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RANBAXY LABORATORIES LTD.

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HISTORY OF RANBAXY

Ranbaxy Laboratories Limited (Ranbaxy), India'slargest pharmaceutical company, is an integrated,research based, international pharmaceutical

company, producing a wide range of quality,affordable generic medicines, trusted by healthcareprofessionals and patients across geographies

Ranbaxy was founded in 1961 and was listed on the

Indian Stock Exchange in 1973. It exports to 125 countries and has ground

operations in 50 or so countries and manufacturingoperations in 7 countries.

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SITUATION ANALYSIS M

ost of its products are manufactured under licencefrom foreign pharmaceutical patent holders, althoughquite a high percentage of sales come from out-of-patent drugs.

Ranbaxy is targeting the higher-spending consumers in

the US & Europe.(4th largest in the world by volume and13th largest by value)

Changing legal(MedicareModernization Act) andsocial(ageing population) factors are driving growth of

generic drugs in the USA. American consumers are becoming unhappy because of

increasing cost.( the annual spending on R & D isincreasing but not in pace with the new drugdevelopment)

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INDUSTRY ENVIRONMENT

Ranbaxy is competing fiercely with its rival to

produce Indias first new patentable drug molecule.

Developing new drugs is now an expensive and riskybusiness.

The regulations have become far more stringent,

raising the amount of time and money drug-makers

need to spend on development.

By 2008, Indian companies are expected to have

30% of the growing generics market globally.

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R & D INFRASTRUCTURE IN INDIA

Government policies and investment programmes areencouraging innovation and development.

India has extremely skilled educated manpower.

Foreign-returned Indians carry with them western

management methods, money, contacts and ambition. The cost of manufacturing in India is 70% lower than in

western countries and trained staff is available at a

much cheaper rate which is encouraging CRAM.(But

manufacturing is 84% and research is only 16%) Indian government has suggested to impose price

control which has been hugely protested by the drug

companies.

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RANBAXYS R & D

Ranbaxy had the highest R & D expenditure of the Indianpharmaceutical firms in 2005.

Ranbaxy has three state-of-the-art multi-disciplinary

research facilities ,out of which two centres focus on generics

and NDDS research and the third is dedicated to new drug

discovery research.(NDDR)

Ranbaxy has developed four NDDS platform technologies

which have led to the development of several new drug

applications(NDAs) based on these technologies.

There are three types of patent possible in pharmaceuticals:on the drug molecule, on the product manufacturing and on

the drug delivery system.

In India there was no product patent, which encouraged

copycat versions.

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ALLIANCES AND ACQUISITIONS

Ranbaxy has made 15 acquisitions since 2004

including eight in 2006.

The major stimulus for Ranbaxys acquisitions

appears to be the search for scale.

It is currently eyeing-up acquisition of

Mercks generic business which would bring

Ranbaxy as the 3rd largestgenericsmanufacturer globally.

It has many strategic international alliances.

ExampleG

SK.

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CASE STUDY QUESTIONS

PROS CONS

MANUFACTURER

OF IMITATIVE

GENERIC DRUGS

Low R & D cost

Less risk

Tap the US generic market.

It can tap 30% of the

growing generics marketglobally.

Short-term

Less margin

No differentiation

DEVELOPER OFPROPRIETARY

MEDICINES

Long-term success

Good R & D

infrastructure can be

competencies to compete

with foreign manufacturers.

Can repair reputation from

copycat manufacturers.

Stimulate research in

High R & D cost

Time invested is more

More risk

Regulations are

stringent

Research was only 16%

of the CRAM market.

Less commoditization

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Ranbaxy should focus on the developedmarket because:

USA & Europe are its biggest market.

Changing legal & social factors in developedmarket.

It can achieve economies of scale.

It can compete with its foreigncompetitors(Novartis) by cost-leadership.

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India has a suitable infrastructure for innovationbut it has its pros and cons.

ProsGovernment investment programmes or state

aids for innovation and development

Extremely skilled and cheap human resource

Low cost of manufacturing

cons

Imposition of price control byGovernment can

block much-needed effort in capital required forcrucial R & D effort.