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The Ranbaxy Story - The Rise of an Indian Multinational By: Bhupesh Bhandari

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How can an unknown Indian pharmaceutical company compete with multinational giants in the same field such as GlaxoSmithKline, Pfizer, ICI, Roche, Parke-Davis, Novartis, Merck, Eli Lilly, Bristol Myers-Squibb, Bayer AG, Abbot, Aventis and Hoechst AG, etc. It required high business acumen, foresight, courage and ability to take risks, to penetrate into the international market dominated by Big Pharma, the collective label for the world’s top pharmaceutical companies. These companies have been operating for more than a century and each of them have long established blockbuster drugs.

The small Indian pharmaceutical company, often giving surprises to the Big Pharma, is Ranbaxy. This company’s ambitious owners have been grabbing the opportunity of introducing generic drugs on the expiry of patents held by the multinational companies. The term generic refers to those drugs the patent on which has lapsed and they are no longer protected by a registered trademark. Any drug company is free to manufacture and market them.

The man who brought strength and success to Ranbaxy in India, Bhai Mohan Singh, was born in a small village near Rawalpindi in 1917. His father Bhai Gyan Chand had set up a civil construction business taking up government contracts and made lot of money. On partition, the family moved to Delhi. Ranbaxy & Co was formed in 1937 by two cousins Ranjit Singh and Gurbax Singh to take up the distribution of medicines in the country on behalf of foreign pharmaceutical companies. Bhai Mohan Singh joined the company in 1952 and soon got its full control, by which time the two Sikh cousins had been ousted. Later Bhai Mohan Singh collaborated with an Italian company Lepetit, primarily to put up a plant for the manufacture of a product called Chloramphenicol. This drug was used in the treatment of gonorrhea, syphilis and typhoid. Thus, Lepetit Ranbaxy Ltd was born with Bhai Mohan Singh controlling 49 percent of the shareholding and Lepetit the remaining 51 percent. Though the joint venture company had been formed in 1959, there was no sign of the Chloramphenicol plant for the next three years. However, Ranbaxy’s first plant at Okhla in Delhi came up in 1960. Since the Chloramphenicol plant did not come up within the stipulated period, the government asked Lepetit to leave India. Consequently Lepetit Ranbaxy became Ranbaxy Laboratories Ltd, owned fully by Bhai Mohan Singh.

Bhai Mohan Singh had ruled over Ranbaxy with an iron fist for over four decades. He was very well connected in Delhi’s corridors of power and fully exploited the contacts, deriving maximum advantage for his company. With the help of brilliant Indian research scientists, Bhai Mohan Singh produced cheap substitutes, for blockbusters drugs of international companies, which became best selling drugs in India, flowing money into Ranbaxy’s coffers. Roche had launched Diazepam under the brand name Valium in 1963. This was by far the best tranquillizer the world had ever seen. It turned out to be an instant success and established Roche’s worldwide reputation in psychotropic medications. Least expecting an Indian company to come out with a clone, Roche had not registered a patent for Valium in India. Bhai Mohan Singh began to think of ways to get the drug to India. His team of scientists and professionals produced Calmpose, which became India’s first pharmaceutical super brand. Bhai Mohan Singh had three sons but the eldest among them Parvinder, who was later known only as Dr Singh, was closest to his father in managing the company.

In 1974, Ranbaxy established a huge pharmaceutical plant in Mohali near Chandigarh. Ranbaxy then entered into the realm of antibiotics and in 1977 became the first company in India, to produce Ampicillin. Ranbaxy continued to add more drugs to its portfolio. While Roscillin, had held the company in good stead in the late-1970s and early-1980s, Cifran proved to be another runaway success. Ranbaxy became India’s largest pharmaceutical company in 1993-94, apart from being the number one exporter and the largest producer of pharmaceutical substances, accounting for almost 15 percent of the national output. It established more production units all over India.

In 1989, Bhai Mohan Singh split the family business between his three sons. Dr Singh was given control of Ranbaxy while the other two brothers were given some property plus cash compensation. Unfortunately soon thereafter, father and the son got into a bitter struggle for power. Bhai Mohan Singh had to face quite embarrassing situations in the board meetings. Although a shrewd businessman, Bhai Mohan Singh was conservative in approach while Dr Singh was aggressive and a visionary and had set his eyes on getting prominence in the global market. In 1991-92 Ranbaxy made an investment of around Rs.40 crore to set up its Cefaclor manufacturing facility. In the 1960s Eli Lilly’s Ceclor went on to become the world’s top-selling oral antibiotic. When its patent expired in 1992, Ranbaxy agreed to sell its entire Cefaclor production of 40 tonnes per annum to Eli Lilly making a profit of approximately $1,450 per kilogram of Cefaclor sold.

In February 1993, Bhai Mohan Singh resigned from the Ranbaxy board of directors and Dr Singh took over as the chairman and managing director of the company. Dr Singh, who was suffering from cancer of the oesophagus, died young in 1999. Although he had already realized his dream of making Ranbaxy a global company, but could not see it making big strides in this direction. After Dr Singh’s passing away Devinder Singh Brar, took over as the managing director and chief executive officer of Ranbaxy. Since the time of joining the company in 1977, Brar had worked closely with Dr Singh, who considered him the best brain in the Indian pharmaceutical industry. Dr Singh’s elder son Malvinder, was also inducted into the company board.

Over the years, Ranbaxy emerged as a leading pharmaceutical company in several overseas markets, having manufacturing units in a number of countries. In the United States, it became the fastest company to record sales of $100 million and was declared the fastest-growing pharmaceutical company in 2001. By the end of 2003, it was amongst the top ten generic pharmaceutical companies in the United States. In November 2003, the Ranbaxy research and development center at Gurgaon, on the outskirts of Delhi, was visited by Bill Clinton, the former American President, who was on a short visit to India. The William J. Clinton Presidential Foundation, had tied up with four companies worldwide to supply anti-AIDS medicine in poor African countries. One of those companies happened to be Ranbaxy. Clinton wanted to assure himself that all the talk about the company’s scientific skills was not exaggerated.

At present Ranbaxy has 8,500 employees worldover. It plans to achieve a turnover of $5 billion in 2012–a quantum jump from the actual of less than $1 billion in 2003. Ultimately, Ranbaxy would be among the top five generic companies in the world, as compared to its number nine position in 2003.

The author has taken great pains in collecting facts and figures about numerous professionals working for the company and the functioning of various multinational pharmaceutical companies, their interaction and legal battles with Ranbaxy. The reading becomes drab at times but makes the reader aware of the constant struggle, which the enterprising Sikh family had to undertake to get recognition and reward at the international level. In order to have a flare of international business dynamics, professionals working for pharmaceuticals companies must read the success story of Ranbaxy. They will get to know its remarkable journey from a distributor of medicine to a multinational corporation, deriving over eighty percent of business from outside India.

PARVEZ RAHIM
KARACHI

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