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.

Introduction

The Pharmaceutical industry in India is ranked 4th world-wide when compared its volume. Most of the companies generate sales from generic products by back engineering but companies like Ranbaxy and Biocon are engaged in developing their own novel drugs; as a result Indian pharma companies are marketing their drugs at the cheapest cost in the world. The quality of the drugs could be estimated from the fact that after US, India has the most number of FDA approved manufacturing facilities. 

Ranbaxy

Ranbaxy laboratories Limited was established in 1961 and is ranked 1st among the pharmaceutical companies in India. It is a globally operating research based company producing a variety of good quality and inexpensive generic products, active pharmaceutical ingredients and has a strong R&D base with 8 NCE’s in the pipeline. Ranbaxy also has a strong base in chemicals, in vitro diagnostics and veterinary medicines (RFCL,2009). It gets 78% of its revenue from overseas sales and has 4 platform technologies (Nabin,2009). It has more than 12,000 employees working in 49 different countries with 11 FDA approved manufacturing units globally and has

annual turnover of $ 1.8 Bn (Ranbaxy,2009). Ranbaxy has pioneered to adopt a hybrid business model which is unique in itself.

Biocon

Biocon India Limited was started in 1978 and 1st biotech company of India; it started with initial focus on enzyme manufacture and marketing. It is a fully integrated biotech company. It has a market in biogenerics, oncology, anti-diabetics, nephrology, cardiology, active pharmaceutical ingredients, finished dosage formulations and also undertakes contract manufacturing and contract research (Shah, 2007). It has integrated R&D program which enables the company to undertake discovery, development, manufacturing and commercialization by themselves. Biocon has currently 7 NCE’s in the pipeline and only Indian company to come up with their in house novel onco-drugs (Biocon,2008). It has more than 3000 employees and has annual sales of over $371Mn.

Competitive Advantage

Major competitive advantage of Ranbaxy is its global presence, operating since 1937, good brand name, alliance with Merk and GlaxoSmithKline in Drug Discovery and Clinical Development has provided company exposure to

50904989 Bio-business essay

international technology and R&D infrastructure (Ranbaxy,2009). It covers majority of the pharma sector. It has a ground presence in 49 countries and has a market in 125 countries. It followed organic and inorganic growth patterns and went on global acquisition spree thereby building a strong base in global market (Nabin, 2009). It has a wide range of products covering anti-infectives, cardiovascular, inflammatory, respiratory, metabolic diseases, dermatology, aesthetic dermatology and recently ventured into CNS, Gastrointestinal diseases and Oncology (Ranbaxy,2009). It has low cost manufacturing facilities in India as well as localized manufacturing bases worldwide.

Although Biocon is a well recognized brand in India but is yet to make its strong presence in world market, but they have initiated the process by having JV in Abu Dhabi based Neopharma and by acquiring AxiCorp (Biocon, 2008). It has products covering mainly Oncology, Immuno-conjugates and diabetes but also have novel delivery systems. Since the copying of biotech drugs are difficult and expensive so Biocon has an edge over Ranbaxy(Shah, 2007). It has a client base in 50 countries but manufacturing sites are limited to India which makes it difficult to tap the worldwide market.

Biocon’s R&D is coming up with orally administered insulin and many novel Oncology drugs. Oral insulin is due to hit the market in 4-5 years and is hailed as the blockbuster drug as it eradicates the need to inject insulin (Biocon,2008). Oral

insulin and novel onco-drugs has worldwide market and will be a huge hit but due anticancer market getting crowded with new drugs sales of onco-drugs could be affected. On the other hand, Ranbaxy’s has come up with anti-malarials, solutions for diabetes and Hyperlipidemia. But Ranbaxy’s market could be limited as the anti-malaria scope is limited majorly to 100 countries and cover 50% of the world population but the novel products they have developed in association with Merk and GlaxoSmithKline have got them paid an upfront payment as well as sharing of royalties worldwide (Ranbaxy,2009).

Ranbaxy global consumer healthcare (RGCH) was initiated in 2001 and involves participation of the consumer and doctors resulting in increase in sales and greater brand acceptance (Ranbaxy,2009). RGCH presented over the counter drugs for common problems like cold & cough (Ranbaxy,2009). Similar type of consumer healthcare initiative was lacking in Biocon. Highlighting clear competitive advantage of Ranbaxy over Biocon.

Strategic performance analysis

Organization structure

Biocon Limited is neatly divided into 3 main organizations, namely Syngene, Clingene and Biocon. Syngene is involved in early clinical discovery of the lead molecule and its development for clinical development which is done by Clingene which undertakes clinical development

50904989 Bio-business essay

and Biocon is involved in manufacturing, licensing and marketing the drug (Biocon, 2008).

Ranbaxy’s organizational structure is clearly demarcated into R&D, Management and Consumer healthcare, with R&D divided into NDDS (Novel Drug Delivery System) and NDDR (New Drug Discovery/ Development and Research) (Ranbaxy,2009).

Business Strategy

Ranbaxy

Ranbaxy’s is focused on tapping the inorganic growth opportunities to strengthen its market both in developing as well as developed market by this way they can sustain and maintain competitiveness. Their organic growth into limuses, peptides and Oncology will be significantly advantageous to their currently existing products (Ranbaxy,2009).

Biocon

Biocon aims to excel in discovery, research and development of novel drugs while maintaining international quality and standards. It is focused to develop consumer base with its extra-ordinary service and products and has strong human resource development platform through training (Biocon, 2008).

Trends

In 2005, India accepted International patent law, by then Ranbaxy has shifted its majority of operations from generics

to a matured research based company and had a mature pipeline of 8 NCE’s. 6 NCE’s from own R&D and 2 in alliance with GlaxoSmithKline. Ranbaxy is not only involved in developing novel delivery systems but is also working in collaboration to develop of new drug (Ranbaxy,2009).

On the other hand Biocon has established Syngene to carry out customized research and Clingene carries out clinical research and development and is working as a self sufficient organization (Biocon,2008).

Ranbaxy followed a diversification business model. This model involves marketing of large number of drugs in small market although sales were not equivalent to blockbuster drug. But developing blockbuster drug is very costly and by this model company generated substantial amount of funds (Pharmaceutical and drug manufacturers, 2009).

Biocon is following an intermediate business model of blockbuster and diversification as they have blockbuster drug in their pipeline which can generate huge sales for small number of drugs and to generate funds they are marketing drugs in small markets which has high treatment cost. Their business model also involves horizontal integration that means acquisition of extra business activity at the same level( Nabin,2009).

In May 2009, Ranbaxy made an alliance with Daiichi Sankyo, a Japanese pharma company. Daiichi Sankyo took 63.9% of

50904989 Bio-business essay

Ranbaxy’s share and with this mutually hybrid model Ranbaxy’s risk was reduced and its opportunities as an originator companies increased. While Biocon has sold its enzymes development business to Novozymes to focus on biotech and Pharmaceutical products and has emerged as a Biopharmaceutical company with a promising pipeline (Ranbaxy,2009).

By alliance with Ranbaxy, Daiichi Sankyo gained access to India market and it entered into generic market. Sankyo got advantage of marketing their products in Ranbaxy’s areas and got access to low cost facilities of Ranbaxy, where Ranbaxy got access to Japanese market, R&D and infrastructure of Daiichi and above all Ranbaxy got rid of its debt (Ranbaxy,2009).

Future Trends

- Use of novel technologies in the drug discovery and high use of in vitro and animal data to predict the pharmacological action of the drug thereby limiting the failure rates.

- Use of genomic and nanotechnology knowledge to develop drugs with wider acceptance as an answer to personalized medicine.

- Due to high attrition rates and regulatory pressure, it will lead to highly developed legal framework to protect the patent thereby sales.

Conclusion

On comparing Ranbaxy and Biocon is different aspects we can conclude that both the companies spend enormous amount on their R&D program and the success of both the companies could be attributed to the management and R&D program which catered the consumer with quality products and satisfied them. Ranbaxy’s has achieved a lot of its objective in comparison with Biocon which is still a developing company. But both the companies have a good management which is good in recognizing companies strength, market condition, consumer behavior and know how to covert weakness into opportunity.

Ranbaxy is the undoubted leader in the industry because of its global presence, heavy investment and strong R&D base with novel products and novel delivery systems, record high increasing sales and profit even during recession.

References

- Biocon, 2008 [available online] http://www.biocon.com/biocon_aboutus.asp [ accessed on 22 Dec 2009]

- Nabin, 2009 [available online] http://www.ksom.ac.in/forum.php [ accessed on 22 Dec 2009]

- Pharmaceutical and drug manufacturers [available online] http://www.pharmaceutical-drug-manufacturers.com/[accessed on 22 Dec 2009]

- Ranbaxy, 2009[available online] http://www.ranbaxy.com/aboutus/aboutus.aspx [accessed on 22 Dec 2009]

50904989 Bio-business essay

- RFCL, 2009[available online] http://www.rfcl.in/Business-Snapshots.htm [accessed on 22 Dec 2009]

- Shah, B.,2007 [available online] http://www.dolatcapital.com/equity_research.html[ accessed on 22 Dec 2009]