RANBAXY LABORATORIES LTD.

HISTORY OF RANBAXY
Ranbaxy Laboratories Limited (Ranbaxy), India's largest pharmaceutical company, is an integrated, research based, international pharmaceutical company, producing a wide range of quality, affordable generic medicines, trusted by healthcare professionals and patients across geographies Ranbaxy was founded in 1961 and was listed on the Indian Stock Exchange in 1973. It exports to 125 countries and has ground operations in 50 or so countries and manufacturing operations in 7 countries.

SITUATION ANALYSIS
Most of its products are manufactured under licence from foreign pharmaceutical patent holders, although quite a high percentage of sales come from out-ofpatent drugs. Ranbaxy is targeting the higher-spending consumers in the US & Europe.(4th largest in the world by volume and 13th largest by value) Changing legal(Medicare Modernization Act) and social(ageing population) factors are driving growth of generic drugs in the USA. American consumers are becoming unhappy because of increasing cost.( the annual spending on R & D is increasing but not in pace with the new drug development)

INDUSTRY ENVIRONMENT
Ranbaxy is competing fiercely with its rival to produce Indias first new patentable drug molecule. Developing new drugs is now an expensive and risky business. The regulations have become far more stringent, raising the amount of time and money drug-makers need to spend on development. By 2008, Indian companies are expected to have 30% of the growing generics market globally.

R & D INFRASTRUCTURE IN INDIA

Government policies and investment programmes are encouraging innovation and development. India has extremely skilled educated manpower. Foreign-returned Indians carry with them western management methods, money, contacts and ambition. The cost of manufacturing in India is 70% lower than in western countries and trained staff is available at a much cheaper rate which is encouraging CRAM.(But manufacturing is 84% and research is only 16%) Indian government has suggested to impose price control which has been hugely protested by the drug companies.

RANBAXY S R & D
Ranbaxy had the highest R & D expenditure of the Indian pharmaceutical firms in 2005. Ranbaxy has three state-of-the-art multi-disciplinary research facilities ,out of which two centres focus on generics and NDDS research and the third is dedicated to new drug discovery research.(NDDR) Ranbaxy has developed four NDDS platform technologies which have led to the development of several new drug applications(NDAs) based on these technologies. There are three types of patent possible in pharmaceuticals: on the drug molecule, on the product manufacturing and on the drug delivery system. In India there was no product patent, which encouraged copycat versions.

ALLIANCES AND ACQUISITIONS

Ranbaxy has made 15 acquisitions since 2004 including eight in 2006. The major stimulus for Ranbaxys acquisitions appears to be the search for scale. It is currently eyeing-up acquisition of Mercks generic business which would bring Ranbaxy as the 3rd largest generics manufacturer globally. It has many strategic international alliances. Example GSK.

CASE STUDY QUESTIONS

PROS MANUFACTURER OF IMITATIVE GENERIC DRUGS CONS Low R & D cost Short-term Less risk Less margin Tap the US generic market. No differentiation It can tap 30% of the growing generics market globally.

DEVELOPER OF PROPRIETARY MEDICINES

Long-term success  Good R & D infrastructure can be competencies to compete with foreign manufacturers. Can repair reputation from copycat manufacturers. Stimulate research in india.

High R & D cost Time invested is more More risk Regulations are stringent Research was only 16% of the CRAM market. Less commoditization

Ranbaxy should focus on the developed market because:  USA & Europe are its biggest market.  Changing legal & social factors in developed market.  It can achieve economies of scale.  It can compete with its foreign competitors(Novartis) by cost-leadership.

India has a suitable infrastructure for innovation but it has its pros and cons. Pros  Government investment programmes or state aids for innovation and development  Extremely skilled and cheap human resource  Low cost of manufacturing cons  Imposition of price control by Government can block much-needed effort in capital required for crucial R & D effort.