Ranbaxy USA crosses sales of US $ 100 million. Ranbaxy filed its first Investigational New Drug (IND) application with the Drugs Controller General of India (DCGI) for approval to conduct Phase I clinical trials DCGI grants approval to conduct phase I clinical trials for RBx-2258. and the trials commence from June 10.5 million in this market Ranbaxy took a significant step forward in Vietnam by initiating the setting up of a new manufacturing facility with an investment of US $ 10 million Ranbaxy achieved a turnover of US $ 600 million for the year 2001 and moved closer to achieving the target of 1 billion dollar by 2004. originally developed by Ranbaxy. world’s largest pharmaceutical market.
htm Business Today. 2006
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.com/history_ranbaxy. Provide Ranbaxy a base from where to manage and expand its operations in the Benelux countries Ranbaxy’s Spanish subsidiary purchases the Mundogen generics business of GlaxoSmithKiline in Spain. Malvinder Singh sold out his stake of 34. a division of GlaxoSmithKline. based on the techonogy developed by Ranbaxy. 737 per share. its second NCE for the treatment of Benign Prostatic Hyperplasia (BPH) Cipro XR 500mg and 1g. trademarks. Combined with Ranbaxy’s own operation in Romania. Ranbaxy’s first NCE in the respiratory segment successfully completes Phase I clinical trials and steps into Phase II. Ethimed. September 10. to complement its own pipeline for the Italian Market. and automated manufacturing equipment from Senetek for its disposable autoinjector for selfadministration of parental drugs for anaphylactic shock Ranbaxy’s Italian subsidiary acquires the unbranded generic business of Allen. While Ranbaxy will leverage its early product development strengths. were launched in USA by Bayer AG Ranbaxy launched the first branded product Sotret (isotretinoin) for 10mg. The acquisition beefs up Ranbaxy’s product portfolio in the country.ranbaxy.8% to Daiichi Sankyo. Daiichi Sankyo acquired over 51% stake in Ranbaxy Laboratories Ltd at Rs. 20mg and 40mg capsules in USA Ranbaxy acquired the generics business of RPG Aventies Life Sciences in France to enter European Market Ranbaxy acquired 18 generic drugs from Spain’s Eframes for sale the local market Ranbaxy’s US arm buys patents.7% of Romanian drug maker Terapia from Advent International for $324 million. Glaxo would use its expertise at late development stage to complete the development process RBx 7796. atop 10 player in Belgium.Journal of Case Research 2003
Ranbaxy receives The Economic Times Award for Corporate Excellence for ‘The company of the year 2002-03’ Ranbaxy and Glaxo SmithKline Plc (GSK) accelerate their discovery programmes through a global alliance for drug discovery and development. Buys 96. Ranbaxy files an IND application for RBx 9001. the Terapia acquisition creates Romania’s largest generic firm Aquires genrics company.