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Ranbaxy-Global Strategy PDF
Ranbaxy-Global Strategy PDF
Volume II
Issue 01
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Volume II
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New Drug Discovery Research (NDDR). The company focused on Urology, anti-infectives,
respiratory, anti inflammatory and metabolic disorders segments.
Bhai Mohan Singhs initial strategy was to focus on Active Pharmaceutical Ingredients
(API).When Parvinder Singh took over the reign, the strategy was shifted to manufacture
generics which were off-patents drugs. Parvinder Singh made far reaching changes in the
company. He introduced management by self control in the company to facilitate all members
of the company to participate in the decision making process. He abandoned top-down policy
pursued by his father Bhai Mohan Singh. He set up a stretch target of sales of US $ 1 billion to
be achieved by 2004. 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
Lilys products and marketed in India, Sri Lanka and Nepal. Ranbaxy was benefited in terms of
technology and Eli lilly got the advantage of low cost manufacturing.
Parvinder Singh looked forward to set up international business in USA, UK, and Latin American
countries. He has adopted global strategy through joint ventures and acquisition to achieve
sustainable growth. 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). The joint
venture manufactured antibiotics, analgesics, cardiovascular and other drugs and marketed all
over China. Later Ranbaxy has increased its stake in RGCL to 70%. Its brand cefran was the
market leader in China. It acquired Thai Pharmaceutical Company Unicher in 1995 and formed
Ranbaxy Unicher Co. Ltd (RUCL). RUCL was importing more than 50% of the products
manufactured in India. It has a strong presence in Antiinfectives, Haematinics, Cardiovasculars,
Nutritional & GI Tract segment in Thailand and India. Parvinder Singh established a global
alliance with Eli Lilly to manufacture and market cefactor in US in 1994. 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. Ranbaxy sourced cheap cefactor intermediates to Eli Lilly and Eli Lily in turn marketed
cofactor as branded product. Ranbaxy has entered the US market and operated through two
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subsidiaries Ranbaxy Pharmaceutical Inc( RPI) and Ohm Laborataries Inc, the over the counter
drug manufacturer in 1995 ( Table 7). Ohm Laboratory had exceptional FDA approval record.
There was immense opportunity to sell generics in Europe. European market is attractive
because of aging population and high health costs forcing the goods to open the generics
market. Parvinder Singh wanted to exploit huge potential in Europe and keeping that in mind,
he set up a subsidiary namely Ranbaxy UK Ltd to sell its branded products in 1996. He acquired
another company Rima Pharmaceuticals, the semisynthetic pencillins maker to sell generics
products in Europe. His basic strategy was to keep the acquired units as profit centres which
helped Ranbaxy to keep acquired firms self sufficient. Also the acquisition process did not
adversely affect the managerial culture, openness, self motivation and positive attitude. The
acquired centre was given full responsibility of profit and loss of the company. The regional
managers were given high degree of autonomy. He had adopted three tier organizational
structures. The first tier consisted of senior managers and second tier regional managers and
the third country managers.
In 1990s, Ranbaxys effort was to sell formulations under its own brand name. It wanted to
move up from low-margin bulk pharmaceuticals to high margin branded formulations. The
major markets for branded generics are Russia, China and other developing countries.
However, in US and UK, Ranbaxy focused on formulations rather than branded products
because of stiff competition from other major players in branded generics.
In UK, Ranbaxy was successful to market branded formulations as it has received approval from
Medicines Control Agency (MCA) for many branded generics. Ranbaxys manufacturing strength
has been established in the field of process development, scaling up and commercialization of
APIs, world class generics, and branded generics. It set up world class manufacturing facilities in
seven countries viz. India, China, Ireland , Malaysia, Nigeria, US and Vietnam. In Malaysia it set
up Ranbaxy Malaysia Sdn Bhd (RMSB) as a joint venture between Ranbaxy and Malaysian
shareholders in 1984. A manufacturing unit was set up in Sungai Petani, Kedah to cater the
need of Malaysia and Singapore market. Later it has increased its stake in RNSB to 55%.
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appointment of D S Brar as CEO, Brar will ensure the professionalism inculcated in the
company by Parvinder Singh and take the company to new heights.
D S Brar has envisioned Vision Garuda of achieving a target revenue of US $ 5 billion by 2012,
70% of revenue should come from International business. He wanted to reiterate Ranbaxy a
research based international pharmaceutical company. He continued to follow the global
strategy of Parvinder Singh. His first acquisition was German generic business Bayer in 2000.
D S Brar took a major decision to pull out of its Indian joint venture with Eli Lilly. He felt that Eli
Lillys 50-50 partnership was no longer required for the production of the drugs in India. He
argued that Ranbaxy has come of age and could manufacture and market quality product
independently in Indian and overseas market. D S Brar found that there was a huge market
potential for anti-AIDS drugs in India. There were 3.7 million HIV positive patients in India.
Ranbaxy wanted to launch anti-AIDS drugs lamivudine, nevirapine, abacavir and indinavir in the
Indian market. The market was dominated by Cipla and GlaxoSmithcline who did aggressive
marketing for the drug. He used low cost manufacturing facilities to manufacture the anti-AIDS
drugs and sold directly to consumers to capture the market. The company entered Consumer
Healthcare which was thriving business in India. The company launched four brands viz. Revital,
Pepfiz, Garlic Pearl and Gesdyp. The business turnover of these products was Rs. 552 million in
2003.
D S Brar launched generic blockbuster antibiotic Augmentin in the U S Market in January 2002.
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. Ranbaxy Branded Products Division, a
marketing arm of Ranbaxy which marketed exclusive company owned branded products had
launched another branded generic product Sotret, the companys brand for Isotretinoin capsule
in the U S market which has market size of US $ 540 million. Ranbaxy gained a market share of
8% for Sotret. It had also got approval from US FDA to make and sell a generic version of
Pfizers antifungal drug Diflucan. Its another product Ceftin accounted one third of Ranbaxys
total sales in U S.
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During 2003, Ranbaxys business operations in the US had widened with revenue of US $ 412
million, representing 42% of the companys global turnover. The company had obtained 24
approvals from US FDA in 2003. The company received US FDA approval for manufacture and
maketing of Isotretinoin of 30 mg strength in June 2003. This was not available to generic
players and even the originator itself. The US market for Isotretinoin was $ 6 million in 2003.
The company acquired the generics business of RPG Aventis Life Sciences in France to increase
the market in Europe.
D S Brar identified two focus areas viz. New Drug Discovery Research ( NDDR) and alliance
management as the key growth engines in R & D. He made an alignment with Geneva-based
Medicines for Malaria Venture (MMV) and developed synthetic peroxide anti-malarial drug RBx
11160. Ranbaxy Laborataries and GlaxoSmithKline Plc (GSK) have entered into collaboration for
drug discovery and clinical development covering a wide range of therapeutic areas. Ranbaxy
would be responsible for activities from optimization of lead components to generation of a
development candidate. Once a compound has been selected as development candidates, GSK
would complete the development. GSK has also got the responsibility of commercialization of
the product.
The best companies are the best collaborators3- Thomas & Friedman
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Indias truly global organization. Ranbaxy would endeavor to be at the forefront in delivering
the India centric advantages to the advanced and developing countries of the world.4
Ranbaxy had signed another collaborative Research agreement with Avestha Gengraine
Technologies Pvt Ltd (Avesthagen) in the area of NDDR. Avesthagen was the first Indias
discovery based bio-technology and bioinformatics company. Dr. Patell, Founder and CEO,
Avesthagen commended on the collaboration, Avesthagens 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. We are glad to partner with Ranbaxy in ths endeour
and look forward to a very fruitful relationship5. Dr. Kasim Mookhtiar, Vice President NDDR, R
& D Ranbaxy said, With the rapid growth of new drug discovery research at Ranbaxy,
opportunities exist for collaborative work. We are glad to avail of Avesthagens quality R & D
services in cutting edge technology to augment our capacity so that our current needs can be
met in a timely manner6
revenues from dosage forms sales. Dosage forms marketing operations are structured through
India; Europe, CIS, Africa; Asia Pacific, Latin America & Canada; North America, The Middle East.
Dr. Rasmi Barbhaiya, 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
technologies7.
Dr. Rashmi Barbhaiya, President, R & D who had held this position since April 15, 2002, left the
company in 2003. Dr Tempest himself took charge of R & D with separate heads for NDDR and
NDDS and generic Drugs Developments reporting to him directly. The company spent US $ 75
million in R & D in 2004, showing an increase of 43%. 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). The company invested in training and development needs of its
employees through tailor made programmes and extensive workshops. There is a formal
mechanism to reward employees for new ideas. It has launched a project called CRUSOE that
4
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works on improving operational efficiencies. Under this project, employees suggestions are not
only captured, but encouraged via contests. Brian Tempest used to spend two-three days in a
week visiting labs and talking to scientists.
By February 2004, Ranbaxy crossed US $ 1 billion in revenues. Ranbaxy was the third largest
filer of ANDAs (150) with US FDA in 2004. He focused four disease segments viz. Infection,
Urology, Inflammation/ Respiratory and Metabolic disorders in his New Chemical Entities (NCE)
pipeline. In Urology segment in India, Ranbaxy is leader and enjoyed a market share of 12.5% in
2006. Commenting on the companys performance in Urology segment, Sanjeev I Dani, Senior
Vice President and Regional Director- Asia and CIS Ranbaxy said, Ranbaxy has identified
Urology as a focus area and as result launched superior therapeutic options for the specialists
. Our dedicated and well trained Urology team helps deliver prompt therapeutic solutions to
the Urologists and supporting specialists8. During the first half of 2007, the company launched
three NDDS based formulations viz. Niftran, Eligard and Roliflo9.
With India becoming signatory to the WTO and introduction of the Patent Product regime, the
Indian market will be an attractive option for introduction of research-based products. In the
new patent regime, only strong players in terms of research and technical capabilities can
survive. Malvinder Singh, Regional Director -India Region of the company was appointed as an
additional Director of the company with effect from January 1, 2004 and number two in the
company. Tempest had lent his support to Malvinder Singh in his India business. Malvinder
Singh wanted to enhance the business in India. He has rationalized the product portfolio and
focused on speciality-oriented therapies. Expressing his delight at this development, Sanjeev
Dani, Senior Vice President & Regional Director, Asia & CIS, Ranbaxy, said, We have
restructured our domestic operations to focus on high growth segments. Due to our strong
marketing capabilities coupled with new product successes, our performance has been buoyant
in recent years. It has culminated into rapid market share gains and now with the number one
position in the domestic market, we intend to secure this leadership position in the coming
months and years through attracting human resources & retaining talent. In-licensing and
8
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launching innovative products remain our prime focus areas10. He understood that in order to
be competitive, a company needs to be strong in the domestic market. He ensured right
doctors to be covered by sales representatives. The coverage ratio has gone up from 30% to
70%. He improved fiscal discipline in the company. Malavinder Singh who joined the company
in 1998 had worked in different projects such as Information Technology, generics, lifecycle
brands and global licensing.
10
11
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manufactured by Terapia Ranbaxy12. Ranbaxy can take advantage of Terapias strong R&D and
manufacturing infrastructure as also their highly skilled senior management team. He acquired
another Be-Tabs of South Africa for US $ 70 million in 2006. Malvinder Singh after the
acquisition of Be-Tabs said, The acquisition results in considerable synergies and further
strengthen Ranbaxys foothold in South Africa. It reinforces our position by expanding our
portfolio in a key market that is exhibiting strong growth potential. 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 population13. 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. The companys
return of net worth was 13.2% in 2006 (Exhibit 2). The company made an impressive
performance by increasing its sale to US $ 40.6 billion in 2006 (Exhibit 3). It made a net profit of
US $ 3.8 billion in 2006 (Exhibit 3).
Ranbaxy is vertically integrated in production and research. To strengthen the vertical
integration capabilities and fermentation capacities, it acquired Cardinal drugs, an API
manufacturer at Malanpur near Gwalior and a strategic stake of 15% in Kerbs Biotechnicals in
India and Jupital Biosciences Ltd, a company specializing in the development and manufacture
of peptitude products. Ranbaxy entered the fast growing Oncology therapeutic segment in the
NDDR agenda. It had a partnership with Zenotech Laboratory Ltd in India to strengthen
oncology therapy and bio-generics in 2007. It had marketed 11 oncology products as generic
formulations in the US and Canada. Having worked with Zenotech for almost two years, we
believe that this investment and partnership provides a strong platform for us to leverage these
opportunities14 Malvinder Singh said.
Malvinder Singhs strategy was to focuss on out-licensing, in-licensing and NDDS. He outlicensed Ranbaxys Statin molecule to Pharmaceutical Product Development Inc (PPD), a leading
contract research organization. PPD will have an exclusive worldwide licence to develop,
12
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manufacture and market Ranbaxys Statin for the treatment of dyslipidemia, chlolestrol
lowering drugs account for $ 32.4 billion in sales for 200515. The company also received a
milestone payment from PPD Inc for the completion of the Phase I clinical studies. 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. In the post exclusivity period, the company launched 5, 10, 20,
40 mg strength of Simvastatin. The company also launched the first Atorvastatin under the
brand name Storvas in Malaysia. The success of Sotret 30 mg led to growth in the overall
prescription market share for the product from 21% to 25.5 % in 2006.
As of December 2006, Ranbaxy holds US FDA approvals for 121 ANDAs and 76 ANDAs are
pending for approvals. During 2006, Ranbaxy received 10 approvals and filed 28 ANDAs
including 1 PEPFAR (The US Presidents Emergency Plan for AIDS Relief) ANDA for approval by
the US FDA. Malvinder Singh continued to focus on NDDS and in-licensing as strategic areas for
future growth of the company. 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). In 2006, Ranbaxy entered into an
agreement with Senetek PLC, to purchase patents, trademarks and automated manufacturing
equipments for proprietary disposable auto-injector technology.
Global Consumer Healthcare registered a sales of US $ 35 million globally and US $ 19 million in
India. Revital is a powerful brand of Ranbaxy which has a market share of 72% in India.
Ranbaxy had a strong Internal Audit function with accreditation of ISO 9001-2000 certificate.
The Audit function is headed by Vice President who reports directly to the CEO and the Audit
Committee.
Ranbaxy set up a Global Quality Assurance team which ensures quality manufacturing process
across all locations.
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It is an encouraging sign that Indian companies today are more convinced about
their global strength of world-class quality, cutting-edge technology, cost
competitiveness and human capital16- 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). Under NDDR mission,
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.
Ranbaxy has spent Rs. 428 crore on R&D in 2007 to move up to the value chain.
Acquisition by Daiichi
Ranbaxy was facing many issues such as poor financial position, no major R&D breakthroughs,
increasing price wars and stiff competition in the generics market. In order to maintain its
growth and market position, Ranbaxy needed an influx of fresh funds and Malvinder Singh was
looking for a partner to tide over the financial and other issues.
Daiichi Sankyo, second largest and an innovator company in Japan wanted to manufacture low cost
generics because of Japan governments new policy of helping the aging population by low cost
generic substitution for branded drugs. Daiichi lacked the low-cost expertise and looking for a low
cost generics company. 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).
In June 2008, Daiichi Sankyo acquired over 51% stake in Ranbaxy Laboratories Ltd at Rs. 737 per
share. Malvinder Singh sold out his stake of 34.8% to Daiichi Sankyo. The new entity can create
better market coverage by producing low cost manufacturing. With Ranbaxys pool of scientific,
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. The new entity is a significant milestone in the Ranbaxys mission of
becoming a research-based international pharmaceutical company. As the company moves into
a next level of growth it would benefit the organization, its shareholders and the employees.
The proposed transaction is also in line with Daiichi Sankyos goal of becoming an innovator
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global company. Thus the creation of new entity would synergize to serve people globally in
terms of low cost drugs. Ranbaxys R&D capabilities of low cost manufacturing and Daiichi
Sankyos competency of innovation will provide the new entity with a sustainable, long-term
competitive advantage.
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USA
Europe
UK
Germany
France
BRIC Countries
Brazil
Russia(Including Ukraine)
India
China
Source: Annual Report 2004
Particulars
EBIDTA to Sales
PAT to Sales
ROCE
RONW
Earnings Per Share(Fully diluted)
EBIDTA
PAT
ROCE
RONW
%
%
%
%
Rs.
2006
15.5
08.5
13.2
20.3
13.2
2005
7.2
5.0
5.3
10.6
06.9
2004
20.4
13.1
29.6
30.0
18.7
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1999
2000
2001
2002
2003
2004
2005
2006
15.6
1.8
7.3
1.8
2.6
1.4
2.1
1.3
2.0
17.4
2.0
8.1
2.0
3.2
1.7
1.9
1.2
1.8
20.5
2.4
10.3
2.5
3.9
2.1
2.8
1.8
2.5
28.2
3.2
18.5
4.5
7.3
4.0
7.1
4.5
6.2
35.3
4.1
24.7
6.1
10.1
5.5
9.6
6.0
7.9
36.1
4.1
24.6
6.0
7.2
3.9
6.3
4.0
5.3
35.4
2.7
23.2
3.9
3.2
1.3
2.0
1.0
2.2
40.6
3.0
27.2
4.6
6.1
2.5
4.4
2.2
3.8
1.5
1.4
1.9
4.6
5.9
3.9
1.2
2.0
869.2
3.7
75
17.0
869.2
3.7
75
15.7
1158.9
4.9
100
21.9
2434.0
10.3
150
28.9
3156.3
13.3
170
42.6
3162.6
13.3
170
28.3
3,166.70
6.0
170.00
5.68
3,168.90
6.0
170.00
9.87
8.7
1.9
6.3
1.7
8.2
1.1
15.0
1.8
1.2
13.8
9.2
2.0
6.4
1.8
8.3
1.1
15.8
1.9
1.2
14.7
9.3
2.0
6.1
1.7
7.5
1.0
17.4
2.1
1.2
16.2
10.4
2.3
6.8
1.8
9.6
1.3
19.6
2.4
1.9
17.7
12.5
2.7
8.0
2.2
13.3
1.8
24.3
3.0
1.9
22.5
16.7
3.6
11.4
3.1
9.5
1.3
26.3
3.2
1.9
24.4
22.3
3.0
16.3
2.8
11.3
1.2
23.8
1.8
1.9
21.9
24.4
3.30
17.4
3.00
12.6
1.40
23.5
1.80
1.9
21.6
129.3
5347
136.6
5784
149.8
6424
105.71
6297
131.1
6797
141.4
7195
63.84
7,174.00
63.05
8,020.00
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others 9%
Emerging 49%
Developed 42%
ROW
15%
Europe
33%
India
21%
N.America
31%
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Issue 01
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
Daiichi
Sankyo
8.2
3.3
1.5
1.4
0.9
13.9
7.8%
$ 1.26
Ranbaxy
Laboratories
1.0
0.6
0.1
0.2
0.1
0.5
28.8%
$ 0.35
43
15,349
18
8,141
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DESCRIPTION
Company Incorporated
1973
1977
1983
1985
1987
1988
1990
1991
1992
1993
1994
1995
1997
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1999
2000
2001
2002
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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.
While Ranbaxy will leverage its early product development strengths, Glaxo
would use its expertise at late development stage to complete the
development process
RBx 7796, Ranbaxys first NCE in the respiratory segment successfully
completes Phase I clinical trials and steps into Phase II.
Ranbaxy files an IND application for RBx 9001, its second NCE for the
treatment of Benign Prostatic Hyperplasia (BPH)
Cipro XR 500mg and 1g, based on the techonogy developed by Ranbaxy,
were launched in USA by Bayer AG
Ranbaxy launched the first branded product Sotret (isotretinoin) for 10mg,
20mg and 40mg capsules in USA
Ranbaxy acquired the generics business of RPG Aventies Life Sciences in
France to enter European Market
2004
2005
Ranbaxy acquired 18 generic drugs from Spains Eframes for sale the local
market
2006
2008
Source: www.ranbaxy.com/history_ranbaxy.htm
Business Today, September 10, 2006
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