Ranbaxy singapore

Ranbaxy’s Future in Sustainable Healthcare

Team B1 – Equilibrium Consulting

2

Situation Analysis Recommendation Implementation Wrap-upAlternatives Financial Impact

Roadmap to Success

Situation Analysis

Alternatives

Recommendation

Financial Impact

Implementation

Wrap-Up

3


Our Understanding

India has highest industry growth in emerging markets (12-14% per year) India, Brazil, Russia, China

Strong profitability potential from NDDS research and development New dosage form licensed to Bayer

AG for $65 million

Dependence on generic drugs leads to volatile profitability 2008: $215.5 million loss due to

inventory write off

2010

2011

2012

2013

2014

2015

$-

$5,000,000,000

$10,000,000,000

$15,000,000,000

$20,000,000,000

$25,000,000,000

Indian Pharamaceutical Industry Growth

Bill

ion

s o

f U

SD

12.3% Compound Annual Growth

Your Growth Potential

4


Roadblocks to Success

Challenges

How to achieve higher levels of synergy

How to promote quality control

How to move towards sustainabilityCompetition

Increased presence of generic players

in developed markets

Supply Chain

Challenges faced as a result of

acquisition

Regulator Authorities

Immediate Threat:FDA import ban in the US

Threats to Revenue Streams

5


Opportunity Statement

By introducing Daiichi’s patented drugs into India,

optimizing quality assurance, and increasing R&D focus

on NDDS (Novel Drug Delivery Systems) Ranbaxy will

leverage synergies with Daiichi by addressing quality

control, in addition to taking advantage of all available

opportunities associated with the ‘Hybrid Business

Model’. The 7-year implementation of this recommendation

will generate an NPV of $1.5 to $2.5 billion.

6


Categorizing Your Challenges

Current Road Blocks Future Growth

What can be done about import ban?

Achieving Better Synergies

Sustainability

2 Key Areas

7






Sustainability

Acquire new producers / build plants

Lobby FDA for timely resolution

Strengthen quality control

processes

+/--

+

2 Key Areas

8






Sustainability

SupplyChain

Sales/ Mrkt

Qlty Mgmt.




processes

+/--

+

2 Key Areas

9






Sustainability

SupplyChain

Sales/ Mrkt

Qlty Mgmt.

Market Growth

Market Share

Revenue Streams

Are we in the right

markets with the right

products?

Is our R&D best suited to

serve our long-term

needs?




processes

+/--

+

2 Key Areas

10






Sustainability

SupplyChain

Sales/ Mrkt

Qlty Mgmt.

Market Growth

Market Share

Revenue Streams

Are we in the right

markets with the right

products?

Is our R&D best suited to

serve our long-term

needs?




processes

+/--

+

Non-Negotiable Decision Criteria

Questions our Alternatives need to Address

2 Key Areas

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Alternatives

Alternatives

1 Generic drugs, Emerging markets

2 Generic drugs, Developed markets

3 Innovative drugs, Emerging markets

What markets? Emerging or Developed

What products? Generic or Innovative

Market Mix

Type of Products

Generic

Developed Emerging

Innovative

Increase generic products in India, South America, Vietnam, China

Increase generic products in USA, Europe, Japan

Market innovative drugs in countries like India, South America, Vietnam, China

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3

12


The Path Forward

Generic in Emerging

Generic in Developed

Innovative in Emerging

Sustainability +/- - + +

Profitability +/- +/- +

New Synergies - - + +

Actionability + + +

Low level of risk +/- + + +

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Recommendation

Quality Control

Committee

Streamline R&D Focus

Bringing Innovative Drugs to

India

Sustainability

Syne

rgie

s

Low High

High

Target

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Quality Control Committee

1. Optimize Quality Assurance

2. Bringing Innovative Drugs to India 3. Streamline focus of R&D

Quality Control Committee Optimization Committee currently in place, headed by Mr. Dale Adkisson

What they do: set internal guidelines

Take it to the next level: Add “honesty and integrity” to corporate culture – Mr. Adkisson should

propose this to the executive board (umbrella term for quality assurance) Includes: Ethical Research/Data Collection Ethical behaviour of sales representatives

Verification by External Audit group: 3rd party: make sure that rules/regulations relating to Quality control are being

followed Ensures no conflict of interest

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Move Into India

Innovative Drug Producers only occupy 5% of the pharmaceutical industry (will increase to 10%)

There is a void in what your group of companies supplies to emerging markets in terms of innovative drugs



Why bring Daiichi brands to India?

Market Mix

Type of Products

Generic

Emerging Developed

Innovative

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Products of Daiichi Sanko



What brands should we focus on?

Rise

in L

ifest

yle

Dis

ease

India in 5-10 years

Given the rise in lifestyle disease across the Indian demographic a market is developing for the following type of innovative drugs Cardiovascular Disease Hypertension Diabetes

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Products of Daiichi Sanko

Benicar (high blood pressure) WelChol (reduce cholesterol) Effient (heart disease) Mevalotin Loxonin Hirudoid Olmetec Captopril Panipenem Cravit Evoxac FloxinOtic Gracevit




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Pharmaceutical Marketing



3 Key Issues: Low level of customer knowledge Number and quality of medical reps Poor customer acquisition, development and retention strategies

Health care providers Medical representatives

Backbone of entire marketing effort Collaboration of “Associations of

Physicians of India” (API) Trade booth/medical

fairs/seminars

Who to target

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Daiichi-Sankyo Medical Representatives



Objective Retrain Ranbaxy Sales Reps SalaryDevelop Rapport with Healthcare

Providers

Action Required

Brand and product knowledge Customer education & retention Focus on customer service 5 reps for each region (Delhi,

Trivandrum, Jalpur, Rohtak)

Compensation-based

Consistent meetings to build relationships

Drug Samples Invitation to

Daiichi Medical Conference

Addressing Your Medical Sales Representatives

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Daiichi Medical Conference



Sample Flyer for Doctor’s Seminar

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Narrowing Focus of R&D

Create synergies in R&D between Ranbaxy

and Daiichi

R&D in India is nearly 50% less than other

countries

Ranbaxy developments will help create line

extension for Daiichi that will serve to extend

their product patents with Abbreviated New

Drug Applications (ANDAs)

Financial incentive: Ranbaxy can profit from

licensing R&D to Daiichi

Objective: Streamline R&D activities to focus mainly on Novel Drug Delivery Systems (NDDS)

What this accomplishes

Orally administered, controlled-release

Inhalation

Trans-dermal (patches)

New NDDS methods




Projected Sales and Costs

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Pharmaceutical Market$20 billion

Generics90%

Innovative10% - $2 billion

Ranbaxy3% - $60 million

Other Firms97%

Transfer Pricing

28% of revenues10% premium

Selling, General & Administrative

Expenses

15% of revenues

Marketing Expenses

$8.5 million$3 million / year

Costs

Sales (2015)

$20 billion

$2 billion$60 million


Financial Implications

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2012 2013 2014 2015 2016 2017 2018

$(40,000,000)

$-

$40,000,000

$80,000,000

$120,000,000

$160,000,000

Net Cash Flows (Sensitivity Analysis)

Base Case Pessimistic Optimistic

Mill

ion

s o

f US

D

$1.5 billionNET PRESENT VALUE(=6.5 times 2010 Profit)

$2.5 billionNET PRESENT VALUE(=11 times 2010 Profit)

Growth12.3% pharmaceutical

industry growth per year

Cost of Capital13%

Assumptions

Market Share5% innovative drug market

share by 2018

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Implementation

Q4 2011 2013 20162012

Short Term (present-2012)Quality Control- Core Value - Quality Control Seminar- External auditing group

Innovative Products in India- Acquisition of Daiichi products- Establish distribution logistics

Medium Term (2012-2014)Quality Control- Continuation of external auditing and bi-annual visits

Innovative Products in India- Training of Medical Sales Representatives- Daiichi Medical Conference- Products launch- Reevaluate and extend product offerings

2014 2015

Long Term (2014 onwards)NDDS- Research and develop TechnologyQuality Control- Continuation of external auditing and

bi-annual visits

Innovative Products in India- Revaluate and extend product offerings

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Risk Mitigation

• Ensures that road blocks like import ban do not occur again

• Sets universal standards that can be applied to 11 plants worldwide

• Pre-emptive action

Quality Assurance Optimization

• Effectively leveraging synergies in: Supply Chain, Marketing & Sales, Quality Control between Daiichi and Ranbaxy

• No additional learning/adaptation costs• Existing Products in New Market; established distribution

channels

Daiichi Patented drugs to Indian

Market

• Expanding range of products/services• Able to further penetrate both developed/developing markets

(new products)• Less focus on volatility of reverse engineering

Increased focus on NDDS (R&D)

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3 Key Takeaways

Quality Assurance

Optimization

Introduce Daiichi’s patented

drugs to India

Profitable GrowthHigh Quality Products

Increase Ranbaxy’s

R&D focus on Novel Drug

Delivery Systems (NDDS)

7 year project generating

$1.5 to $2.5 BillionNPV

Ranbaxy will:1. Benefit from increased synergies

2. Ensure the sustainability of the ‘Hybrid Business Model’

Sustainability

Syne

rgie

s

Low High

High

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Slide IndexOur Understanding

Our Understanding

Roadblocks to Success

Opportunity Statement

Alternatives


Alternatives

Decision Matrix

Recommendation

The Path Forward

Quality Control Committee

Move into India

Products of Daichii Sankyo

Pharmaceutical Marketing

Medical Sales Representative

Daichii Medical Conference Pamphlet

Narrowing Focus of R&D

Financial Information

Projected Sales and Costs

Financial Implications

Implementation

Risk Mitigation

Wrap-Up

Key Challenges

Mitigate Import Ban

Synergies

Clarifying Synergies

What Provides LT Sustainability

Pharmaceutical & India Analysis

Pharmaceutical Value Chain

Generic Drug Consumer Profile

Patented Drug Consumer Profile

CVD & Hypertension

Competitor Analysis

Why India - Growth of Indian Population

Implementation

Detailed Overall Implementation

Detailed Short Term Implementation – Content

Detailed Short Term Implementation – Visual

Quality Assurance Committee Implementation


Projected Sales (Pessimistic)

Projected Sales (Most Likely)

Projected Sales (Optimistic)

Revenue for Daiichi Sankyo

Net Present Value Model

Quality Control Costs

Recommendation Details

NDDS: Why?

Benicar, WelChol and Effient

Value Proposition: Daiichi

Value Proposition: Ranbaxy

Synergy Office

Externalities

Corruption

What is Sustainability in this Context?

Why Not Generic? – Ranbaxy Market Penetration

Incentive for API

Hedging

Triple Bottom Line

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Projected Sales (Pessimistic)

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Projected Sales (Most Likely)

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Projected Sales (Optimistic)

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.


Revenues for Daiichi Sankyo

Transfer pricing model

Ranbaxy purchases drugs from Daiichi at cost plus 10% premium

Ranbaxy is a subsidiary of Daiichi Sankyo

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$70 - $130 millionNPV for Daichii Sankyo


Net Present Value Model

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Quality Control Costs

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Cost Amount

Training Seminar $1,250,000

Information Materials $200,000

Online Media $150,000

Total $1,600,000

• $1.4 million dollar investment into Quality Control

• Funded with cash (currently $550 million in cash and bank balances)

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Key Challenges

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Key Issue: FDA

How to mitigate import ban issue?

Acquire /Build New Production Facilities

Implement Internal Quality

ControlSustainability - ++

Capability of existing Infrastructure - +

Ease of Implementation +/- +

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Key Issue: Synergies

Supply Chain Sales & Marketing

Quality Control

Ease of Implementation

++ +/- ++

Maximizing Efficiency ++ + +/-

Cost Savings ++ + +

Leverage Industry Opportunities

++ +/- -

How do we effectively leverage synergies between Daiichi and Ranbaxy?

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Leveraging Synergies

R&D AIP Manufacturing

Secondary Manufacturing

& PackagingDistribution

Consumer Sales/Marketi

ng

Ranbaxy leveraging Daiichi’s investments in R&D:-Established Patented Products-Product Mix:

Daiichi leveraging Ranbaxy’s increased R&D focus on drug delivery-Extending Patents on products-Outsourcing part of the R&D process

Daiichi leveraging Ranbaxy’s established distribution channels (Patented Drugs):-Market Knowledge + Access-Consumer Knowledge -Customer Loyalty

Ranbaxy leveraging Daiichi’s established distribution systems in developed markets (drug delivery systems):-Japanese Market

Daiichi leveraging Ranbaxy’s sales representatives-Marketing/Sales of Patented Drugs

Ranbaxy leveraging existing brand equity of Daiichi products-Product Mix:-Awareness/Brand Loyalty

.

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Key Issue: Sustainability

Expand into New Geographic Regions

Product Line Development

Streamlining R&D processes

Profitability ++ +/- +

Long-term Growth ++ + +

Core Values + + +

Leverage Industry Opportunities

++ +/- +

What alternative provides a long term sustainable strategy for both Daiichi and Ranbaxy?

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Pharmaceutical and India Analysis

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The Pharmaceutical Value Chain

Drug Manufacturer

PharmacyPharmacy Benefits Manager

Consumer

Drug Wholesaler

Health Insurer /

Medical Staff

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Generic Drug Consumers - India

Demographic

Lower incomeRecent ascension into the middle classTier 2 Consumers

Behavioral• N

eed for OTC products• Basic solutions to prevent symptoms

Psychographic

Lack of access to healthcare services; lack of ability to spend on healthcareIncreased focus: Neuropsychiatry, Oncology, Cardiovascular, Gastro-Intestinal,

.

43


Patented Drug Consumers - IndiaDemographic• H

igher Income• Middle/High class consumers• Tier 1 Consumers

Geographic• U

rban Areas• Mumbai/Bangalore/Chennai/Delhi

Behavioral• Safety• B

rand Names • Quality Assurance• Prescription based medicines P

sychographic• A

ccess to hospitals/clinics/healthcare

• Western lifestyle diseases

• Increased focus: Neuropsychiatry, Oncology, Cardiovascular, Gastro-Intestinal,

.

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India: Key Health Issues

Heart diseases: number one killer in both urban and rural areas Prevalence rates of CVD in rural populations lower than urban

populations 25% in age group of 25-69 years Predominantly 60–69 years

Cardiovascular Disease

Hypertention

Causes: Urban lifestyle inadequate sleep, cigarette

smoking, stress levels, lack of exercise

Hypertension is 25-30% in urban and 10-15% in rural subjects

Diabetes

Life-long incurable disease caused by high blood-sugar levels

41M Indians have it Expected 74M will have it in

2025

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Competitive Analysis

Main Competitor: Cipla Prominent Indian pharmaceutical compnay; manufacturing low-

cost anti-AIDS drugs for HIV-positive in developing countries product range comprising cardiovascular drugs

Other Competitors: Dr. Reddy’s laboratories, Sun Pharmaceutical


Growth of Indian Population

1.2 billion people

1.6% annual growth

Will surpass Chinese population in 2025

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Emergence of the Middle Class

530 million people will enter the middle class

by 20251985 1995 2005 2015 20250

200

400

600

800

1000

1200

1400

1600

Demographic Shifts in India

Upper Class

Upper-Middle Class

Middle Class

Lower-Middle Class

Below Poverty Line

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Implementation


Q4 2011 2013 20162012

Detailed ImplementationShort Term (present-2012)

Quality Control- Core Value- Quality Control Seminar- External auditing group

- Identification - Practices

Innovative Products in India- Acquisition of Daiichi products- Establish distribution logistics

Medium Term (2012-2014)Quality Control- Continuation of external auditing and bi-annual visits

Innovative Products in India- Training of Medical Sales Representatives- Begin marketing products - Daiichi Medical Conference- Revaluate distribution strategies- Extend product offerings

2014 2015

Long Term (2014 onwards)NDDS- Develop Technology- ResearchQuality Control- Continuation of external auditing and

bi-annual visits

Innovative Products in India- Revaluate distribution strategies- Extend product offerings

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Short Term Implementation (2011-2012)

Quality Control Optimization- Addition to core values

- Approaching Dale Atkinson about approaching Executive Committee of Ranbaxy- External Auditing

- Searching for/hiring of external “quality auditors”- Establishing of jurisdiction; responsibilities- Investigate processes of Ranbaxy plants, make sure they adhere to CQ rules

and regulations- Quality Control Seminar

- Planning for Seminar; Location, dates- QC Seminar Follow up

- 2 visits per year by Dale Atkinson and his Quality Committee to Ranbaxy plants

Patented Drugs into India- Acquiring Products from Daiichi- Re-training of Sales Force


Implementation – Immediate Actions

Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Core Value

Quality Control Seminar

Quality Control Exec. Team: Bi-annual visits

External Auditing Group-Identification

- Begin audit

Acquisition of Daiichi products

Establish distribution logistics

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Quality Assurance Committee

How to Implement – Weekend Training Session: 2 top level managers from each production

facility Away for one weekend; sessions held by

Mr. Adkisson and his group why is this important? What impact does this have on the company (financially and socially)

Mr. Adkisson and his committee visit plants; (bi-annually for each plant) check on

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Recommendation Details

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NDDS: Why?

NDDS- Helps companies build patent fences- If they develop a new delivery system for an existing drug, and if

they are First-to-File to produce as the original patent runs out, they can receive marketing exclusivity for up to 180 days

Benefits for Ranbaxy- Transfer Pricing- Following a market trend

- Increased number of Indian Generic Pharmaceutical companies going in this direction

- Mitigates Risk- Reduces focus on US market; allows Ranbaxy to further penetrate

Indian pharmaceutical generic market- Sustainability

- Increased variety of products/services offered- Further penetration of both developed/developing markets- More to offer both new/existing consumers

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Why Benicar, WelChol, Effient

1. Quality Control Committee



Drug Addresses Patent Expiry

Successful In Other Markets

Benicar High Blood Pressure

2016

WelChol Lowers Cholesterol

2014

Effient Heart Disease

2012

Addresses the trend of increasing occurrence of lifestyle disease among Indians

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Value Proposition - Daiichi

Sustainable innovative drug manufacturer

Sustainable; financially and in terms of business model + effectively leveraging demographic trends – part of a mutually beneficial partnershipHIGH END/NICHE PENETRATION

Established Distribution Network, In depth consumer knowledge, Market/Consumer Access

What I Get

How I Feel

Who I Am

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Value Proposition - Ranbaxy

Sustainable generic drug manufacturer

Further penetration of the Indian drug market, taking advantage of demographic and industry trends – part of an effective partnership

Financial incentives + Increased sales and market share in the Indian drug market; Leveraging of R&D synergies

What I Get

How I Feel

Who I Am

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Synergy Office

Will complement our penetration into the Indian market with innovative office

Facilitate the logistics behind our recommendation Sales and Marketing: Medical sales representatives Supply Chain: Use of our distribution channels for Daiichi office Quality Control: Coordinating quality control in for Ranbaxy

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Externalities

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Corruption

Net

work

Established, trusted network

Co

mmission-based

Medical representatives

APIAssociation of Physicians of India (API)

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What is Sustainability?

Pharmaceutical Industry:- Sustainability in terms of business model

- Is the “Hybrid Business Model” sustainable in the long term?- Ensure growth, profitability, and constant innovation

Market Mix

Type of Products

Generic

Emerging Developing

Innovative

A truly sustainable Pharmaceutical company is present in all four segments


Ranbaxy Generic Drug Market Penetration

Ranbaxy already sells generic drugs in all major developing and developed pharmaceutical markets

Entered Japan through the Daiichi Sankyo Espha subsidiary in early 2010

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Incentive for API

Provide international industry experience Support API’s objective in organizing, promoting

the search in problems relating to the science of medicine Meetings, exhibitions, conferences


Hedging

Ranbaxy currently hedges against all major currencies in the markets they operate

Ranbaxy will purchase drugs from Daiichi Sankyo in Japanese Yen

Ranbaxy should continue to hedge against currency fluctuations in the Indian Rupee and Japanese Yen using future contracts

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Triple Bottom Line

Sustainability in a broader context: Additional focus for pharmaceutical companies in regards to

sustainability “Health & Safety” of customers and individuals

Triple Bottom Line: PROFIT

Economic impact Is our recommendation profitable for the company?

PEOPLE All the stakeholders, including society at large Focus on “honesty & integrity” – improves overall quality for stakeholders Positive impact on community by introducing medicine that was previously

unavailable PLANET

Impact on the planet and natural systems

Ranbaxy singapore

Business

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