MARKETING STRATEGY OF RANBAXY
Ranbaxy has set itself apart in the marketplace through through the rapid expansion of its product line and its willingness to emulate complex drug formulations. RPI's commitment to quickly expanding the breadth and depth of its product line has been key to its success in the marketplace.
Ranbaxy has a commercial commercial advantage as many of o f the high-profit branded drugs with expiring patents over the next few years are in the categories where Ranbaxy has proven expertise - antiinfectives, gastrointestinal, cardiovascular and analgesics.
RPI has a turnkey marketing group that works with other pharmaceutical companies to co-market and co-promote a variety of chemicals and products. As a marketing partner, RPI is able to meet the marketing needs of companies while they themselves focus their efforts on a drug's development, development, manufacturing, distribution and sales.
Marketing Strategies is the department focused primarily on developing and executing strategies for the promotion and distribution of branded, generic and OTC products for RPI.
One of the key tasks for the department is to identify opportunities in different markets and distribution channels and pursue those to developing and establish new relationships in the marketplace. Managed Care and Internet marketing are a couple of key areas that the department is looking to introduce into its ever-expanding service offerings.
Ranbaxy Laboratories Ranbaxy Laboratories Limited was established in 1961 and listed on the Bombay Stock Exchange in 1973. Ranbaxy started as a manufacturer of active pharmaceutical ingredients (API) and soon began looking at international markets for exporting these ingredients. By 2006 Ranbaxy has world-class manufacturing facilities in eight countries namely China, Ireland, India, Malaysia, Nigeria, Romania, the US & Vietnam. {Table 4 Here} Table 4 shows internationalisation history of Ranbaxy over the years. In 1977, Ranbaxy
established a subsidiary in Nigeria through a joint venture and in 1984 it expanded operations to Malaysia. In Nigeria Ranbaxy supplied equipments against its share holding in the joint venture unit in 1978. Due to FDI laws prevalent in country, the company‟s equity contribution has to be in the form of exports of Indian made capital goods and know-how. The main motives of Ranbaxy‟s Nigeria venture were to exploit its process advantage by supplying cheap drugs to the unmet demand in a developing country (Pradhan, 2006). The joint venture in Malaysia was formed by the Indian and Malaysian 13 government. Compare to the 10% holding in the Nigerian joint venture, Ranbaxy had a 53% holding in their Malaysian joint venture. Since then Ranbaxy has expanded its geographical presence through joint ventures to new countries like Thailand, Canada and China and through wholly own subsidiaries in countries like the Netherlands and HongKong. At the end of 2005, the number of subsidiaries and joint ventures of Ranbaxy stood at 50 covering a total of 30 countries (Pradhan, 2006). By 2006 in 48 overseas ventures, Ranbaxy holds a majority or full ownership showing a preference towards full ownership in overseas expansion. The firm was listed on the Luxembourg Stock exchange in 1994 and raised money to establish a global presence in generic drugs manufacturing through a combination of overseas investments and foreign acquisitions. After euro issue Ranbaxy invested close to $100 million over a four year period globally and created physical infrastructure in different parts of world. Ranbaxy entered the US in 1995 by acquiring an FDA-approved manufacturer, Ohm Laboratories. In 1996, it started a joint venture with another US based firm Schein Pharmaceuticals for marketing Ranitidine in US. In 1998 Ranbaxy established a 100 percent subsidiary in the US and started marketing products under its brand name. Within just four years of starting its US operations, Ranbaxy touched the US $ 100 million mark for sales in the US. The firm also began expanding its production facilities in Europe by setting up a subsidiary in the UK (1994) and establishing a manufacturing plant in Ireland (1995). These have proved instrumental in Ranbaxy‟s forays into other European markets; the company first entered UK and created a critical size which provided the company with a platform to expand it further in Europe. After UK entry it swiftly expanded into Poland ($ 6 million), Hungary ($ 4 million), the Czech Republic ($ 8 million) and the Slovak Republic ($ 8 million); each of which were million dollar businesses during expansion. The manufacturing plant in Ireland provides the backbone of Ranbaxy‟s European business. In recent years Ranbaxy has pursued an aggressive acquisition strategy for the internationalisation of its operation. In 2004, the company consolidated its position in the European market further by acquiring the fifth largest generics company in France. In 2006 Ranbaxy acquired two generic companies namely, Terapia in Romania and Ethimed in Belgium and followed that by buying a large unbranded generic product portfolio of Allen S.P.A in Italy. 14
In order to protect its international investments, Ranbaxy also applied for patents all over the world for its innovative production processes. The experience gained also developed regulatory skills needed to obtain approvals for its products under Para 2 of the Abbreviated New Drug Applications (ANDAs) scheme in the US. In the case of Ranbaxy joint ventures, acquisition and organic route have emerged as key part of Ranbaxy‟s internationalisation strategies. Ranbaxy began with joint ventures in developing countries first and then in other developed countries. This has proved an importance source of learning for operating in international markets. At the heart of strategy was sequential expansion; first prioritise market in overseas country, then export in that country or form joint venture to understand dynamics, then set up infrastructure and finally start expanding. Malvinder Singh, CEO of Ranbaxy describes internationalisation strategy of Ranbaxy, “Our first joint venture in Nigeria (1977), then we went to Malaysia and t hen to Thailand. There we picked up and learnt what is meant to operate in international market, at patent regimes, at marketing and distribution. It is completely different. So we moved up value chain in our products and up the export markets from developing nations to developed countries. By that time 1993 had come. We said it is not just India; the market is global of which India is one market”. (Rediff. Com (2004), The Rediff interview/ Malvinder Singh President Ranbaxy). Flow Chart 1: Ranbaxy‟s overseas expansion 1977 1981 1992 1995 1997 2000 2002 2002 2003 2005 2006 2006 Subsidiary in Netherland JV in Nigeria JV in Malaysia Acquisition in USA (liquid manufacturing facility) Acquisition in Germany (Basics) Subsidiary in HongKong Acquisition in USA (Ohm Laboratories) Acquisition in Japan 10% equity stake Acquisition in France RPG
Aventis (Generic) Acquisition in Germany Procter &Gamble (Generic) Acquisition in USA Sentek’s
business 3 acquisitions in Europe Spain, Belgian, Italy
MarketBusting Moves Ranbaxy Laboratories Limited has managed to lead the industry and strengthen its global presence by successfully implementing the following MarketBusting moves: • #14: Radically improve your productivity • #25: Capitalize on second-order effects of shifts in constraints • #37: Make a Land Grab #14: Radically improve your productivity In the competitive and fast-paced pharmaceutical industry, Ranbaxy has actively pursued strategic alliances and acquisitions to gain access to breakthrough technologies and fast growing markets. They have managed to balance their R&D costs and work force by working with some of the leading drug development laboratories around the world while leveraging their financial support and distribution networks in commercializing scientific discoveries. In 2003, Ranbaxy entered an agreement with Medicines for Malaria Venture, Geneva (MMV) for the development of Synthetic Peroxide anti-malarial drug. The company entered human clinical trials and got approvals to conduct clinical trials in the United Kingdom in 2004.4 As CEO and Managing Director, Dr. Brian Tempest stated, “Ranbaxy is committed to developing a drug that is not only safe and effective, but also affordable to people in India and hundreds of millions others who have to live with this terrible disease everyday.” The success of the partnership has further promoted Ranbaxy‟s image among populations and allowed it to meet a growing and important demand in treating malaria. #25: Capitalize on second-order effects of shifts in constraints The growth of generics grew at a faster rate than the total pharmaceutical market from 2003-04. The demand for more affordable drugs in developing countries has attracted several manufacturers to produce quality drugs at low-costs due to economies of scale and more flexible legal frameworks. Ranbaxy has aggressively followed industry trends and penetrated the generics market through alliances and heavy investments in R&D. Ind ia‟s low cost of innovation, production and labor allows it to market and distribute competitively in other parts of the world. Ranbaxy invests about 9% of sales into R&D as it tries to increase its share in the branded drug segments. 5 It has discovered several chemical compounds, got US patents and FDA approval for its drugs, which it distributes in several countries abroad under its brand name. The company has managed to become the market leader in several regions with the fastest growing generics segments such as France, Spain, Russia and many others. #37: Make a Land Grab After years of success, Ranbaxy has the technological expert ise and strong quality culture to back it up when it entered the laboratory testing business. It has the potential to fully exploit opportunities for growth in the clinical testing areas as it happens to be the single largest source of clinical laboratory testing in South Asia offering an extensive range of diagnostic tests. With the backing of four full-fledged testing facilities in Mumbai, Delhi, Mohalli and Bangalore, the company plans to increase its presence from 215 to over 400 towns with the number of collection centers going up from the existing 500 to 2,000 across the country. The laboratory which conducted four
million tests at present would have the capacity to carry out 25 million tests annually. The company would provide services of world-class tests at affordable prices in the country.6 4 „Ranbaxy
and MMV achieve potential breakt hrough‟ Global Pharmaceuticals Conference‟ 6 „Ranbaxy‟s Expansion Plans‟ 5 „UBS
Key Lessons Ranbaxy‟s manufacturing strengths have established it as a producer of world -class generics, branded generics and a major supplier of its range of Active Pharmaceutical Ingredients. Its overseas facilities are designed to cater to the needs of the local regulatory bodies of that country while the Indian facilities meet the requirements of all International Regulatory Agencies. Ranbaxy is now the 7th fastest growing pharmaceutical company in the world.7 It has pursued strategic alliances, leveraged its core competencies in finances, distribution network and quality processes to become one of the world leaders in the pharmaceutical marketplace. The company is growing rapidly and expanding into markets globally while investing in R&D to form its image of a research-based international pharmaceutical company. Ranbaxy
Overview Ranbaxy Laboratories Limited is India’s largest pharmaceutical
company, producing a wide range of generic medicines. The company ranks among the top ten global companies in the generic medicine business and has a presence in 23 of the top 25 pharmaceutical markets. Turnover was US$1.607 billion in 2007. It operates in 49 countries, has manufacturing facilities in 11, and employs 12,000 people. Although it focuses on generics, Ranbaxy has placed a lot of emphasis on research in the areas of novel drug delivery systems and new chemical entities, and employs 1,200 research scientists Although they did not start the company, the Singh family has been central to its success and owns most of the equity. Bhai Mohan Singh joined the company as a partner in 1951 when it was a distributor and led it through its early growth and subsequently into manufacturing. His son, Parvinder Singh, joined the company in 1967 becoming managing director in 1982 and chairman in 1993. It was his vision to transform Ranbaxy into an international company based on research rather than simply carrying on with local low-cost manufacturing. When he died suddenly the company was lead by non-family members, D.S Brar and then Brian Tempest, a European. Malvinder Singh, one of Parvinder’s two sons, was appointed President (pharma) and an Executive Director at the time of Tempest’s appointment. Tempest then became Chief Mentor & Executive Vice Chairman of the Board and Malvinder the CEO whilst another European, Peter B urema, is President of the Global Pharmaceutical Business. History The company’s history contains three intertwined threads stemming from Parvinder Singh’s policy: the growth of its
business at home and abroad, its policy of challenging patents to gain sales in rich markets, and its attempts to develop its own intellectual property and transform itself into a research-led organisation. Growth
The company started in 1937 as a distributor for Japanese
vitamins and anti- tuberculosis drugs. The company’s manufacturing history was triggered by an alliance in 1951 with the Italian company Lapetit under which Ranbaxy distributed Lapeti t’s products in India. In 1961, Lapetit assisted Ranbaxy to set up some limited local manufacture. This was the first example of Ranbaxy’s use of alliances to gain technical expertise. The association with Lapetit ended in 1966, due to Ranbaxy’s determinat ion to formulate more products locally. Faced with an ensuing product shortage, Ranbaxy “reverse -engineered” Lapetit’s products by 1969. At the same time, it also expanded its product range by developing Calmpose, its own version of Valium. At that stage, there was nothing to prevent Ranbaxy copying others’ products, but Ranbaxy was very small compared to the foreign multinationals (MNCs) and Indian public sector firms, such as Hindustan Antibiotics ltd and IDPL, which dominated the local market. 21
The Indian government introduced patent legislation in 1970; however, this only protected processes. Competitors were free to imitate products as long as they used a different process. This created a disadvantage for MNCs co mpared to local imitators, and they were further discouraged by the introduction of price controls on drugs and later (in 197 3) by restrictions on the amount of equity they could hold in local companies. This clearly provided a spur for the development of local pharmaceutical companies such as Ranbaxy, which established its bulk drugs facility at Mohali, Punjab, in 1971 and went public in 1973. Over subsequent years, it has continued to invest in its Indian manufacturing operations, which still form the core of its operations. Initially the company concentrated on the local market; however, given the low-cost Indian labour, the low capital cost of setting up a pharmaceutical plant in India (onethird the cost of Europe or United States), and the highvalue density of pharmaceuticals, exporting either generic products, which were out of patent, or “copies” of patented drugs to countries which were prepared to accept them was an obvious strategy for Ranbaxy, and indeed this is what it started in 1975. From 1980, the company transformed from a local to an international company. The driving forces were Parvinder Singh’s vision, the extension of price controls in the Indian market, and some encouragement from the government to companies to invest abroad. In 1993, reflecting the growing importance of its overseas operations, Ranbaxy restructured into four regions – India and Middle East; Europe CIS and Africa; Asia Pacific; and North and South America – setting up regional headquarters in the US and UK in the following year. In 1992, Ranbaxy expanded it operations via a joint venture with Eli Lilly to manufacture Lilly products in India and market them throughout South Asia; in 1994, when it looked as if the US healthcare reforms would trigger an explosion in the generic drug market, Lilly also contracted Ranbaxy to make generics for it.
By 1997 the Indian economy was beginning to slow down and drugs exporters, facing competition by the Chinese, began to increase focus on generics, and in the same year Ranbaxy engaged in a spate of alliances and acquisitions to gain scale domestically. Although Parvinder Singh died in 1999, the company continued along the same course, but after 2004 its international activities seem to have accelerated (see table below) slightly anticipating the acceleration of outward FDI from the country as a whole. It is interesting to note that M&A increasingly appears to have become the dominant expansion mode, perhaps driven by increasing levels of inward FDI, the growth in the Indian economy, and relaxation of the constraints on Indian co mpanies, which wanted to expand overseas. Ranbaxy: Recent International Activity 2004 n Began operations in France n Increased equity stake in Brazil, China, Peru and Thailand 2005 n Set up joint venture in Japan n Acquired 18-product generic portfolio from EFARMES of Spain n Set up a new manufacturing facility i n Malaysia n Set up a manufacturing facility in Brazil n Agreed plans for joint venture in Mexico n Entered Italy with wholly owned subsidiary n Opened third R&D facility at Gurgaon, I ndia n Launches operations in Canada 2006 n Acquired Be Tabs South Africa n Acquired unbranded generics business of GSK in Italy and Spain n Acquired Terapia in Romania n Signed a deal to form a joint venture with South Africa‟s Community Investment Holdings to sell lowcost generic AIDS drugs in Africa n Signed strategic alliance with Zenotech to market basket of Oncology products in various global markets n Renewed and expanded its alliance with GlaxoSmithKline (GSK) Emerging Multinationals: Manufacturing In a Rapidly Changing Global Landscape 22
Challenging Patents Originally, the company’s business was in generic drugs
(i.e. those out of patent) or selling copies of patented drugs in countries that permitted this. However, in 1984, the US Hatch Waxman Act was passed and this allowed generic manufacturers to challenge existing patents and, if successful, to have 180 days free of competition from other generics manufacturers. This made the United States a prime target market prompting Ranbaxy to enter the US market. By 1995, the US was Ranbaxy’s largest market outside India. This aligned with Ranbaxy’s strategy of copying and emphasised the need to develop skill in challenging patents that it has deployed to great effect in recent years, for example by invalidating Pfizer’s US patent for the anti-cholesterol drug Lipitor in 2006 and gaining US FDA approval for its generic equivalent, Simvastatin. Research
However, the company decided that it needed to create its own Intellectual Property (IP) to compete in the longer term. Indian drugs companies had some natural competitive advantages in research. Not only was there a good supply of highly skilled and comparatively cheap research chemists,
but, thanks to the huge population, it was easier and quicker to conduct clinical trials there than in the West. In 1985, the Ranbaxy Research Foundation was established. By 1990, Ranbaxy had acquired its first US patent. By 1993, the company had formalised the emphasis on research by declaring its vision to become a research-based international pharmaceutical company, and its new research facility at Gurgaon (near Dehli) was operational the next year. In 1994-95 (when the capital cap on foreign MNCs was relaxed, the number of drugs under DPCO was reduced, and an agreement was reached that product patent laws would be fully introduced by 2005), the Indian market became more attractive to foreign co mpetitors, thus confirming the wisdom of Ranbaxy’s strategy of emphasising research, rather than relying solely on low-cost production. Its research programme began to show results in 199 8, when it filed its first investigational new drug application and by 1999, Ranbaxy was selling exclusive development and worldwide marketing rights for its anti-anthrax product, Ciprofloxacin, to Bayer AG. In 2003, Ranbaxy entered a global alliance with GSK for drug discovery and development (renewed and expanded in 2006). By 2005, it had developed RBX 11160, an anti-malarial compound. Ranbaxy: Manufacturing Operations and M&A Brazil Yes 05 Latin America 5 3 1 02 Signature Pharmaceuticals (liquids syrup manufacturing) United States Yes 95 95 Ohm Laboratories North America 28 2 1 North and South 33 America Vietnam 3 Yes 01 China 1 Yes 04 Malaysia 2 Yes 87 Japan 2 Yes 04 Asia Pacific 7 10 4 Nigeria 2 Yes South Africa 4 Yes 06 06 Be Tabs-5th largest generics company in RSA Africa 8 10 2 Ukraine 3 Russia 3 97 Natco Pharmaceuticals CIS 6 2 0 Ireland - Yes 96 96 Rima Laboratories 06 Unbranded generics business of GSK (Italy and Spain) Italy & Spain 2 05 18 products into the portfolio of generics from EFARMES (Spain) United Kingdom 3 Germany 3 00 Basics, Bayer's generics business France 5 04 RPG (Aventis) SA Romania 5 Yes 06 06 Terapia, the country's largest independent generic pharma company Europe 24 16 2 Europe CIS and Africa 38 97 Acquired substantial part of Gufic Group 97 Merger with Crosland Research 20 Yes 97 Increased stake in Vorin Laboratories India India and Middle East 21 3 1 Examples of M&As in last decade Year of Acquisition Year Established Number of countries with Manufacturing Number of countries with operations Approximate %age of global sales (2007) 2005 2002 1995 1995 United States Vietnam 2001 2004 1987 2004 2006 2006 Tabs fifth largest generics company in RSA 1997 1996 1996 2006 and Spain 2005 Acquired 18-product portfolio of generics from EFARMES (Spain) 2000 Bayer‟s 2004 2006 2006 country‟s 1997 1997 1997 Last Decade Countries with Countries with Operations ↔
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Global Sales
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Nevertheless, it appears that Indian companies became concerned by the “winner takes all” nature of drug discovery and by 2004 it was noted that they were also focusing on lower-risk types of research such as devising new ways of delivering established drugs. For example, Ranbaxy developed a once-a- day version of Bayer’s antibiotic, Cipro, for which it received royalties from Bayer, and its development of a three-in-one combination antiretroviral drug gained it the first approval from the FDA under the President’s Emergency Plan for Aids Relief. More recently, the company appears to have become more concerned at the risks implicit in research. In 2007, it indicated it wanted to dilute its stake in its research company by up to 60% by hiving it off into a separate entity in 2008. Summary The overriding rationale for Ranbaxy’s expansion seems to
have been the exploitation of economies of scale a nd scope in R&D, product approval, and possibly bulk drug synthesis. Ranbaxy has only established manufacturing operations in 11 of the 45 national markets in which it has sales operations. Given the low cost of manufacturing in India and the high value density of the products, it seems unlikely that gaining overseas manufacturing sites was driven by the need to acquire capacity or skills. Most likely, the overseas manufacturing facilities were primarily established to facilitate market entry and/or as part of acquisition. In most cases, the synthesis of active chemicals has been retained in India when the formulation and packaging has been transferred. Local packing also makes it easier to comply with local regulations regarding packaging and labelling.
