Prepared By: Group 3

Prabin Paudel
Shailesh Lamichhane
Govind Sah
Urmila Malla
(API)
M/S Cheminor Drugs Ltd.
1984
Problem:
Balancing the *two business models:
Maintain the image of Generic led business (short term), &
Transform into drug discovery led business for long term to
form a Global drug company.
Producing profits today and invest in future growth.
Managing interconnected synergies; organizational expansion &
People issue.
Active Pharmaceutical
Ingredients (APIs)
Drug discovery research
Dr. Reddys Research
Foundation (DRF)
Discovery research
facility for R&D
deptt.s of other
drug discovery
companies
Branded
Generics
DRL
BUSINESS
synergies
Profit Centers
Cost Centers
In 1970s, Indian government had open the
gate for Process Patent regime.
Manufacturer can produce the formulation of
the patented drug, if the process differs the
original drug/ innovator.
Opportunity: offering same formulation with
the similar efficacy at the affordable (lower)
cost.
Personal investment : $ 40,000
Borrowings from Banks : $ 120,000
Total Investments : $ 160,000
Supplier of active ingredients for other
drug companies
Advantage: Can control the backward
support for the supply of active ingredients
to product formulations long term
leverage
DRL started manufacturing
formulation and selling under its
brand name.
Problem of many me-too drugs in
the segment.
In 1984, Cheminor Drug Ltd. was formed.
Purpose: Selling high quality bulk actives for Western markets
specifically US.
Active constituent of off-patent drug can be
manufactured and sold under different generic name,
after satisfying regulatory clauses for manufacturing and
marketing.
By 1989, Co. become largest exporter of ibuprofen (bulk
active salt) to the markets like US, Italy, Spain & Japan.
Started in 1993 focus on drug discovery. (research lab in Hyderabad and
discovery research lab in Atlanta, Georgia)
Separate entities separate core competencies Profit centers.
DRF: Employee 200 (split into 30-40, each focusing on distinct
therapeutic area)
Fresh PhDs
Talent pools from Universities spirit of excellence scholarships
Incentives: Good Salary + Stock options + Financial sponsor for
national & international workshops/ conferences
Motivate to pursue doctorate
Aurigene Discovery Technologies separate Service entity
undertaking outsourced discovery assignments of other drug
companies (research facilities in Boston & Bangalore).
Working in collaboration with R&D departments of other drug
discovery companies.
Purpose: Build competencies drug discovery process among
clients including Dr. Reddys Labs.
Advantage: Knowledge enhancement based on variety of research
assignment and can align with the corporate knowledge which can
be leveraged for long run to access regulated markets.
Opportunities: growth
segments.
Thrust areas: Bulk actives &
branded formulations - Generics
Threat: Entry barriers in
the form of stiff
domestic competition.
Focus for future: Shared
risks.
Business domains
Bulk actives &
branded formulations
Generics
Ranbaxy (both
domestic & global
presence) can compete
due to deep pockets and
rich research knowledge
Cipla (strong in
domestic market but
started making marks in
foreign markets) not a
serious threat in near
future for foreign
markets
Teva (Israel)
competence in
respective
domain backed
by R&D
support.
Novartis
Generics
(Swiss) known
player with
global presence
Mkt share:
total 11%
Source of funding : Financial capital market
Purpose:
Diversification into Vertical & Horizontal integration
Expanding generic business &
Drug discovery infrastructure
Financial Instruments for funding:
GDR (Global Depository Receipt) issue in July 1994 -
$ 48 million
ADR (American Depository Receipt) issue in April 2001-
$ 115.5 million
Total funds raised = $ 163.5 million
Used for:
Generic Markets: market building and penetration
Drug discovery & research: infrastructure and hiring knowledge
pool

All the three entities brought under same
roof 2000.
New Logo and Brand identity identified
for the Corporate brand.
New Vision:
To become a discovery led global pharmaceutical
company.
Dr. Reddys Laboratories (Dr. Reddys)
PRODUCT
DIVERSIFICATION
Diversified into no. of APIs
manufactured & sold in Indian
& 50 foreign destinations
INTERNATIONAL
EXPANSION WITH
BRANDED
FORMULATIONS
(2000) Industry leader in three branded
formulations (therapeutic areas):
Pain management, Gastroenterology &
Cardio-vascular
GROWTH IN GENERIC
BUSINESS
Also started making
neutraceuticals, womens healthcare,
styptics & dental care
Diversifying into diagnostics &
instrument business (Medical
Equipments)
BUILDING DRUG
DISCOVERY CAPABILITIES
Enter into R&D based domain
Build formidable marketing chain
(2000) 1,500 MRs for national detailing
network for reaching prescription
doctors
6 factories for manufacturing active ingredients as per
FDA standards.
3 formulation plants manufacturing branded
formulations.
Supply chain network: 2,000 stockists; 1,00,000 retailers in
India; and exporting channels for over 50 foreign
destinations.
East European Countries
South-East Asian Countries
Latin American Countries
Target markets: Russia, China, Brazil & Mexico
DRLs
Foreign
Target markets
Generic drugs represents $ 40 billion market in 2001
Growing at 10 to 12% per year.
Reasons for growth: Pressures on govt.s in US, European
countries & Japan reduce healthcare costs.
Drug price competition & Patent Restoration Act 1984
(US) Waxman-Hatch Act allow the access to active
ingredient of original patent drug (getting off-patent) file
registration before patent expiry removing the leap period of
market entry.
Market scope: $ 30 billion post 2005.
Waxman-Hatch Act also permits:
Generic players to file for Abbreviated New Drug Applications
(ANDAs) generic versions of all post 1962 patented drugs.
5 year exclusivity for innovator (New Chemical Entity or NCE
block) generic player can file for patent challenge criteria:
bioequivalence same as of patent drug for approval 1 year
before off-patent (Paragraph IV application).
Overall cost: Bioequivalence study cost ($ 5,00,000 to $ 2
million) + Market operational costs.
Factors for investing in ANDAs: predictability of success or
failure is low and timing of entry is slow.
Risks: Application processing delays, regulatory changes and
R&D failures.
Drug prices in exclusivity period 60-70% of original drug &
after exclusivity entry of competition 15-20% of peak price.
(Timing of entry is crucial)
Cost advantage: 57% (foreign mkts) 76% (india) of patent
company.
New opportunity domain: Specialty drugs
Generic drugs sold under companys own brand unlike
conventional generics being sold under molecule name.
Growth prospects & distinct from original patent drug
offer improved/different version of original compound
(NDDS) better dosage/compliance/convenience) niche
market need aggressive marketing to prescribers for market
entry.
Overall costs: Clinical Trial on patients - $ 10 to 30 million +
cost on detailing (US).
Pfizers blood pressure drug Norvasc (US).
Initial focus: Diabetes and similar other therapeutic areas.
Reasons: less competitive; low entry barriers; nascent knowledge
domain.
Trials process expensive and risky
Concentrated on pre-clinical trial stage; costing $ 10 million
Strategy adopted: risk sharing
out-licensing clinical trials like Anti-diabetic molecules Novo Nordisk & Novartis.
Collaborative research like NDDS for Chronic obstructive Pulmonary disease
(COPD) UK based Argenta Discovery.
Balaglitazone Denmark based Rheoscience.
Nine NCEs pipelines covering four therapeutic areas: diabetes,
metabolic disorder, anti-infective & cancer (different competencies,
market structures, regulatory framework, disease patterns, prescribers
preferences, diff. promotional efforts etc.)
2002 Operations & Sales offices in 60 countries
Subsidiaries in US, Brazil, UK, France, Holland & Singapore.
US share in overall revenues were higher.
Market size: $245 billion market of $500 billion global
market in 2005-06.
International vs Domestic revenue sharing: 2:1
Huge generic growth prospects post 2008 - $ 82 billion
formulation market getting off-patent globally.
Value created in India; realised in US and
other markets.
Managing across cultures
Across geographies
Separate time of entries
Sustaining the competence in each four
business models; extracting optimum from all
geographies.