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The Rediff Interview/Malvinder Singh, President, Ranbaxy
November 25, 2004
Ranbaxy is India's pharmaceuticals giant, with ambitions to be a global major. Given the nature of the pharmaceuticals market, much of the growth will come from abroad. Driving this growth is Malvinder Mohan Singh, the elder son of the iconic Parvinder Singh who turned Ranbaxy from a middling Indian company into a growing multinational giant.
Malvinder Singh, President (Pharmaceuticals), agreed to speak to Deputy Managing Editor Amberish K Diwanji about himself and Ranbaxy.
Excerpts from an exclusive interview:
How does it feel stepping into the shoes of a great man? Do you feel a shadow looming over you just being your father's son?
I look at it positively actually. I think there is a lot that Dad had done; one as an individual, in terms of the values and beliefs he held. And then for the industry and the country.
For me, I think there was a tremendous amount of learning over the years, being a part of the house, the industry.
But do you feel constantly measured against your father?
From people's perspective, they do make comparisons. They make comparisons with everybody, whether it is your father or a peer in the industry. But from my perspective, I have never really looked at as a comparison.
The way I saw it, he was a great person, a great father, a great role model, but I am my own person and I think today's environment is completely different and I am charting my own course.
How do you look back at the last 10 years of Ranbaxy?
If you look at it for the last 10 years, in 1993, we had come out with our vision statement of being a billion-dollar company in 10 years and a mission statement of becoming a research-based international company. And that whole transformation was led by my father, who foresaw what would happen January 1, 2005.
Ranbaxy was one company that always believed we must observe international patent norms; we worked with the government to say we must follow global norms.
At the same time, he pointed out that the Indian pharmaceutical industry is about 1 to 1.5 per cent of global pharmaceutical industry.
If we wish to be anything significant, then we can't be limited to India. And therefore, right in the late 1970s, he had started to look at internationalising by exporting our products, by setting up joint ventures in emerging markets.
Our first joint venture was in Nigeria (1977), then we went to Malaysia, and then to Thailand. There we picked up and learnt what it meant to operate in an international market, at patent regimes, at marketing and distribution. It is completely different.
So we moved up the value chain in our products and up the export markets from developing nations to developed nations. By that time 1993 had come. We said it is not just India; it (the market) is global of which India is one market. A huge emphasis would be on research and development -- that really is the thrust of the pharma industry in terms of products.
The second critical activity was a strong team to make our dreams a reality. So we have grown from $150 million in revenue in 1993 to $1 billion in 10 years.
Today, 80 per cent of our business is international, and the remaining 20 per cent is domestic.
What is the core competency or advantage that Indian firms, in general, and Ranbaxy, in particular, bring to the globalised pharmaceutical industry?
If you look at Indian industry, I see two clear strands emerging. One is our huge talent pool in terms of scientists and chemists; second is our mathematical skill. Any firm abroad has huge number of Indian guys handling the finance aspects.
From a Ranbaxy perspective, three things have helped us succeed. One is that the Indian pharma industry is extremely fragmented. In the 1980s and 1990s, we moved up the line to become the market leader and the largest Indian pharmaceutical company.
I have run the Indian business of Ranbaxy and I can tell you it is extremely competitive where virtually every strain of molecule has been patented. You bring out a product and a similar one comes out within months. So there is huge pressure in terms margins, of creating a brand, and establishing a brand.
That has led to Ranbaxy being a very aggressive marketing company, fighting for a market share at rock-bottom prices and making that model work.
Then we have cost efficiencies in terms of manufacturing. We have global knowledge and capabilities. India is a low-cost base. So we have world-class products at Indian prices.
And the third component is cost of innovation. This is a very critical fact that not many see.
Ranbaxy is today what it is because we took the risks, we made the investments, and created the infrastructure. And not just in exports, but we created infrastructure in the local markets abroad. When the whole world was looking at India and when Indian firms were themselves inward looking, we were looking out because that is where the market is.
The United States is 50 per cent of the global pharma market; Europe is another 23 per cent.
But is Indian pharma missing something. It has not seen the kind of success that has visited Indian IT industry?
The pharmaceutical industry has two components: one is generic, the other is the proprietary drugs. In the generic space, India is today center-stage of the global firms. Every company has an India plan. They are sourcing from India, they are manufacturing in India, or they are exporting to India. They are leveraging India's strength.
No doubt that IT has been succeeding differently, but in the generic space, India is at the heart of what is happening in the pharma world.
If you look at the research side and the proprietary space, India has done considerable work but there is space for more work.
We are getting more investments for research, there are more collaborations, there is a lot more of updated research coming into India and this will increase once the new patent regime comes in January 2005.
But we also need to develop and enhance our offering: the way we work in ensuring patents, the way we operate, and make other firms comfortable. But that will happen.
You were one of the first firms to strike out in the US? What was the experience like?
We set up our office in 1993-94. We had a small team for three or four years, understanding what we need to do, what it means to have an FDA [Food and Drug Administration] approval, the regulatory process, how the American market works.
We got our first product marketing in the US in 1998. And in the meantime, we bought a manufacturing plant in the US and got some revenue going. Between 1998-2001, we crossed $100 million; we were the fastest generic company in the US to cross that figure.
At the end of 2002, we were slightly short of $300 million at $296 million. At the end of 2003, we were $411 million. So the rate of growth has been very fast and today we are among the top 10 players in the US market. We have more prescriptions that are prescribed than many of the multinationals.
This has happened because we had a very large product offering; we were consistent in supplying; bringing down prices to competitive levels; and we have what I would say is a smart product portfolio basket.
The most challenging part of the US market is being effective from a distributive point of view.
Unlike India, where we have thousands of stockists and lakhs of retail outlets, in the US there are 10-12 large stores which control distribution for you to reach your customer.
And it is not just price that will get you into these huge retail chains; it is a certain level of comfort. The key is to win their trust that Ranbaxy will deliver; because if you get listed with them and then you default, you are asking for trouble.
And we have done all this over a period of time and nurtured our relation with the distributing chains.
There have been news reports of Ranbaxy pulling out some anti-AIDS drugs. What is the problem here?
The issue is on our HIV range. We have voluntarily called back those products because we have seen some discrepancies in the data from one of the CRO (contract research organization) that we had chosen. We had a few months ago started to redo the studies and we have already filed our studies with the US FDA. We don't need to file our studies with the FDA, but this is to be doubly sure.
The [George W] Bush Administration has a focus on giving generic HIV medicines to developing nations. We are working very close with the Bush Administration to have our products filed with them and they will give us an approval and then they will use the products they have approved.
So we have already filed two products and are on course to do additional filing of such products.
Ranbaxy and CIPLA are both giving out anti-HIV/anti-AIDS medicines extremely cheaply. Is this a case of corporates doing their bit for a social cause?
We are probably the most widely dispersed ARV supplier of products in the market. Coming as we do from an emerging economy country, we have seen huge amount of social inequity, and from a social perspective, we believe it was an important for us to play a role, and we have done that. We are committed to it and we are going to do more.
Are we going to see more of such social causes being championed by corporations?
I certainly hope so. I think it is important for companies to give back to society. It is an integral part of the culture that is now emerging that companies do play a role in society, especially for leading companies.
How well prepared are Ranbaxy and other Indian pharmaceutical firms for January 1, 2005, when the international property rights law into force?
Ranbaxy is ready, given that 80 per cent of its business is international and it is growing. The rest of India does not seem so well prepared. The impact will be felt over the next two-three years. Next year will be fine but eventually it will work to consolidating the industry.
Firms will have to reassess themselves and there will be some sort of a shakeout. And some big firms might now be more willing to bring in a lot more investment.
There is a fear that prices of some drugs will go up? Is this fear justified?
Let me put it this way. India is a very competitive market. Patented products will always be at a premium, but if there is no scientific value-addition, then it won't make much of a difference.
But if I bring a product that has adds some significant value, sure I can charge more. So it depends on what products come in.
It is believed Indian firms will have to spend more on R&D. How much of revenue should be spent on R&D?
Whatever is spent on R&D in India has a lot more value here than abroad for a host of reasons.
But no matter what we are doing, we are still at a nascent stage. On the proprietary side of this business, we are still emerging. I think it will pick up over time but this is a long-term projection.
Ranbaxy is probably unique in the sense that you, as the largest shareholder, probably report to Brian Tempest. . .
Not 'probably.' I do.
This is not to be found in India. How has this arrangement worked out so far? Do you see this is a trend of more professionals taking charge at the highest level of firms in India where the promoters and their families tend to dominate?
Let me put it this way: I think in today's environment, we are getting a lot more people who are in the process of getting that experience that can be effective at the top. When I look at professionalism versus ownership. It is a question of someone being able to drive a company, to lead, and to do it in a way that there is a system of checks and balances.
It is not a question of whether you are a stakeholder or a professional; it is the way you work and how you do what you do.
But the fact is that top posts are invariably held by the largest shareholders? Will there be a divorce between the two?
I believe that Dr (Parvinder) Singh was a professional the way he ran the company. He always believed the company came first, before the shareholder. And the CEOs have since all been professionals.
Yes, I have moved up; I have held a whole host of positions; I have worked outside; I started at the bottom as a management trainee and I have rolled up my sleeves and gone through the grind. And I am here.
My company's retirement age is 58. I don't want to be sitting at the to seat for the next 20 years. I want to do it for a while. And then I want to move on to other things and find someone else to do the top job. I am not hung up on it.
There have been stories of how brothers who inherit business empires are heading for a split. You and your brother Shivinder inherited Ranbaxy. Will we see you two stay united or do we see a split down the line?
He is today my confidant, my best friend. Both of us are very similar and yet very different. We are two-and-half-years apart (in age), we went to the same school and college, got married at roughly the same time, our kids are of similar age. . .
When it comes to our operating time and the way we work; he is looking into the healthcare business that we started a few years ago.
But do you see the businesses splitting into different companies?
We are united, we spend time together, we are both young with our own dreams and ambitions.
When there are no issues, why look into it. From a Ranbaxy perspective, we are clear about what we want to do; from a healthcare point of view we are clear about what we want to achieve and he is moving in that direction. We have our hands tied and doing our jobs.
Finally, where do you see Ranbaxy in the next 10 years?
By 2007, we are looking doubling our revenues to $2 billion. We are then looking at an aspirational target of reaching $5 billion in revenues by 2012. The focus will be continuing to drive the business and move from a ranking of No. 10 into the top 5. That will be driven by the developed markets: America and Europe are the two growth engines, followed by the BRIC nations (Brazil, Russia, India, and China).
By 2007, our intent is that the US should be 50 per cent of the market (it is around 40 per cent currently) and between the US and Europe, it should be 70 per cent. And as we move closer to 2012, I expect some of our proprietary products also to pick up.
So we have just started some of our branded products and over a period of time that will gain momentum.
Today Ranbaxy is very different from what it was just a few years ago, and by 2012 it will be quite different from what it is today. We are constantly evolving firm.
Image: Rahil Shaikh