Prepared By: Group 3 Prabin Paudel Shailesh Lamichhane Govind Sah Urmila Malla
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Prepared By: Group 3
Prabin Paudel
Shailesh Lamichhane
Govind Sah
Urmila Malla
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(API)
M/S Cheminor Drugs Ltd.
1984
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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.
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Active Pharmaceutical
Ingredients (APIs)
Drug discovery research
Dr. Reddy’s Research
Foundation (DRF)
Discovery researchfacility for R&Ddeptt.s of otherdrug discovery
companies
Branded
Generics
DRL
BUSINESS
synergies
Profit Centers
Cost Centers
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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 withthe similar efficacy at the affordable (lower)
cost.
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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 ingredientsto product formulations – long term
leverage
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DRL started manufacturing
formulation and selling under its
brand name.
Problem of many ‘me-too’ drugs in
the segment.
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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
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Aurigene Discovery Technologies – separate Service entity –
undertaking outsourced discovery assignments of other drugcompanies (research facilities in Boston & Bangalore).
Working in collaboration with R&D departments of other drugdiscovery companies.
Purpose: Build competencies–
drug discovery process amongclients including Dr. Reddy’s Labs .
Advantage: Knowledge enhancement based on variety of researchassignment and can align with the corporate knowledge which can
be leveraged for long run to access regulated markets.
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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%
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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
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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 pharmaceuticalcompany”.
Dr. Reddy’s Laboratories (Dr. Reddy’s)
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PRODUCT
DIVERSIFICATION
Diversified into no. of APIs –
manufactured & sold in Indian
& 50 foreign destinations
INTERNATIONAL
EXPANSION WITH
BRANDEDFORMULATIONS
(2000) Industry leader in three branded
formulations (therapeutic areas):
► Pain management, Gastroenterology &Cardio-vascular
GROWTH IN GENERIC
BUSINESS
► Also started makingneutraceuticals, women’s 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
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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.
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East European Countries
South-East Asian Countries
Latin American Countries
Target markets: Russia, China, Brazil & Mexico
DRL’s
Foreign
Target markets
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Generic drugs represents $ 40 billion market in 2001
Growing at 10 to 12% per year.
Reasons for growth: Pressures on govt.s in US, Europeancountries & 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) – fileregistration before patent expiry – removing the leap period ofmarket entry.
Market scope: $ 30 billion post 2005.
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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 yearbefore off-patent (Paragraph IV application).
Overall cost: Bioequivalence study cost ($ 5,00,000 to $ 2million) + Market operational costs.
Factors for investing in ANDAs: predictability of success orfailure 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.
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New opportunity domain: Specialty drugs
Generic drugs sold under company‟s 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).
Pfizer‟s blood pressure drug „Norvasc‟ (US).
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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.)
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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.
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Value created in India; realised in US andother markets.
Managing across cultures
Across geographies
Separate time of entries
Sustaining the competence in each fourbusiness models; extracting optimum from all
geographies.
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