At Biocon, we fave focused on building fermentation-tectinology ‘platforms and related skill sets ina strategic rather than an opportu- istic manner. We fave strategically built up our cinicat capabilities to augment development and commercialisation. In other words, not only fave we built runways but we are, in fact, Building an airport at wliich any select biotech opportunity can land, ‘Kiran Mazundar-Shaw Chairman and Managing Director ‘Biocon ‘When Kiran Mazumdar-Shaw set up alittle operation in 1978 extracting Papain enzyme from papayas in her garage in a leafy neighbourhood of Bangalore, few in India had ever heard of biotechnology. Her ambition was to build a ‘world-class institution using India’s own scientific talent. A zoologist rummed brewer, Kiran aimed to make Biocon one of the world’s top-five biotech companies in the near futuresort ott water 80 Cases in Strategic Management INTRODUCTION Biocon, the first Indian biotech company established in Bangalore, was a fully integrated healthcare Bioes company that delivered innovative biopharmaccutical solutions. From discovery to development and 20 billig commercialsation, Biocon had the defining science, cost-effective drug development capabilities and useful. B significant manufacturing eapacity to move ideas to market, Biocon leveraged India’s globally competi- Biocon tive cost base and exceptional scientific people resource to invest in R&D programmes, while providing on the castom and clinial research services to intemational pharmaceutical and biotechnology majors through their subsidiaries, Syngene and Clinigene (Exhibit 1). Biocon eame into being quite by accident, In 1974, asa fresh brew-master from Ballarat College, ‘Melbourne, Kiran aspired to follow inher father’s footsteps, who was India’s frst master brewer, work- ing with the UB Group, But since this was a male-dominated business in India, the best job she could get was in quality assurance and not in operations. Disillusioned, she accepted an offer in Scotland. at ‘Around that time, Les Auchincloss, founder of Biocon Ireland, got in touch with her to know whether ail she would be interested in helping him to manufacture and market industrial enzymes in India. Biocon Pe Lie iandininad ian tina eran al also bought isin glass, a protein extracted from the swim bladder of tropical fish. Intrigued by the offer, ae Kiran stayed back. In November 1978, Biocon was formed with Rs 1 lakh seed capital as a 70:30 joint ial venture of the Irish company and Kiran Mazumdar, in a small shed in Koramangala in the outskirts of ea Bangalore. It was to manufacture a range of novel industrial enzymes aimed at the food, beverage and pret textile industries based on solid substrate fermentation, sold in both local and export markets. Initially, om the company manufactured and exported papain, a plant enzyme and isin glass, a marine hydrocolloid, ce which were key products forthe brewing industry. It was @ low-tech operation at first where enzymes an \were sourced from Ireland and formulated in India, But, Kiran did not find this exciting enough, and decided to make Biocon a full-scale biotech company. aa Kiran started focusing on a niche, enzymes manufactured by surface fermentation. At that time, these were sourced from Korea and Japan, which were the market leaders. As a technology, surface fermentation was considered dated in the west because it was more labour intensive, cruder and less controlled than submerged fermentation. However, solid fermentation could give upto twenty times ‘more yield and some micro-organisms like fungi grew well in the solid state. Biocon decided to learn solid state fermentation but Biocon had no R&D of ts own. The R&D team knew nothing about design- {ng a manufacturing plant, let alone about solid state fermentation. In 1984, Biocon began focusing on research and development to develop novel enzymes for the Biocon Group worldwide, through solid state fermentation process technology referred to as ‘koji technology’. In carly 1980s, Kiran had met a student, Shrikumar Suryanarayan from the Indian Institute of Technology (IIT) Madras, who wanted to buy enzymes ftom her for his project. Kiran gave him the enzymes for free. Two years later, Suryanarayan came back after obtaining MTech from IIT Delhi. He had offers from US universities fora Ph.D. and wanted her to help him decide. Kiran offered him to start an R&D for Biocon. He accepted and designed the first fermenter in Biocon. This new reactor could contain micro-organisms well. Its contents could be mixed while fermentation was in process. Things could be added and taken out without disturbing the fermentation process and it consumed less energy. Biocon named this new reactor Plafractor. The Plafractor eliminated the disadvantages associated with conventional surface fermentation based on tray culture and deep bed culture. The traditional method also did not lend itself to automation and process control so volumes were low. The Plafractor allowed bulk production and critical fermentation. Even Dr. R.A. Mashelkar, Director General of the Council of Scientific and Industrial Research observed: biotech of resesfealtheare ment and ilties and ‘competi- providing Sthrough t College, fer, work- she could Scotland. F whether 2. Biocon b India. It ithe offer, 0:30 joint askirts of erage and Initially, rocolloid, enzymes bugh, and that time, y, surface rand less aty times dito learn utdesign- cusing on mh solid stitute of © him the Delhi. He gmto start, zor could s. Things ss energy. jated with al method r allowed © Council Reinventing Biocon 81 Thave not seen anybody equal the creativity of Biocon’s solid state ferment: jon, Biocon’s mastery of solid state fermentation was a good strategic weapon. Drugs worth about USS 20 bitlion were made through fermentation. Having a high yielding method like this was extremely useful, By 1988, a successful pilot scale operation focusing on two fruit juice enzymes was in place. Biocon required funds for scaling up. It was then that Mr. N. Vaghul, the then Chairman of ICICI, bet on the unknown, He recalled a decade later: In most cases of venture capital financing, the decision is made more onthe strength ofthe evaluation of the entrepreneur. Kiran Mazumdar impressed me ftom the fist day as one ‘ho had the right instnets, dedication and commitment tor discipline, [had no doubt at that time that she would be able to pull through. {In 1988, Biocon Ireland was sold to Unilever and Kiran found herself dealing witha new and powerful partner. But Biocon extended its range of products into specialised food enzymes, bakery enzymes and textile enzymes, whose biggest application was in stonewashed jeans. In 1997, when Unilever sold its specialty chemicals business worldwide to ICI, Kiran decided to move independently, as partnerships ‘were restricting diversification. While Biocon saw its future in pharma, neither Unilever nor ICT were focused on it. Kiran exercised her pre-emptive rights to buy back her shares from Unilever. In April 1989, Helix Biotech Limited was incorporated as a Pharmaceutical Biotechnology Company, which later diversified into pharmaceutical bulk activities. This was merged into Biocon in 1997. ‘Once at a dinner party, some foreign visitors told Kiran Mazumdar about the opportunities of con- tract research. In November 1993, Syngene, a 99.99%-owned subsidiary, was incorporated to conduct research for third-party clients in the area of drug discovery and development. It was conceived as a sepatate business and had to stand on its feet. Syngene made its customers pay for teaching its chem- ists and biologists. Syngene designed and managed research projects for overseas pharmaceutical and biotechnology companies pursuing pre-clinical research for new drug discovery. The principal areas of research included synthetic chemistry, molecular biology and custom synthesis. Syngene was well placed to provide services to innovator companies in developed markets that aimed at bringing out new proprietary products while reducing research and development costs. Syngene offered high-value dis- covery and development services, from target identification and validation to small molecule and library synthesis. But at Biocon, each space had to be linked. Biocon found a unique way to blend chemistry ‘and fermentation and started providing pharmaceutical and biotechnology majors customised solutions inthe areas of synthetic chemistry and molecular biology, which was supported due to their reputation for meticulous IPR protection ‘On 27® March 2000, when Kiran turned 46, her best birthday present came in the form of aUS patent for the Plaftactor, which paved the way for Biocon to license the technology and give ita proprietary position in pharma manufacture at a low operational cost. Tn the late 90s, Gordon Ringold, a former business associate who had started a company, Surrimed, in the US, told Kiran Mazumdar about the exciting possibilities of clinical research. Clinigene was incorporated in December 2000 to conduct longitudinal clinical studies in selected disease segments as a wholly owned subsidiary of Biocon, Clinigene did Phase I to Phase II clinical trials for new drug ‘molecules, clinical studies, clinical research aimed at identifying new biomarkers for diseases such as ‘Type Il diabetes, clinieal research aimed at discovering new indications for existing drugs and clinical laboratory tests for other pharmaceutical companies and contract research organisations (CROs). Cli- rnigene’s laboratory was the fist Indian laboratory to receive certification from the College of American Pathologists (CAP), which was required by large pharmaceutical companies to provide clinical research 2 couse eo pores e1tinan 882 Cases in Strategie Management services. Clinigene, specialised in Phase I-IV clinical trials and studies, using well-characterised clini- cal databases in diabetes, oncology, lipidemia and cardiovascular diseases, They offer these services at theit CAP and NABL-accredited Central Reference Laboratory and a state-of-the-art Bioavailability and Bioequivalence (BA/BE) Centre. ‘The core expertise of Biocon was in fermentation anda substantial majority oftheir biopharmaceuti- ‘cal and enzyme products were produced through fermentation techniques, A large number of products were also manufactured using synthetic chemistry techniques either entirely or in combination with fermentation techniques. Their growth strategy was driven by innovation in both biopharmaceutical “business, where they developed non-inftinging processes for the manufacture of focus products and enzymes business, where they developed novel enzymes and customised applications Biocon’s fully integrated business model spanned the entire drug value chain, from pre-clinical dis- covery 10 clinical development to commercialisation, Business in custom research (Syngene), clinical development (Clinigene) and biopharmaceuticals (Biocon) provided multiple revenue streams to balance risk, drive innovation, deliver products and accelerated growth, Biocon had an impressive track record of commercialisation capabilities. They brought to market considerable portfolio of biopharmaccuticals, led by the blockbuster Statins. The commercialisation of Insulin, Immunosuppressant and a range of biogenerics demonstrated their highly advanced process development and manufacturing expertise, Under rapid progress, there were two challenging collaborative Projects for the development of novel medicine, including Oral Insulin and Th, Biocon also marketed ‘a basket of branded formulations in India; among them were INSUGEN, BIOMAB EGER and EPO. Biocon developed a robust drug pipeline, led by monoclonal antibodies and several other molecules at exciting stages inthe biopharmaceutical value chain. With the successful commercial launch ofthe first anti-cancer drug and several promising discovery partnerships in the clinic, Biocon envisioned scaling new heights in frontier science and achieving new milestones in affordable medicine. Its strategy was to target generic drugs that were to go of¥patent inthe near future and then develop non-infringing processes ‘based on its proprietary technology in fermentation combined with its skills in synthetic chemicals, HUMAN CAPITAL The ability to attract and motivate good people was a key factor behind Biocon’s success. Biocon’s key People like Suryanarayan were all long timers, hand-picked by Kiran Mazumdar. They grew with the company and could not think of working for any other company. It was either Biocon or nowhere. Nirupa Bareja, Head of Human Resources, was a doctorate in Marine Biology and stayed with the company as there was something special about the atmosphere. Kiran met Charles Cooney, Professor of Chem cal and Biochemical Engineering at Massachusetts Institute of Technology in 1980s, when he visited Bangalore as Director of Astra Research Centre. Arun Chandavarkar, a doctorate from Massachusetts Institute of Technology, was the brightest student of Cooney and was expected to accept an offer from Unilever, as his father had spent long years at Hindustan Lever. But he joined Biocon to head its techni cal function, Murali Krishnan, President of Biocon Group, Finanace, was helping out Biocon in 1981 while studying to become a Chartered Accountant, He joined the company soon and did not finish his CA degree. Ajay Bhardwaj, who headed the Marketing Department, came from Max India with a sal- ary cut after reading a story about Biocon, Anindya Sarkar, a Ph.D. in Microbiology from Kolkata, got 8 gall from Biocon asking him whether he was interested in joining the company, He joined R&D in 1997 and started heading the Intellectual Property Division. Patents were necessary to sell even in the ‘generics market to have an economical and non-infringing route. Kiran’s husband John Shaw had neverReinventing Biocon 83 seen a company with such an open culture. Shaw was 2 30-year veteran at Coates Viyella Group. He uit Coates and came to Bangalore to head the Intemational Business Development at Biocon as he felt: Thisis an opportunity to be involved in an exciting industry where brainpower is the critical advantage, Biocon has entrepreneurship, drive and scientific talent in abundance. INORGANIC GROWTH ‘Over the years, Biocon emerged as an integrated biotechnology enterprise with presence in biophar- maceuticals, enzymes, custom research and elinieal research, Biocon was India’s largest biotechnology ‘company in terms of revenues. In 2001, Biocon became the first Indian company to be approved by US FDA for manufacture of lovastatin, a cholesterol-lowering molecule and Biocon’s proprietary bioreactor, Plafractor was granted a US and worldwide patent, In 2003, Biocon became the first company worldwide to develop human insulin on a Pichia expres- sion system. In the same year, anticipating the increasing importance of immunotherapy medicines of the future, Biocon established Biocon Biopharmaceuticals Pvt. Lid. (BBPL), a joint venture with the Cuban Institute CIMAB, to develop and market a range of MAbs and Cancer Vaccines. CIMAB was the ‘commercial branch of the Centre of Molecular Immunology (CIM), & Cuban biotechnology institution dedicated to research, product development and manufacture of mammalian cell culture products. BBPL. could leverage CIMAB's expertise in developing and manufacturing immunotherapy products (which ‘was largely imported into India) and Biocon’s R&D and state-of-the-art manufacturing capabilities. The resulf ofthis partnership was the launch of India’s first anti-cancer drug, BIOMAb-EGFR. In 2004, Biocon launched INSUGEN, the new generation bio-insulin, manufactured in Asia’s largest ‘human insulin plant, Soon after this, it entered into a strategie partnership with Vaccinex, to discover and. o-develop fully humanised antibodies focused on cancer, inflammation and autoimmune diseases. The collaboration combined Vaccinex’s unique capabilites to discover fully human monoclonal antibodies using its proprietary antibody discovery technology and Biocon’s proven expertise in clinical research and biologics manufacturing, Vaccinex was a privately held biotechnology company headquartered in Rochester, New York engaged in the discovery and development of novel therapeutic antibodies. As a result ofthis partnership, two monoclonal antibodies, BVX-10 (directed against TNFa—a promising farget for therapeutic intervention in Rheumatoid Arthritis) and BVX-20 (intended for use inthe treatment of patients with relapsed or chemotherapy resistant follicular B-cell NHL and CD20 positive diffuse large B-cell NHL in combination with chemotherapy) moved into pre-clinical stages. Biocon signed a product licensing agreement with Bentley Pharmaceuticals Ine. forts intranasal spray formulation for Insulin administration in 2005, Bentley Pharmaceuticals Inc. was a technology-based specialty pharmaceutical and drug delivery company with a growing branded and generic produit line in Europe. The licence agreement covered 85 countries, granting Biocon exclusive as well as co-exclusive rights to develop and market throughout Asia, Africa and the Middle East. In addition, Biocon also entered into a long-term supply agreement with Bentley under which Biocon provided Bentley and its licensees, with a competitive supply of Insulin for worldwide markets. The terms of agreement assured Bentley commercial supply of Insulin for worldwide markets. Biocon also signed a Memorandum of Understanding (MOU) with the Karolinska Institute, Sweden, to collaborate in research and research-education initiatives. Karolinska Institute was Sweden’s leading Medical University, reputed to be among Europe's best. The institute's reputation for visionary science afforded it the exceptional honour and responsibility to nominate The Nobel Prize for Medicine and84 Cases in Strategic Management Physiology every year. As a result of this memorandum, the firms partnered in product development, joint PRD studies at Karolinska Institute joint research programmes between Karolinska Institute and Biocon and Scientific Symposia in India sponsored by Biocon in association with Karolinska Institute. “The year 2006 was a year of great achievement. Biocon inaugurated Biocon Biopharmaceuticals, India's largest multi-product Biologics facility at Biocon Park, India’s largest integrated biotechnol- ogy hub, comprising an integrated cluster of research laboratories and manufacturing facilities spread seross 90 acres in KIADB (Kamataka Industrial Areas Development Board) industrial estate. Biocon also entered a licensing agreement with multinational healthcare company, Bayer HealthCare (BHC) for the exclusive marketing and trademark rights for INSUGEN for the Chinese market. Bayer HealthCare, a subsidiary of Bayer AG, is one of the world’s leading, innovation companies in the healthcare and ‘medical products industry, based in Leverkusen, Germany. It proposed to expand the collaboration to other countries in Asia Pacific. Biocon’s subsidiary, Syngene concluded a cooperation agreement with Innate Pharmaceuticals AB, Umea, Sweden to jointly develop, manufacture and market virulence blockers to counteract bacterial diarthoea disease. Innate Pharmaceuticals AB was formed in 2000 to create a commercial platform for the world-leading researc taking place at Umed University and Karolinska Institute in Stockholm, Using in vitro and cell-based assays, several novel small molecule inhibitors of Type 3 secretion in Yersinia and Salmonella were identified in this collaboration. These promising inhibitors were characterized for drug-like properties and analogues of such compounds were synthesised in order to improve both po- tency and physico-chemical properties. Some of the promising compounds were being tested in animal ‘models for diarrhoea and evaluated for pharmacokinetics and toxicity profile in rodents, Biocon granted an exclusive licence to Ferozsons Laboratories Limited for marketing India’s first anti-cancer drug BIOMAb EGER in Pakistan, Ferozsons Laboratories Limited was the foremost national Oncology Company in Pakistan. The successful debut made by BIOMAb EGFR in the Indian market since mid-September, 2006, evinced strong licensing interest for the proprietary cancer drug in the region. Biocon’s decision to select Ferozsons Laboratories Limited as its exclusive licensee in Pakistan ‘was based on the leadership position that the company enjoyed in oncology. Tn 2007, Biocon and Abu Dhabi-based pharmaceutical company Neopharma signed an MOU to establish joint venture to manufacture and market a range of biopharmaceuticals for the GCC (Gulf Cooperation Council) countries. This landmark agreement between the two companies heralded the region’s first foray into development and marketing of life-saving biopharmaceutical products. Biocon also launched its Nephrology Division and a comprehensive portfolio of renal therapy products, Syngene entered into a research partnership with Bristol-Myers Squibb (BMS). Through this symbiotic global partnership, Syngene provided BMS rescarch and development services for discovery and early drug development. Biocon signed a Memorandum of Understanding with Deakin University, Australia, to establish Deakin Research Institute in Bangalore and joint development of a mammalian cell bio-processing facility at Geelong, Victoria, Australia. Deakin University, Victoria was Australia’s fastest growing university in multidisciptinary research with greater focus in biotechnology and biosciences research. Tin June 2007, Biocon divested enzymes division for USD 115 million to Novozymes and decided to focus on biopharmaceuticals. Biocon and Abraxis Bio Science, entered into an agreement wherein ‘Abraxis licensed the right to develop a bio-similar version of G-CSF (Granulocyte-Colony Stimulating Factor) in North America and the European Union, Abraxis BioScience, Inc. was an integrated ¢lobal biopharmaceutical company dedicated to meet the needs of critically il patients. The company devel- oped, manufactured and marketed one of the broadest portfolios of injectable products and leveraged revolutionary technology such as its nab platform to discover and deliver breakthrough therapeutics thatWU to Gulf the erapy a this Overy lish sing wing arch. cided mercin ating slobal devel- raged esthat Reinventing Biocon 88 [ransform the treatment of cancer and other life-threatening diseases. The first FDA approved product to this nab platform, ABRAXANE, was launched in 2005 for the treatment of metastatic breast cancer. inder the terms of the agreement, Biocon received an upfront licensing fee and following approval in licensed territories, royalties from Abraxis Bio-Science. In addition, Biocon and Abraxis Bio-Science snounced a licensing agreement for the commercialisation of ABRAXANE (paclitaxel protein-bound ticles for injectable suspension-albumin-bound) in India for the treatment of breast cancer. Under , € terms of the agreement, Biocon also got the right to market ABRAXANE in Pakistan, Bangladesh, Sri Lanka, United Arab Emirates, Saudi Arabia, Kuwait and certain other Persian Gulf countries. As rt ofthis agreement, Abraxis received royalties from Biocon based on net sales of ABRAXANE in ese countries ices nceee 106 take in Get i aan ae cin aracza ion of €30 million in 2008, Established in 2002, AxiCorp was headquartered in Friedrichsdorf, (near Frankfurt) Germany. AxiCorp was a specialized marketing and distribution company established in 2002 by a group of industry experts to address the lucrative generics and parallel distribution market in smany and Europe. It marketed parallel distributed EU-pharmaceuticals as well as its own generic id “axcount”, This unique business approach contributed to significant cost savings for German Sealth providers and patients in the patented pharmaceuticals market as well a inthe off-patent market. -AxiCorp was amongst the fastest growing pharmaceutical companies in Germany, which employed 170 employees, had launched over 180 products and had a turnover of €75 million in 2007. This acquisition abled Biocon to market and distribute a range of pharmaceuticals including generics, bio-similars, logics and innovative pharmaccutical products in Germany and Europe. Inthe sanie year, Biocon entered a strategie partnership with LATRICa, Inc toco-develop an exclusive sw class of immunoconjugates for targeted immunotherapy of cancers and other infectious diseases. EATRICa was a privately held biotechnology company engaged in the discovery and development of sovel targeted immunoconjugates for prevention or treatment of cancer and infectious disorders, [ATRICa bras a start-up company formed in 2007 with technology developed at the Johns Hopkins University, Baltimore, Maryland, USA, and had exclusive licence to the immunoconjugete technology invented by Johns Hopkins, Scientist and Company founders, Dr. Atul Bedi and Dr. Rajani Ravi. The candidate products were co-developed based upon IATRICa’s technology platform and Biocon’s proven expertise sn drug development, biologics manufacturing, and clinical research. BIOTECHNOLOGY INDUSTRY IN INDIA. Biotechnology is defined as a set of techniques for industrial exploitation of biological systems or pro- cesses. It encompasses any technique that uses living organisms to make or modify products, to improve plants or animals or to develop micro-organisms for specific use and involves applying molecular and collular biology, plant, animal and human genetics and immunology in order to create new products. Conventional techniques of producing biotechnology products, using traditional microbiological fer- mentation, have evolved with the development of modern technology. Modem biotechnology entails use lofcell fusion techniques (use of information technology for documenting biodiversity and study DNA structures), genetic engineering, structure-based molecular design and recombinant DNA technology {insertion of foreign gene) and hybridoma technology (fusing and multiplying cells). Biotechnology has transformed many parts of the chemical industry, agriculture, and medicine. India had a small share ofthe global biotech market, but had all the capabilities to become a dominant player. The consumption of biotech products in India was expected to quadruple within a decade. The ftuman and animal segment of the industry alone was growing by at least 20%. While India had been onal bee es ciieeantemeniaimeniines eewore were 86 Cases in Strategic Management practicing conventional biotechnology for decades, modem biotechnology was rather new to India, In 1999, the total biotech market in India was valued at $1 billion, just 1.5% ofthe global industry, but was expected to grow to $45 billion by 2010. Human health biotech accounted for 60% of the total sales, ‘hile sgro-biotech and veterinary-biotech together accounted for 15% of the total revenue and medical devices, contract R&D and reagents and supplies constitute the remainder. 800 companies were operating inall sectors of biotechnology, but only 25 were working in the modern biotech sectors. India had rich biodiversity, varied species of flora and fauna, varied climatic zones, large population with varied demography, largest agriculture sectors, world-class information technology industry, vibrant pharmaceutical sector and a large pool of scientific talent that created almost a perfect environment for biotech companies to shift base here. With its large population of over a billion people, India also provided a huge market for products and services. India had a rich human capital, which was the strongest asset for this knowledge-based industry, and 2 large English-speaking base, India produces roughly 2.5 million graduates in IT, engineering and life sciences, about 650,000 postgraduates and nearly 1500 PhDs qualified in biosciences and engineering) ‘each year. India had proved its competency in sclected areas of biotechnology such as bioprocess engi neering, skills in gene manipulation of microbes and animal cells, eapacity in downstream processing) and isolation methods, and its competence in recombinant DNA technology of plants and animals. Indie also allowed assisted stem cell research that permitted researchers to use embryos from fertility clinics ‘upon informed consent ofthe donors, thus giving ita clear head startin this new and promising field in Biotech. India had the strength and capabilities in this industry, and a definite advantage to move ahead and become the chosen location for many biotech companies looking for large markets and low-cost qualified workforce to work in theit R&D division. ‘The Indian Government had been playing an important role in the development of Biotech sector from the very beginning and there were large number of R&D institutions set up by the Government, During) the National Consultation on the Draft National Biotech Development Strategy meeting at Hydersbad on™ May 2005, Mr. Kapil Sibal, and Union Minister for Science & Technology, Government of Indi expresses his commitment towards the industry Biotech is the sunrise industry of India. We will promote Bioentreprencurship and seek concessions to nurture this sector. We shall empower Biventrepreneurs by simplifying regulatory reforms. We will scale up Biotechnology programmes. ‘The inherent strengths of India combined with rising public interest inthis sector, growing investment by traditional business houses, tax incentives and the significant foreign investment available, poised) Indian biotechnology sector to emerge as a significant force on the global biotech map. CRYSTAL GAZING Kiran Mazumdar Shaw steered the company through several reinventions, first moving from being an enzyme maker to stains (cholesterol busting drugs) and when prices crashed and Chinese compet tion intensified, she shifted focus to bio-pharma. Now she wants to unlock value from her three mais bbusinesses—Biocon, Syngene and Clinigene and the company as a major biopharma company. She! expressed herself wel: ‘We keep reinventing ourselves. Inthe first 20 years we focused on enzymes, inthe last 10 ‘ve focused on biopharma and services. We now want to get into the market with our own products. It was first about branded enzymes, now it is about branded biopharma, ‘While ms ‘opportunity i maceuticalse charges are & Biocon wills competition & That leaves is certain that borrowings e« evolutions, w :Reinventing Biocon 87 ‘While markets like China are good stepping stones, Kiran Mazumdar Shaw is aware that the real | pportunty lies inthe US and Wester Europe, where hundreds of illons of dollars ae spent on phat-, ‘maceuticals every year. However, she also realises that such markets are difficult to enter as regulatory charges are high and there are many large competitors, much larger than Biocon. Hence, she feels, Biocon will not be able to make money for at least 4-5 years inthe US market, apart from facing tough competition from firms such as the US $13 billion Amgen and Biogen, which may also foray into India, ‘That leaves just one option—acquisitions, However, that too requires heavy investment of funds. Kiran iS ceriain that they will not goto market to raise funds for future growth, butmay think of leveraging the borrowings completely. Considering that Kiran has successfully steered her company through previous evolutions, would you bet against her? Pe | stethonsiieee tn) eet88 Cases in Strategic Management Exhibit 1 Er Microbial Technologies, Pharmaceutical Manufacturing Marketing EE oc Development Molecular Biclogy lineal Research Synthetic Chemistry Clinical Development Research & Development Cinical Trials Syngene Clinigene Biocon -PRE-CLINICAL DISCOVERY CLINICAL DEVELOPMENT ‘COMMERCIALIZATION . + Chemistry $ — Medicinal Chemistry + Clinical Operations + Research Collaboration ' = Process R&D + Clinical Development + Product Development — Analytical Services \ ~ Combinatorial Chemistry + Clinical Data Management + Process Development \ Custom Manufacturing and Biostatistics + Manufacturing = Polymer Chemistry + Biology + Regulatory Services, + Regulatory filling Molecular Biology ~ Protein Sciences + Human Pharamacology Unit Cell Line Sciences + Marketing — Assay Services + Bioanalytical Research + Custom Manufacturing —eADMEt & PK Studies Laboratory Bioanalytical Services + Central Laboratory + Licensing — Biologics PTE based protrams > BABE Studies > Process Seale UP Fee for Service Projects > Phase TPK/PD > Regulatory Approvals Risk Sharing Projects Phase H-IV Clinical Tals > Marketing & SalesReinventing Biocon 89 ‘Exhibit 2—Mission —To be an integrated Biotechnology Enterprise of Global Distinction essential fo this mission Is excellence in: + Intellectual asset creation through discovery, research and development + State-of-the-art manufacturing capabilities + Internationally benchmarked quality and regulatory systems + New medical insight through disease-specific clinical research + Customer relationship through outstanding products and services «+ Homan resource development through training, mentoring and empowering + Management of research and business partnerships Exhibit 3—Biocon Values ‘Focus on People nie ofall that we do. We value and respect our people by celebrating diversity, ‘Our employees are atthe c in all our interactions. ‘competence, tus, transparency and openness i Diversity “Weare inclusive and embrace a song commitment to equal opportunity and demonstrat respect and Jresation for diversity, deriving our tenth from the diferent sis and backerounds Winin oot workforce Prt prema means valuing diflerences in experiences and styles of working, thinking, communicating challenging, and leading. “Trust, Integrity and Commitment ‘We value candour, trust and integrity, We reeognise our respons ‘al principles expected inthe biotechnology industry. Commitment 19 are rewarded at all levels, bility to uphold the inherent moral and eth the organisation and to business ethies Quality First ~ from research to processes to human resource practices. Biocon ‘Quality is integral to all Biocon activities “improving and offering innovative products and solutions tots ‘continuously explores new ways to keep ceonsumers, stakeholders and employees. Innovation ‘out to all organisational activities. We us for new deug discoveries, lenges ofthe knowl- {Innovation is inherent to not only our fo ‘ean we evolve, progress and address the chal believe that its only by innovating that cedge-intensive biotechnology world. oa Las90 Cases in Strategic Management Exhibit 4—Biocon—Produet Mix Sales Quantity (Tonnes) Sales Value © Groves ‘Year Enzymes Pharmaceuticals ‘Enzymes. Pharmaceuticals ee Net Curent Ast Mar 2004 2464.03 280626 6632 43537 eso Se Mar 2005 302756 4109.69 6 SSi87 = Mar 2006 404781 Gi8545 8573 sea ee Mar 2007 4606.75 9580.289 103.49 15642 er * ova Total Net Curent bit S—Biocon—Summarised Balance Sheet Total Maro7 | Mar‘oe | nfar’os | Miarvo4 | Mar‘oa | Marvoz | Moro] pT! — Book Vale of Ue SOURCES OF FUNDS ec if Equity Share Capital 50 50 50. 50 1.84 1.82, 15 ee Reeves Supin | sas | asi7 | oasi | aoa | ince | asa | wa Contingent biti Nunber of aly an Funds ® at ax shares outstanding Sere Yous rosie | ioror [7038 | ere | usr | aa) aaa fintacs) ‘nsecrod Loans 028 | oa Q o Q 5 | 389 Toad 10473 | 90682 | ras | oars | 19337 | isis | 94a USES.OF FUNDS ; Fined Assets Gross Block ssa | sie | 2702 [| isi2s | assss | tases | veer Operating Income Less Reval Expenses Reserve | ia | ve | ts | i | ons 2 an se Accrmlated Daredan us| sna | esa | ataa | anse | aia | 6a Ne Block mise | 22654 | 2034 | s4aso_| 12008 | 10209 | e026 Copia Work progress aso | ascas | 10 | saat | 798 | an | 22 nvesinens zas | 13506 | 237 | s9 | eas | eas | ove csc (Contd,) a Operating ProfitExhibit S—(Contd,) Reinventing Biocon 91 = ‘Maro7 | Mar‘oe | Mar‘os | Mar‘o4 | Marva | Mar‘o2 | Mar‘01 : Net Current Assets ; ——} Pere asses, Loans |} BP ssrances aor | sas6 | 2057 | seis | tszas | 9583 | 6695 =e Pe tes & Provisions 2s62 | casz7 | asigs | stag | soas | seas | 3557 Foal Net Curent Asses zn | sim | san | s997 | soe | 377 | 3136 Tl Total 0473 | soeaz | ross | oa7s | 19336 | tst98 | 942 Book Valve of Une | J evstedinvesnents essi | 13906 | 2867 | 893 | sas | sas | 006 Marker Value of Quoted 13 Investments ° o | 02 ° o ° ° 351 Coningca ables | 14496 | 7049 | tase | i311 [3477 [1256 ° Number of Egy —} J stares ousanding 343 Gin tacs) 1000 | 10000 | 1000.0 | .o0 | i838 |. 1822] 30 399 = Exhibit 6—Biocon—Summarised Income Statement Ex ; ‘Mar 07 | Mar 06 | Mar ’05 | Mar "04 | Mar %03 | Mar “02 | Mar 701 Income Rar Operating income was | cies | esos | sonss | 2sse4 | 10052 | i221 . Expenses : zl Material Consumed wae | sa64s | sanz | 25537 | tote | 8264 0 ee Monufcuing Expenses | 7322 | 3698 | 3192 | 23 | 2007 | us | 6989 al Personnel Expenses 327 | a206 | 4208 | 3527 | 2731 | 1965 | 120 =| Selling Expenses mea | te36 | 1247 | 846 | 497 | 245 o 282 aa > 2 375 % [AdmininraiveExpowes | 6488 | 297 | 2596 | 2618 [\ isis | 97s | 85 Expenses Capitalised 0 0 0 0.71 0.17 0 = Cost of Sales 637.78 | 511.58 | 460.63 347.56 | 192.62 | 125.62 OL cou) Operating Profit 1e7s7 | iso0s | wwosi | 142 | om | x49 [a2 . (Cond)ee sor een wart 92 Cases in Strategic Management Exhibit 6—(Contd.) ‘Mar’07 | Mar’06 | Mar’0s | Mar’o4 | Mar‘03 | Maro Other Recurring Income | 39.72 | 627 | 1499 | 686 | 119 | 44r ‘Adjusted PBDIT 22729 | 18631 | 2088 | tots | 64.21 | 3931 Financial Expenses ais | 248 | 269 | 317 | 506 | 467 Depreciation sri | 2285 | 1809 | 1395 | 1202 | 778 ‘Adjusted PBT 161.52 | 16098 | 18402 | i44te | ard | 2686 “Tax Charges 127 | 2739 | 1412 | 22st] ines | 7.09 ‘Adjusted PAT vas.sz | 13359 | 1699 | 1213s | 3528 | 19.77 Non Recurring Items 953 | -on | 317 | 332 | 059 | ose Other Non Cash adjust- ments 0 o | 132 o OD o Reported Net Profit wseas | sa4s | 17439 | 12467 | 35.87 | 2031 ‘Barings Before Appro- priation ages | 372 | 27876 | 183.75 | soos | 232 Equity Dividend 30 25 20 10 0 0 Dividend Tax sa [351 [281 | 128 0 0 Retained Earnings as34 | 343.49 | 25596 | 17247 | 590s | 232 OVPREMERETREE SSPE rereREFERENCES Annual Reports of Biocon ‘Business Indi, Biocon; The winning edge, Mar 24, 1996, p.74 ‘Business India, Biocon Rising, Dec 21, 2003, p.62 Business India, Bioeon: statins and something different, Mar 18, 2001, p.21 Business Toda, Biocon’s Big Bet, Jan 30, 2005 p.62. Business Today, Biocon Bom Again, November 4, 2007, p.116 Business World, Passage to India, August 21, 2001, p.76 ‘Business World, Biocon’s New Charge, May 8, 2006, p-44 ‘nttp:wwvebiocon.com/biocon_aboutus.asp, May 21, 2008 httpi/ivwrw.biocon.com/biocon_aboutus_brand.asp, May 21, 2008 hnttp/vwrw.biceon.comi/bicean_aboutus_business.asp, May 21, 2008 hitp:/iwww-biocon.com/biceon_aboutus_history.asp, May 21, 2008 -ntp:ewvefeei com/biatechnology htm, May 21, 2008 -itp:/wwww.icei.com sectors/biotechnology/biotechnology-advantege htm, May 21, 2008 inti liwwwficel.com/sectors biotechnology biotechnology-detai.htm, May 21, 2008 India Today, Biotech Bonanza, Aug 9, 2004, p.19 ‘Newsweek Intemational, First lady in Asia, October 11, 2004 Overview of the Biotech Sector in India—A FICCI Publication Reinventing Biocon 93 : € ¢ ¢ 3 q 5 a g ’ 7