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50904989 Bio-business essay

Strategic analysis of the business model of Ranbaxy Laboratories Limited


and Biocon India limited.

“Growth means change and change involves risk, stepping from known to unknown”

-Anonymous.

medicines (RFCL,2009). It gets 78%


• Introduction of its revenue from overseas sales
and has 4 platform technologies
The Pharmaceutical industry in
(Nabin,2009). It has more than
India is ranked 4th world-wide when
12,000 employees working in 49
compared its volume. Most of the
different countries with 11 FDA
companies generate sales from
approved manufacturing units
generic products by back
globally and has annual turnover of
engineering but companies like
$ 1.8 Bn (Ranbaxy,2009). Ranbaxy
Ranbaxy and Biocon are engaged
has pioneered to adopt a hybrid
in developing their own novel
business model which is unique in
drugs; as a result Indian pharma
itself.
companies are marketing their
drugs at the cheapest cost in the Biocon
world. The quality of the drugs
Biocon India Limited was started in
could be estimated from the fact
1978 and 1st biotech company of
that after US, India has the most
India; it started with initial focus on
number of FDA approved
enzyme manufacture and
manufacturing facilities.
marketing. It is a fully integrated
Ranbaxy biotech company. It has a market
in biogenerics, oncology, anti-
Ranbaxy laboratories Limited was
diabetics, nephrology, cardiology,
established in 1961 and is ranked
active pharmaceutical ingredients,
1st among the pharmaceutical
finished dosage formulations and
companies in India. It is a globally
also undertakes contract
operating research based company
manufacturing and contract
producing a variety of good quality
research (Shah, 2007). It has
and inexpensive generic products,
integrated R&D program which
active pharmaceutical ingredients
enables the company to undertake
and has a strong R&D base with 8
discovery, development,
NCE’s in the pipeline. Ranbaxy also
manufacturing and
has a strong base in chemicals, in
commercialization by themselves.
vitro diagnostics and veterinary
50904989 Bio-business essay

Biocon has currently 7 NCE’s in the to make its strong presence in


pipeline and only Indian company world market, but they have
to come up with their in house initiated the process by having JV
novel onco-drugs (Biocon,2008). It in Abu Dhabi based Neopharma
has more than 3000 employees and by acquiring AxiCorp (Biocon,
and has annual sales of over 2008). It has products covering
$371Mn. mainly Oncology, Immuno-
conjugates and diabetes but also
• Competitive Advantage
have novel delivery systems. Since
Major competitive advantage of the copying of biotech drugs are
Ranbaxy is its global presence, difficult and expensive so Biocon
operating since 1937, good brand has an edge over Ranbaxy(Shah,
name, alliance with Merk and 2007). It has a client base in 50
GlaxoSmithKline in Drug Discovery countries but manufacturing sites
and Clinical Development has are limited to India which makes it
provided company exposure to difficult to tap the worldwide
international technology and R&D market.
infrastructure (Ranbaxy,2009). It
Biocon’s R&D is coming up with
covers majority of the pharma
orally administered insulin and
sector. It has a ground presence in
many novel Oncology drugs. Oral
49 countries and has a market in
insulin is due to hit the market in 4-
125 countries. It followed organic
5 years and is hailed as the
and inorganic growth patterns and
blockbuster drug as it eradicates
went on global acquisition spree
the need to inject insulin
thereby building a strong base in
(Biocon,2008). Oral insulin and
global market (Nabin, 2009). It has
novel onco-drugs has worldwide
a wide range of products covering
market and will be a huge hit but
anti-infectives, cardiovascular,
due anticancer market getting
inflammatory, respiratory,
crowded with new drugs sales of
metabolic diseases, dermatology,
onco-drugs could be affected. On
aesthetic dermatology and recently
the other hand, Ranbaxy’s has
ventured into CNS, Gastrointestinal
come up with anti-malarials,
diseases and Oncology
solutions for diabetes and
(Ranbaxy,2009). It has low cost
Hyperlipidemia. But Ranbaxy’s
manufacturing facilities in India as
market could be limited as the anti-
well as localized manufacturing
malaria scope is limited majorly to
bases worldwide.
100 countries and cover 50% of the
Although Biocon is a well world population but the novel
recognized brand in India but is yet products they have developed in
50904989 Bio-business essay

association with Merk and healthcare, with R&D divided into


GlaxoSmithKline have got them NDDS (Novel Drug Delivery
paid an upfront payment as well as System) and NDDR (New Drug
sharing of royalties worldwide Discovery/ Development and
(Ranbaxy,2009). Research) (Ranbaxy,2009).

Ranbaxy global consumer Business Strategy


healthcare (RGCH) was initiated in
Ranbaxy
2001 and involves participation of
the consumer and doctors resulting Ranbaxy’s is focused on tapping
in increase in sales and greater the inorganic growth opportunities
brand acceptance (Ranbaxy,2009). to strengthen its market both in
RGCH presented over the counter developing as well as developed
drugs for common problems like market by this way they can
cold & cough (Ranbaxy,2009). sustain and maintain
Similar type of consumer competitiveness. Their organic
healthcare initiative was lacking in growth into limuses, peptides and
Biocon. Highlighting clear Oncology will be significantly
competitive advantage of Ranbaxy advantageous to their currently
over Biocon. existing products (Ranbaxy,2009).
• Strategic performance Biocon
analysis
Biocon aims to excel in discovery,
Organization structure research and development of novel
drugs while maintaining
Biocon Limited is neatly divided
international quality and standards.
into 3 main organizations, namely
It is focused to develop consumer
Syngene, Clingene and Biocon.
base with its extra-ordinary service
Syngene is involved in early clinical
and products and has strong
discovery of the lead molecule and
human resource development
its development for clinical
platform through training (Biocon,
development which is done by
2008).
Clingene which undertakes clinical
development and Biocon is • Trends
involved in manufacturing,
licensing and marketing the drug In 2005, India accepted
(Biocon, 2008). International patent law, by then
Ranbaxy has shifted its majority of
Ranbaxy’s organizational structure operations from generics to a
is clearly demarcated into R&D, matured research based company
Management and Consumer and had a mature pipeline of 8
50904989 Bio-business essay

NCE’s. 6 NCE’s from own R&D and In May 2009, Ranbaxy made an
2 in alliance with GlaxoSmithKline. alliance with Daiichi Sankyo, a
Ranbaxy is not only involved in Japanese pharma company. Daiichi
developing novel delivery systems Sankyo took 63.9% of Ranbaxy’s
but is also working in collaboration share and with this mutually hybrid
to develop of new drug model Ranbaxy’s risk was reduced
(Ranbaxy,2009). and its opportunities as an
originator companies increased.
On the other hand Biocon has
While Biocon has sold its enzymes
established Syngene to carry out
development business to
customized research and Clingene
Novozymes to focus on biotech and
carries out clinical research and
Pharmaceutical products and has
development and is working as a
emerged as a Biopharmaceutical
self sufficient organization
company with a promising pipeline
(Biocon,2008).
(Ranbaxy,2009).
Ranbaxy followed a diversification
By alliance with Ranbaxy, Daiichi
business model. This model
Sankyo gained access to India
involves marketing of large number
market and it entered into generic
of drugs in small market although
market. Sankyo got advantage of
sales were not equivalent to
marketing their products in
blockbuster drug. But developing
Ranbaxy’s areas and got access to
blockbuster drug is very costly and
low cost facilities of Ranbaxy,
by this model company generated
where Ranbaxy got access to
substantial amount of funds
Japanese market, R&D and
(Pharmaceutical and drug
infrastructure of Daiichi and above
manufacturers, 2009).
all Ranbaxy got rid of its debt
Biocon is following an intermediate (Ranbaxy,2009).
business model of blockbuster and
• Future Trends
diversification as they have
blockbuster drug in their pipeline
– Use of novel technologies in
which can generate huge sales for
the drug discovery and high
small number of drugs and to
use of in vitro and animal
generate funds they are marketing
data to predict the
drugs in small markets which has
pharmacological action of the
high treatment cost. Their business
drug thereby limiting the
model also involves horizontal
failure rates.
integration that means acquisition
– Use of genomic and
of extra business activity at the
nanotechnology knowledge
same level( Nabin,2009).
to develop drugs with wider
50904989 Bio-business essay

acceptance as an answer to presence, heavy investment and


personalized medicine. strong R&D base with novel
– Due to high attrition rates products and novel delivery
and regulatory pressure, it systems, record high increasing
will lead to highly developed sales and profit even during
legal framework to protect recession.
the patent thereby sales.
• References

• Conclusion – Biocon, 2008 [available online]


http://www.biocon.com/biocon_abo
On comparing Ranbaxy and Biocon utus.asp [ accessed on 22 Dec
2009]
is different aspects we can
conclude that both the companies – Nabin, 2009 [available online]
http://www.ksom.ac.in/forum.php
spend enormous amount on their
[ accessed on 22 Dec 2009]
R&D program and the success of
both the companies could be – Pharmaceutical and drug
attributed to the management and manufacturers [available online]
http://www.pharmaceutical-
R&D program which catered the
drug-manufacturers.com/
consumer with quality products
[accessed on 22 Dec 2009]
and satisfied them. Ranbaxy’s has
achieved a lot of its objective in – Ranbaxy, 2009[available online]
http://www.ranbaxy.com/aboutus/a
comparison with Biocon which is boutus.aspx [accessed on 22 Dec
still a developing company. But 2009]
both the companies have a good
– RFCL, 2009[available online]
management which is good in http://www.rfcl.in/Business-
recognizing companies strength, Snapshots.htm [accessed on 22
Dec 2009]
market condition, consumer
behavior and know how to covert – Shah, B.,2007 [available online]
http://www.dolatcapital.com/equity
weakness into opportunity.
_research.html[ accessed on 22
Dec 2009]
Ranbaxy is the undoubted leader in
the industry because of its global