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Sundaram: spearheading a radical transformational change

Toning up Glaxo
GlaxoSmithKline (GSK) India is emerging stronger than ever before, in the unfolding post-product patent era. Business India takes a look at the restructuring initiatives, its impact and what future portends

ld timers in Mumbai recall bus conductors bawling, Glaxo, to announce arriving at Worli, a mid-town manufacturing hub, dotted with tall chimneys of textile mills. Like several of these mills that have been shut down or relocated outside the highcost island-city, Glaxo has also relocated its production unit, in existence since 1937, to its Thane and Nashik plants. In 2004, it realised Rs107 crore by selling 180,000 sq ft of land in Worli, retaining only a part, to build an office building.

This metamorphosis is in line with what is being witnessed across the manufacturing segment in general. The pharma industry is distancing itself from the commodity manufacturing business to move up the value chain, to the more desired and fancied domain the research-based knowledge industry. V. Thyagarajan, vicechairman and senior vice-president (Asia-Pacific), has a down-to-earth explanation for this about turn. The demography of this company has changed. And we wanted to give the employees an environment which is conducive to creative thinking and
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entrepreneurial work, which they feel proud of. Renamed Glaxo SmithKline (GSK) Pharamceuticals India, the new look, steel-and-glass edifice, is but an outward manifestation of the total revamping initiative scripted by Thyagarajan, (then vice-chairman and MD) way back in 2001 and executed by his team including S. Kalyana Sundaram (the present MD), Mernosh Kapadia, senior executive director as well as Pradip Nayak and Ashoke Banerjee, directors. This was just after the merger of Glaxos operations with SmithK-

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lineBeecham (SKB). Glaxo, at that time, was the biggest pharma company operating in the domestic markets, a position it had held for 28 years, and SKB, an equally well respected, though smaller (about 20 per cent of Glaxos size) company. The merger provided a trigger to catalyse the next phase of transformation to Indias largest pharma company in the domestic market, says Sundaram. The announcement of the product patent laws coming into force in 2005 also induced the company to move in the fast lane. A clear need Despite being a dominant player, holding the largest share (6.6 per cent) in a highly fragmented market (estimated at Rs15,000 crore in 2000), Glaxo was clearly slipping in terms of growth top line and also profit. The PBIDT was less than 16 per cent between 1997 and 2001 (except in one year) and cumulative top line growth during this period was 25 per cent. PBT in relation to sales in 2000 was below 10 per cent, the lowest in the five years since 1995. And this was happening at a time when pharma business worldwide was booming. Wockhardt, the fifth largest pharma company, boasted of operating margins of 23 per cent in FY2000. Ranbaxy Laboratories, virtually on a par with Glaxo in mid1990s, had almost trebled its turnover by 2001. At that time, Glaxo was contending with a bulging product portfolio range. There were more than 250 brands mainly in anti-infectives, respiratory and anti-ulcerants, with the top 20 brands contributing to over 50 per cent of the sales. It had to grapple with high multinational overheads, monitor over half a dozen production sites across India and manage aspirations of a diverse workforce of more than 7,300 people, post merger. The legacy of the bureaucratic colonial past was also well preserved, with more than 400 employees in the administrative department housed at the Worli office. These factors were amplified in the prevailing environment, where prices of a significant number of drugs, estimated at over 60 per cent (48 per cent in value terms in

2001), were in the purview of the Drug Price Control Order. Even after the merger with SKB, the companys pharma business could muster a growth of only 7.2 per cent, as against the industrys average growth of 9.7 per cent. This was notwithstanding the fact that SKB had a unique portfolio comprising vaccines for Hepatitis B, anti-infectives and antibiotics, boasting of brand leaders like Augmentin. Glaxo, on the other hand, was more into the acute care segments. Its other two divisions Agrivet Farm Care and Qualigens Fine Chemicals were not significant, with pharmaceuticals contributing nearly 90 per cent of the turnover. The process patent regime, which had fostered the growth of Indian companies like Ranbaxy, Cipla, Nicholas, Wockhardt, Sun Pharma and Dr Reddys was already eroding the diminishing overall share of MNCs like Glaxo. The market share of all MNC s together had fallen to 35 per cent in mid-1990s, from 80 per cent in

1970. Though Glaxo had a few power brands, Some medicines were sold below the price of chalk, thanks to rigid price controls and import restrictions, confides an insider. Being No. 1 was important from a sales perspective, but insignificant from a profit perspective, recalls Thyagarajan. The merger with culturally different companies (SKB and Burroughs Wellcome), as also the impeding introduction of the product patent laws by 2005, made it imperative for the company to redefine its role, so as to retain its leadership mantle. The main mantra on which the restructuring blueprint was drawn was that profit growth should outpace sales growth and reach at least 25 per cent of sales. It was not just Glaxo but the entire pharma industry that was undergoing a phase of consolidation and restructuring in the late 1990s, in preparation for the new product patent era, points out R. Shahani, managing director, Novartis India. A

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nearly 66 per cent in 2003. Glaxo had, over the years, invested heavily in building a pan-India disciplined sales team and penetrated across interiors. This facilitated its movement from being sales-driven to marketingdriven, says Harcharan Singh, VP, sales & marketing. Augmentin, which was ranked 50 at the time of merger with SKB, is today the number one brand, accounting for Rs100 crore in sales. To improve profitability and growth simultaneously, a dual strategy was adopted, says Shaina Mukadam of HDFC Securities. Accordingly, the promotion expenditure on the power brands was pushed up, while taking aggressive price increases in some of the largest ones such as Iodex, Augmentin, Ceftum and Neosporin, she adds. According to ORG figures for April 2005, GSK s Augmentin holds 43.5 per cent share in the Rs137.68 crore CoAmoxyclav market. The next closest competitor is Alkem Laboratories Clavam brand, with an 18.2 per cent share, followed by Ranbaxys Moxclav at 12 per cent. Says an analyst who tracks the pharmaceutical sector at Indiainfoline, Augmentin has a good brand value. Though its expensive, it has a good demand. Sundaram, who took over the reigns from Thyagarajan in 2003, also brought in two major strategic shifts, which involved devising a country-

The demography of the company has changed, says Thyagarajan

developing country like India, with its growing population, was too big a market to be ignored. So, each company was devising its own policies for survival and growth. While Ranbaxy, Wockhardt and Sun Pharma looked at global markets to drive growth, Nicholas Piramal was partnering innovator companies in global market. Methods of execution In GSK India, what we really did was to undertake a radical transformational change from top to bottom, across companies, says Sundaram, a chartered accountant, who worked in New Zealand and Singapore markets,

directly overseeing the marketing strategies. Product portfolio review, with emphasis on profit, was one of the primary tasks undertaken. Our portfolio was vast, with product life ranging from over 50 years to less than six months, says K. Shivkumar, VP, marketing. What the company did was to identify the lead brands as well as brands under the purview of DPCO and progressively reduce the less profitable brands. Five brands were sold and about 45 SKUs discontinued between 2000-05. Focussed attention on 30 lead brands saw their contribution rise from under 40 per cent to
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Kapadia: an integral part of a revamping initiative

Nayak: absorbing the best of cultures to form a new entity

Banerjee: creating modern, integrated and cost-effective plants

specific policy, filling in portfolio gaps through joint ventures for comarketing and co-promoting with other Indian companies and MNCs. Country-specific policy Indias share in Glaxo in terms of value was barely 1 per cent in 2000, though it accounted for 25 per cent in terms of volume sales. Writing off the investments would have been a little more than a rounding off entry in the consolidated balance sheet of the group. New product launches eight in the last five years hardly provided any advantages, as the molecules through ingenious reverse engineering were identified and produced through other processes by

competitors. And Glaxo PLC itself did not have that many new products. Sundarams new policy aimed at moving into the fast growing chronic diseases segment (that would require regular medication to keep the symptoms under check), which was growing at 16-24 per cent per annum, in contrast to the acute medical care segment growing at 6-8 per cent. He also underscored the need to retain a differential pricing policy, in line with the countrys pricing policies. Glaxo PLC was also undergoing a metamorphosis of sorts in late 1990s and early 2000s and had a few drugs addressing the central nervous and cardio-vascular segments, which were growing at 24 per cent. Glaxo PLC

was persuaded to bring in more of the research-based drugs to cater to the chronic diseases segments in the Indian markets, says Deepak Parekh, chairman of the company. Another major shift in the policy driven by Sundaram was the decision to go for in-licensing, to strengthen the product portfolio gaps. This involved getting into strategic tie-ups with the original researchers of the drugs, to enable Glaxo to officially market the products, under its own brands, after paying royalty to the innovator. Nine such agreements have been entered into, including the ones with Organon for marketing oral contraceptives with Ranbaxy for co-marketing cephalosporin and

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28th year regime shaken

year-old reign as the numero uno in the Indian retail market by Cipla in 2004. Cipla with sales of Rs1,128 crore was ahead of GSK India by Rs14 lakh. While the lead is not much in terms of value, it has shaken up the industry. ORGIMS data is, however, restricted to retail sales and does not capture institutional sales or sales of vaccines. If these are taken into account, GSK Indias share comes to 6.45 per cent.

SK India was dethroned from its 28-

anti-infective cefalexin drugs. It recently tied up with a Japanese firm Eisai to co-promote a drug to treat peptic ulcers and gastric disorders, though this new product would cannibalise its own 20-year-old ranitidine, which is under the purview of DPCO. Apart from converting a formidable competitor into a business partner, these initiatives also created a barrier against newer entrants in the already crowded industry. The managements rationale was to exploit the companys well-developed infrastructure for developing and expanding the range of its products. An Indiaspecific policy would allow GSK I ndia to position itself as a company of choice for partnering, says Ravi Limaye, VP, marketing & business development. Competitiveness Thyagarajans blueprint also involved rationalisation or realigning of manufacturing and reducing complexities ahead of getting into the

preparatory mode for the 2005 postpatent regime. Overheads were killing too many people, too many expenses. We realised that, in the generic market, we were up against a lot of competent Indian companies who, apart from having a much better product portfolio than ours, also had a lower cost base. As a result of which they were able to promote more, explains Thyagarajan. Instead of top-driven mergers, where change is literally forced on employees, we decided to go in for a more open and transparent method, with the aim of absorbing the best of cultures from both companies to form a new entity, says Pradeep Nayak, director, who looks after the entire plant and man-power rationalisation. Amalgamation of SKBs workforce with Glaxo, cutting down operations at factories from the existing nine units to two units, streamlining production schedules, etc, were some of the initiatives the management took to send a signal of its determination to break away from the colonial past totally. As a part of the change, Worli plant was the first to cease operations. The management came up with VRS schemes, which helped it claim that, with no employees left, it had to sell off units. Despite opposition from workers, union leaders and gentle and not-so-gentle persuasive overtures from politicians, Nayak managed to bring down the workforce from 7,300 at the time of the merger to 4,000 in 2004. Of this, the strength of the production staff alone was cut to 1,400 one-third of what it was earlier. The initial costs of relocating the Worli plant and the severance

India is very much at the top

Russel Greig , president of GSK International, heads the $5bn international operations in 120 markets across the continents. In a telephonic conversation with Daksesh Parikh, Greig speaks about GSK I ndias growth potential, future positioning and GSKPLC s plans for looking at India as a sourcing and research development base. Excerpts from the interview: What is the relevance of GSK India in the global context? India has made a significant contribution and is growing year by year. It figures among the top five markets and so it is a cornerstone of the performance in the international markets. If India doesnt do well, international division will also have a problem doing well too. What is the future role envisaged for GSK

payments to 600 employees working in Mumbai and Bangalore (estimated at Rs100 crore in 2001) was partially offset by the Rs40 crore profit made on the sale of one of its properties in Worli. The Mulund plant, acquired through the merger with Burroughs, followed, as did the Ankleshwar plant. The Mulund unit, housed on 19 acres of land, is in the process of being sold at an estimated amount of over Rs200 crore. Rationalising production also helped in creating one of the most modern integrated and cost-effective plants at Nashik. It is today one of the biggest plants in the GSK global group, catering to 50 per cent of the Indian companys requirements, says Ashoke Banerjee, technical director in charge of production and research, who was entrusted with the task of integrating process and product manufacture. The creation of huge capacities was also done to take care of the companys policy of acquiring brands sans their production units.

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We have partnerships and might consider the prospect of setting up our own discovery unit. It raises the prospects of doing more clinical trials of India, which will be mutually beneficial. We will bring in expertise and knowledge and innovation faster into the Indian market place. This will be good for the Indian economy as well as the commercial health of GSK. Is the shutting down of plants in India a global GSK strategy of de-emphasising on manufacturing? With globalisation, every company is trying to reduce the manufacturing cost by moving to high-quality and relatively lowcost markets. And we are no different. But we have been happy with the quality and the cost of manufacturing in India, as we undertake a constant review of the manufacturing plants. We have to take 3-5-10 years horizon. Will you be setting up more production bases for servicing other markets? I dont want to give you any firm commitment. All I can say is that India has several attractions as a manufacturing base, along with two or three other countries. We are looking at consolidating our manufacturing base and place more emphasis about manufacturing and high quality in low-cost countries. India is very much at the top. The other country we are taking a close look at is China. Can you tell us what products will be launched in India and when? It will depend on the performance of our products in phase II and phase III of the clinical trials throughout the globe and I hope to see regulatory approvals for the first wave of products from GSK to come in by, say, end 2007 or, more likely, 2008. I also hope that we have two vaccine products Rotarix for the treatment of paediatric diarrhoea and Cervarix, which has the potential to prevent 80 per cent of the risk to cervical cancer. Both these products have been filed for registration in India. x

India? With the passing of the patent law, we will see a distinct change in the business atmosphere for India, as it opens a new chapter in its intellectual property laws.

Negotiations through a newly cre- also improved productivity, says M.R. ated sourcing department for bulk Vasanthkumar, VP, IT and supply quantities of material delivery at pre- chain. determined rates, e-procurement and more emphasis on outsourcing Beneficial impact helped in drastically curtailing Results of cost-containment and expenses by roughly 20 per cent. At other strategic policy changes, like one time, there were 19-20 couriers aggressively marketing vaccines, zipping in and out of the premises, which currently account for 8 per each catering to different divisions cent of the total income, had a benefiand department. Now, there are cial impact. In FY2004, sales increased just three, says Jayant Dwivedy, VP, procurement. The focus was not just on costs but on adding value to the total expenditure of the organisation. Centralised sourcing, emphasis on outsourcing and use of technology also saw back room office staff cut from 400 to 125. Similar gains also accrued from restructuring the supply chain of distributors and carrying & forwarding agents, as also from integration of service functions like finance and information technology. Mapping territories, profile of doctors on the net Shivkumar and Singh: focussing attention on brands
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to Rs1,479 crore, with PBIDT rising sharply to Rs436 crore, on a three-fold growth in margins over 2001. The margins were the highest among all pharma companies, surpassing those of Ranbaxy (28 per cent), Wockhardt (27.1), Cipla (22.1) Nicholas Piramal (13.8) and Pfizer (18.8). The PAT in 2003 and 2004 were also the highest in the recent past, even after excluding the profit made on the sale of land in Worli. While it is still below the 25 per cent of sales target, analysts are confident of the target being reached soon. To retain its leadership position, the company is banking on a high level of interest from the parent company, introduction of combination vaccines, patent and off-patent drugs and the continuance of the India-specific strategy in the new environment. The liquidation of its land at Worli and the likely sale of surplus Burroughs Wellcome land in Mumbai and SKB property in Bangalore will provide the necessary

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Inspiring confidence

arkets love turnaround stories. The doubling of the GSK Indias share prices from a level of Rs348-398 in May 2001 to Rs748 in May 2005 can be viewed as a demonstration of the investors faith in the restructuring initiatives. The companys market capitalisation stands at Rs6,483 crore up from Rs2,566 crore in May 2001.The higher

Says Shaina Mukadam of HDFC Securities, We expect GSK India to be one of the biggest beneficiaries of the change in patent laws, in the long-term. Its parent has one of the largest and most promising pipelines in the industry, with 140 projects in clinical development (as at the end of February 2005). This includes 88 NCEs and 20 vaccines.

dividend payouts, with the likelihood of more cash being generated over the next two years from the sale of its properties in Mumbai and Bangalore as also the decision to go in for a buyback of shares from the open market at a price not exceeding Rs800, has sustained interest in the stock.

Notwitstanding the aggressive posturing, GSK IIndia ranks fourth in market cap behind Ranbaxy, Cipla and Sun Pharma. In the global markets also, Glaxo PLC, despite having the biggest product pipeline, is still trailing behind US based Pfizer, with Novartis breathing down its

neck. Sanofi-Aventis leads in Europe. GSK I ndia also enjoys a lower P / E ratio compared to its peers. Says Deven Choksey, MD of research-based broking firm Kisan Ratilal Choksey: It is natural that Glaxo valuations are trailing Ranbaxy, Cipla and Sun, largely because the exports business for Ranbaxy, Cipla and Sun are growing at more than 30, 50 and 50 per cent respectively. This driver is not present with Glaxo. However, Choksey sees the huge cash balance on its books, almost Rs100 per share, and its buyback programme as positive, which could allow it to acquire companies and grow, if opportunities exist. The downside in Glaxo is minimum, he says, while the upside would depend upon growth from core business and new launches. While the cost containment drives of governments is fostering generic growth globally and the expiration of some of the major blockbusters in the US by 2006-07 could accelerate it, there is nothing to prevent MNC s from entering this generic market, says Gul Tekchandani, a fund manager. He feels that GSK India is one of the greatest turnaround stories in pharma and its full impact has yet to be felt. Hope, however, rules high among analysts. They feel that GSKs potential to bring in more blockbusters and new vaccines will be the differentiating factor, which will help it maintain the leadership position.

funds for the repositioning of the company in the competitive postpatent period. When you are at the top of the mountain, you can see the panorama beyond. If you are mid-way or at the bottom, you see only the mountain, says Thyagarajan, explaining that the MNCs who took a different view of the Indian market in the last 30 years and exited to a lower profile will have to climb the mountain first. Sundaram too is gung-ho about the prospects and feels that Glaxo has a clear edge over other MNCs. He cites well-spread distribution network, knowledge of the country, rapport with the doctors, among others, as advantages. Thyagarajan points out that Glaxo PLC has the largest product pipeline in the world, with many drugs in

advanced stages of development. According to David Stout, president of pharma operations, there are 140 projects in clinical development stage with 34 new chemical entities ( NCE) in Phase I, 43 in phase II and 11 in phase III/registration stages. Besides, there are 20 vaccines too, awaiting trial. They include medicines for breast, lung and prostrate cancer, diabetes, thrombosis and bacterial infection. Besides widening product portfolio, opportunities for conducting clinical trials and also assessing the results of the trials conducted elsewhere in the world are expected to increase GSK I ndias overall importance in the group. Stout points out that, by 2025, cumulative market size of India and China would have a significant number of senior citizens,
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which would see cumulative growth in consumption of medicines comparable to the US. Vaccine a growth driver Vaccine is being positioned as one of the major growth drivers. GSK, which has been marketing vaccines, will start production at a site near its Nashik plant. This is the first plant outside Europe where Glaxo PLC would be producing vaccines. While the proprietory technology would be retained by Glaxos Biologicals in Brussels, marketing of the vaccines would be done through GSK I ndia. Marketing of these vaccines is expected to give an edge to the Indian arm. GSK is banking on the launch of two new vaccines Ceravarix (for treating virus causing cervical cancer

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becoming more and more difficult. In India, generics still account for bulk sale in the municipal and staterun hospitals. Even GPs and specialists suggest cheaper alternatives to patients. In India, competition from alternate system of medicines, including ayurveda and homoeopathy, for treatment of chronic diseases is gaining ground. Sundaram agrees that differential pricing policies, based on purchasing power parity, will be the norm in all developing markets. It is not correct to assume that the introduction of product patent will see a sharp rise in the price of patent drugs being introduced in the country, he says. Sundaram, however, foresees the introduction of one new drug every year in GSK for the next few years. Skilful marketing The introduction of patent drugs and vaccines to combat lethal and lifestyle diseases like cancer, diabetes will also require the building of a different skill set among marketers. In case of cancer drugs or heart diseases, evidencebased marketing will have to be done at the hospital levels, convincing super specialist doctors, as against mass selling dependent on prescriptions through general practitioners. Harcharan Singh and Shivkumar point out that Glaxo has already started training its workforce for development of these skill-sets, though they feel that more technical knowledge is still required. However, there is no guarantee of GSK India not becoming a fertile poaching ground of new talent like in the past. Acquisition a mind set They have a buy-back of shares (see box), but is that the best way to crate long-term value for shareholders? Another challenge concerns the aggressiveness in the emerging market place. GSK investments were valued at Rs700 crore at end March. The sale of other properties may increase it

in women) and Rotavirus (for controlling diarrhoea in children). Challenges galore The newfound confidence notwithstanding, GSK will be facing challenges from new entrants and aggressive moves by competitors. Bristol Meyers, Bohreigner Manaheim and Merck are looking at re-entering India in a big way. While initially they may enter niche areas, they may opt to increase their presence subsequently. The market share of Glaxo, post-mergers, has come down to 5.4 per cent from 6.5 per cent. The product patent rules in India are unlikely to bring about radical changes in the fortunes of the pharmaceutical companies at least, not for a few years. Generic markets will continue to dominate and account for 95-98 per cent of the overall markets. Says R. Shahani of Novartis, Market segmentation will take place over the next 5-10 years. Novartis which, like Glaxo, has been around for decades, agrees that companies like GSK India and Novartis will have an advantage over other MNCs, as they have a ready-made platform for introducing innovative drugs. Competition from domestic firms too cannot be wished away. Indian companies, which have built manufacturing competitive skills in the last 30 years, will look at growth through innovation, says Habil Khorakiwala, CMD of Wockhardt India (which is expected to develop mastery in research in new molecules soon). However, Development may be a different ball game and only those with deep pockets will be able to undertake it, says Parekh. Companies are already de-emphasising manufacturing activity and looking at moving up the value chain. Researchers point out that the long product pipeline should not be taken at face value. Nor can it be assumed that all the drugs that are in

the clinical trial stage will meet with success. Developing a new drug is costly, its results uncertain and the process lengthy, says a spokesperson of a major Indian pharma company. There is also no guarantee that the new drug will be able to command a premium price right through the product cycle of the drug, especially in Europe and developing markets in the Asian continent. The research and development of a new molecule (from the discovery stage through the transition from the clinical and data verification stages to

the ultimate drug stage) is estimated to cost $800 million. Besides, risks of failure are high and can occur at any stage of the development. Its commercial viability also may be impaired, due to excessive cost of manufacture or inability to differentiate the drug sufficiently from the competitors. Even Glaxo PLC had to relinquish the marketing rights of Levitra in all but the US markets. The affordability issue The affordability question does not concern just the individuals ability to pay but also of the governments capacity to fund the social health programmes. While, in India, it is still the individuals who largely pay for the medical bills, governments the world over are questioning the high cost of R&D . And getting premium pricing is
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low costs and this will make it an ideal production hub for meeting the global needs, says an analyst. India, with its skill-sets for developing creative and innovative products, is also looked on as a centre for furthering research-based activity, a fact that even GSK PLC has realised. Value addition through contribution in research and development will grow, says Thyagarajan. Pharma companies are looking at doing research in cheaper and more productive places. India has good quality doctors, so high quality trials can be done here. I see India as a centre of manufacture, a source of scientific talent and, therefore, scope for R&D here, he adds. However, it may be a while before MNCs are able to enter into the generics markets. Despite the fact that MNC s like Novartis has entered the generics markets, most experts feel that it requires a different skill set to enter into this segment. Future hazy The future for the pharmaceutical industry is still hazy. Everyone believes that 2005 will be seen as an inflection point in the history of pharmaceutical industry in the future. But will there be a shakeout? Which companies will survive? What will operating in product patent period entail? Will patent products be able to grab a 5 per cent share over the next five years? There are of course no easy answers to these queries. The passage of the product patent bill in India, despite the hue and cry, is just the beginning and, in a few years, it may well be regarded as the easiest step undertaken in the transformation of the industry, says Shalini Thaker, IP director of UKbased Huntleigh Healthcare, who had earlier worked in the patent office in the UK for several years. The growth in pharmaceuticals may well surpass if not equal the growth in IT in the coming years, says Sundaram. And Glaxo will remain in the forefront, driving the change, he says. As it was for the bus commuters in Mumbai in the past, GSK India will continue to remain a landmark for the Indian pharma industry in the future a benchmark, of sorts.
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India is looked on as a centre for research

even more. But has the company been able to shed off its ultra-conservative image acquired over the decades, asks critics. Glaxo India has never been credited in moving swiftly for clinching deals, be it assets or brands (the two major mergers with SKB and Burroughs in India had followed global mergers of the parent companies). Indian companies, on the other hand, have been swifter and more agile in seizing opportunities. Nicholas Piramal, a late entrant in pharma, grew rapidly through a series of takeovers, to emerge among the leading pharma companies of India, in a period of 16 years. Ranbaxy has, likewise, become the leading pharma company in India, with revenues (of domestic and export sales combined) of Rs3,764 crore in FY2004. Sun Pharma, a company started in mid1980s, has gatecrashed into the top five slot through takeovers of companies. Glaxo, on the other hand, has not been able to grab business opportunities, which could have complemented its product portfolio and helped in ramping up sales. Sundaram agrees that there would be a shakeout in the pharma industry over the next few years. We would look at acquiring brands/companies at the right price, he says. Indian companies, which have grown to this stature, have different mind-set. Emphasis on asset-growth eclipses

decision of right price, the rationale being that higher price can be recovered and new products can be built along the periphery to extend and complement the original product. International companies like Teva, are already sniffing around in Indian markets. And a couple of landmark takeovers may actually drive up valuations rather than bring them to more realistic levels. Exports & production hub The major growth drivers of Indian companies (of servicing generics) as also overseas market clearly place GSK India at a disadvantage. GSK PLC having manufacturing bases in several countries may not permit GSK India to pursue growth through exports. India already has the largest number of US approved plants outside US. It has the ability to produce quality drugs at

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