Morepen Labs - Transforming To A Healthcare Company

Journal of International Business Education 3.
© 2007 NeilsonJournals Publishing Ref. No.: JIBE3-0CS3
This case study has been peer reviewed by the editorial board of the Journal of International Business Education (JIBE). For further information
on this journal please visit the JIBE website at www.neilsonjournals.com/JIBE
Morepen Laboratories Limited: Transforming to a

Healthcare Company
Vasant Sivaraman, Suresh Lalwani and Rohit Jalan
S P Jain Institute of Management & Research, India
Purchased for use on the PGP-GM:453Strategic Management Custmisation phase, at S P Jain Institute of Management & Research.
Abstract. Set in India in 2002, the case calls for an assessment of the business direction in which Morepen Laboratories Ltd (MLL) is headed.
Under the direction of Sushil Suri, the company was poised for a transformation from being a bulk drug pharmaceutical company to an integrated
healthcare company. Advised by leading global consultants, MLL was ahead of its time in stepping into exciting growth sectors. At the same time,
the core business was on the verge of large payoffs in a blockbuster market where the patent of the innovator was due to expire.The case offers
an opportunity to examine the business strategy of the active pharma substance (loratadine) including elements relating to ‘industry analysis’,
competitive positioning, sustainability, commitments and capabilities. The bold moves by MLL to diversify into new business present a canvas
to assess the corporate strategy at work. The case also affords scope for financial statement analysis, financing alternatives and capital structure
Usage permitted only within these parameters otherwise contact info@thecasecentre.org

deliberations.
Taught by Prem Chandrani, from 30-Sep-2021 to 28-Feb-2022. Order ref F424671.

Keywords: Active Pharma Ingredient, Loratadine, related diversification, pharmaceuticals, OTC, sustainability, generics, Claritin, India, asset
liability gap, commitments & capability, competitive advantage, industry analysis.
1. Introduction
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Sushil Suri, a Chartered Accountant, had taken over the helm of management of Morepen Laboratories Limited (MLL)
after K.B Suri, his brother and the founder of MLL passed away in the year 2000. Within a span of two years he carved
out an ambitious transformation of the company, as a result of which MLL was voted as one of India’s top 25 fastest
growing companies and among India’s top 5 fastest growing pharma companies in 2001. MLL was also presented the
Lalit Doshi Memorial Award, 2002 (outstanding performance and growth- best among all companies supported by
SICOM, the state industrial development corporation).
The ‘Dr. Morepen’ brand was one of the best-known launches in the year 2001 and held promise for great value
creation. From being just a bulk drug company, MLL had forayed into branded formulations, diagnostics, retail and
Over the Counter (OTC) category which was christened Fast Moving Health Goods (FMHG). Sushil Suri’s vision for
MLL is reflected in his statement on the acquisition of the Lifespring retail chain in June 2002, “Pharma retail is ready
to take off in India and the Indian healthcare retail market offers several opportunities. Acquisition of the Lifespring
chain will give a significant boost to Dr. Morepen’s charter of expanding its basket of goods as well as offering an on
ground experience of health and beauty products on the lines of the Boots model which is doing extremely well.” A
combination of acquisitions and new businesses were targeted to enter attractive industries and achieve profitable
growth
The investments had been made, the returns were expected. It was anticipated the stakeholders would benefit
considerably from the lucrative returns. The bulk drug business was about to reap the benefits of the active
pharmaceutical ingredient (API) loratadine that was to go off patent (patent holder, Schering Plough’s (SP) brand name
‘claritin’) in December 2002. To tap this opportunity, MLL had tied up a distribution arrangement with Geneva Pharma,
wherein MLL would be the sole supplier of loratadine at US $8,000 per kg for the exclusivity period of 180 days.
As Sushil Suri reviewed the briefing for the upcoming meeting of the Board of Directors, he reflected on the
businesses in the portfolio, spanning from bulk actives, formulations, FMHG, diagnostics, global generics and retail.
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2 Ref. No.: JIBE3-0CS3 Morepen Laboratories Limited: Transforming to a Healthcare Company
The Board had to be presented with business plans in order to seek approvals for additional investments that would
propel the shift of MLL towards being a fully integrated healthcare provider.
2. Morepen Laboratories
Morepen Laboratories was set up by K B Suri in the year, 1984 at Solan in Himachal Pradesh as a private limited
company. A first generation entrepreneur at the age of 22, Suri was a qualified analytical chemist. Subsequently MLL
got listed in the year 1992 by when it was manufacturing semi-synthetic penicillin products such as ampicillin,
amoxycillin and cloxacillin. In the year 1994 it set up a project for manufacturing new products like loratadine,
cisapride, omeprozole and ketorolac.
While the company was always managed and run by the promoter family, the leadership baton fell into the hands
of Sushil Suri in the year 2000 when his elder brother passed away. Sushil Suri had been associated with MLL since
1989 and was inducted as Director (Finance & Corporate Affairs) in February, 1992. The composition of the Board is
listed in Exhibit 1.
Financial Institutions (FIs) and small investors each owned about one-third of the shareholding of the Company.
These were followed by the next largest categories of promoters and their relatives and promoter controlled companies,
together having a shareholding of 27%. Exhibit 2 gives the shareholding pattern1 of MLL as on 31st March 2002.

Exhibit 1: Board of Directors
Names Position
Mr. Sushil Suri Chairman & Managing Director

Mrs. Kanta Suri Whole Time Director

Dr. P.S. Pritam Nominee Director – ex LIC
Mr. N.H. Bhatter Director – ex DMD, SICOM
Mr. Manoj Joshi Director
Dr. Jujhar Singh Director-Technical
Mr. J.S Pal Nominee Director
Mr. V.K Saxena Nominee Director - IDBI
Mr. Arun Suri Director
Exhibit 2: Shareholding Pattern
Promoters & Relatives Promoter's

14% Companies
13%
Others
32% Financial Institutions
35%
Banks Mutual Funds FIIs
1% 2% 3%
Over the last two years, Morepen had been exploring new horizons beyond the bulk drug manufacturing base and
had been looking to moving up the value chain and making efforts in setting up a business model establishing its reach
to the ultimate consumer. To align with the changing business paradigm which would bring in its wake consumer
expectations – the company, during the year 2001-02, ventured into diagnostics under the brand name of “HOME
HEALTH”, clinical diagnostics, and Fast Moving Health Goods under the umbrella brand “Dr.Morepen – Health in
your hands”. Under this umbrella brand, Morepen launched a host of new products. Their success had been very
1. Source: Company Annual Report

Journal of International Business Education 3 Ref. No.: JIBE3-0CS3 3
encouraging and the current volumes and value indicated significant growth prospects in the near future. The traditional
and emerging business segments of the company are depicted in Exhibit 3.
Exhibit 3

A description of the businesses follows. The section on Bulk Drugs below covers Global Generics under the
segments ‘Loratadine’ and ‘Exports’. API is dealt with under the segments ‘Domestic Market’ and ‘Other Drugs’.
3. Generic Formulations
Generic Formulations represents unbranded finished dosages (tablets, injectibles etc), aimed at domestic institutional
buyers (eg hospitals) and often involved bought out products. Since this operation involved a substantial trading
component, the volumes could be high. However, given the fact that buyers dealt in large lots and did not go by brands,
margins tended to be very thin.
4. Bulk Drugs
The bulk drug business commenced operations at Masulkhana in 1985 an additional unit was set up at the same location
in 1994. The Masulkhana plant was an USFDA-approved facility that made loratadine. Though the second unit was set
up in 1993-94, its capacity was expanded from 500 kg to 2 tonnes of bulk drugs in 1999 in anticipation of loratadine
orders. According to Sushil Suri, “Morepen has spent Rs 8,869 million in the three plants” (Masulkhana for bulk drugs,
Parwanoo for formulations and Baddi for bulk drugs, dosages and OTC products). Exhibit 4 depicts a comparison with
other companies.
Exhibit 4: Comparison of Investments
Company Plant Locations Investments As of December 2002

Ranbaxy Dewas (Madhya Pradesh), Mohali, Rs 7,269 Mn
Ropar and Toansa (Punjab), Poanta
Sahib (Himachal Pradesh) and
Okhla
Cipla Bangalore, Kurkumbh (Pune), Rs 3,412 Mn
Patalganga and Vikhroli
(Maharashtra)
Morepen Parwanoo, Masulkhana and Baddi Rs 8,869 Mn
in Himachal Pradesh
The initial production was for Ampicillin and on stabilization of its antibiotic production, MLL ventured into the
global markets in 1990. The product portfolio was expanded to include therapeutics like antihistamine, anti-
hypertensive, anti-cholesterol, antidepressant, anti-asthmatic and anti-diabetic drugs. The portfolio also resulted in a
shift in strategy from low-margin products like Ampicillin to high margin products like Sultamycillin, products that had
a long, multi stage production process which were complex and not easy to replicate. Over time the company developed

technical capabilities to manufacture complex drugs in commercial scale employing cGMP (current Good

Manufacturing Practices of the World Health Organization). In a bid to achieve global benchmarking standards, the
company engaged Pharamaplan of Germany as project consultants for ‘current Good Manufacturing Practices’ and
external quality audit.
4.1. Exports
Growth in the bulk drug business, during the past three years, had been on the back of exports, which almost doubled
from Rs 317 Mn in FY 00 to Rs 628 Mn in FY 02. The overall export basket comprised primarily 20 drugs, with the
top 12 drugs constituting almost 97% of total exports in FY 02. Exports provided relatively better margins for
comparable drugs in relation to the domestic markets and had been the primary driver of increase in operating margins
during the last three years. FY 02 saw MLL increasing its thrust on exports with an increased portfolio of products
including fexofenadine, norfloxacillin, montelukast, fluvastatin, ciprofloxacillin and ampicillin trihydrate. In the past,
it had already been supplying to about 20 countries across South America, Eastern Europe and Canada. Since the time
MLL received its USFDA approval, it tied up with over 20 international pharmaceutical companies for the supply of
loratadine to USA, Western Europe and Canada.
4.2. Loratadine
Exports had been to the non-regulated markets and included blockbuster drugs like loratadine. MLL was the largest
generic manufacturer in the world of loratadine, an (non sedative) antihistamine (anti allergy) drug other than its patent
holder, viz., Schering Plough, USA for whom the claritin group of products accounted for about one third of sales
revenue and about 70% of profits. The patent for loratadine had already expired in the EU and Canada; subsequent to
an initial two-year extension and a subsequent six month extension for pediatric use (granted in lieu of the patent holder
undertaking additional studies to establish the effect of the drug on children), the expiry in USA was due in December
2002. The ability of the company to manufacture this drug with USFDA approvals (obtained in March 1999) opened
the gateway for exports and loratadine was the largest contributor to MLL’s exports in FY 00 (60%) and 01 (76%). The
Abbreviated New Drug Application (ANDA) filing for this drug had been done by Geneva Pharmaceuticals to get the
USFDA approval for the new process for loratadine. Morepen tied up with Geneva Pharma to be the exclusive supplier
at $8,000 per kg for the exclusivity period. The tie up with Geneva, USA (the generics subsidiary of Novartis that had
a wide presence in the US market) for supplying to USA was under the Para IV filing which provided Geneva Pharma
with exclusive marketing rights for 180 days post December 19, 2002. MLL had already started supplying trial batches
to Geneva. The size of the market for loratadine was estimated at US$ 3.2 billion, with regulated markets alone
accounting for US$ 2.2 bn, of which USA accounted for an estimated 85%. This drug enjoyed more than 50% market
share amongst antihistamines and was growing @ 30% p.a. Based on that dream, the company raised over Rs 6 bn in
debt, built manufacturing capacities and prepared itself for D-day – 19 December 2002, when Schering’s patent would
expire. MLL’s commitment to loratadine was reflected in the 24 tonne capacity set up; this represented 65% of the
global USFDA approved bulk capacity (excluding Schering Plough). In anticipation of the market opening up for
loratadine, MLL also entered into tie ups with international generic/ OTC players including Genpharm, Teva, Perigo
and J&J.
The other Indian generic competitors included Cadilla Healthcare, Zydus Cadilla, Tonira Pharma and Srini Pharma.
However, none of them had the requisite USFDA approval to take advantage of the post-patent period. Production of
loratadine was a complex 11-stage process involving a 60-day production cycle and, though a number of players, both
domestically and globally, had tried manufacturing the drug, MLL was one of just two generic manufacturer worldwide,
with a USFDA approval. The other manufacturer was a Spanish company. MLL however, could produce with high
purity at a low cost which was an added edge.
However, there was also a risk to contend with – that the drug may take the OTC route – that Schering Plough could
launch an OTC version on expiry of the patent. Consequently, the price drop for MLL could be steep, though volumes
could experience a sharp jump. It was estimated that the drug would contribute Rs 1,198 mn to total sales in FY 03,
increasing to Rs 2,078 mn in FY 04 and then taper off, as prices decline further. Despite a substantial price decline, the
margins were expected to be at least three fold as comparede to less developed markets.
4.3. Other Drugs

The successful development of loratadine prompted MLL to develop other complex molecules including Cisapride and

Zafirlukast. For Cisapride, MLL had obtained the European and Canadian DMFs (Drug Master Files; this process
documentation allows the company to enter the overseas markets); however, the withdrawal of the product by its
innovator, viz., Johnson & Johnson, forced MLL not to proceed with a USFDA approval. Zafirlukast, on the other hand,
had been superseded by Montelukast, focusing MLL’s efforts at development of the new molecule. The risks of pre-
mature withdrawals and development of better molecules had always been prevalent for all Indian generic
manufacturers and MLL was not immune to such risks. Considering the relatively low cost of developing such drugs in
India, the cost of failure would not have a deep impact on MLL’s balance sheet. MLL had introduced certain other high-
value drugs in the export markets that were yet to go off patent. These included:
• Atorvastatin (patent holder – Warner Lambert (Pfizer) with a market size of US$ 3.27 bn (world’s second
largest molecule), to go off patent by May 2007. This drug contributed Rs 19 mn to MLL’s FY02 export
sales). MLL had filed for an international patent for preparation of Atorvastatin in an amorphous form.
• Montelukast (patent holder-Merck with a market size of US$ 580 mn. This drug would go off patent by
October 2011 and contributedRs 1 mn to the company’s FY02 export sales)
• Zafirlukast (patent holder-ICI with a market size of US$ 128 mn, to go off patent by April 2006; MLL’s FY
02 export sales Rs 7 mn) and
• Fexofenadine (patent holder-Richardson Merell with a market size of US$ 984 mn, went off patent by April
2000; MLL’s FY 02 export sales Rs 2 mn).
The demand for all these products had been growing at rates in excess of 30-40%. Indian pharmaceutical
companies, on account of the expertise they had developed, were the leading suppliers of these drugs in the global non-
regulated markets and included players like Matrix, Hetero, Dr. Reddy’s (for Montelukast), Dr. Reddy’s (for
Zafirlukast), Aurobindo Pharma and Orchid (for Sultamicillin) and Ind Swift, Cadilla and Ranbaxy (for fexofenadine)
(See Exhibit 1 in the Appendix for more on the industry and the major players). However, none of them had USFDA
approval to cater to the lucrative US markets. Though MLL was developing ‘non infringing’ processes and was moving
ahead with filing Drug Master Files (DMFs) for blockbuster drugs like Pioglitazone, Fexofenadine and Ramipril (in the
pipeline) for USFDA approvals, it was estimated that the next drug to be available in its portfolio with the necessary
approvals was likely only by FY 04-05. European and Canadian approvals could, however, be forthcoming earlier than
USFDA approvals.
4.4. Domestic Market
Despite the growth in top-line being achieved by exports during the past three years, domestic markets for bulk drugs
continued to be the mainstay of MLL’s bulk drugs business and contributed 78% of total bulk drug sales in FY 02
aggregating Rs 2,229 mn. Out of the total 31 drugs being domestically marketed by MLL, nine contributed 95% of
domestic sales in FY 02.
5. Branded Formulations – Medicus
MLL forayed into the generic formulation business in 1996. In a move towards forward integration of its activities MLL
subsequently launched its branded formulation business as 3H, i.e., Help, Healing and Happiness. Among other things,
Morepen tied up with a leading national hospital group- Apollo Hospitals- to launch 3H 1066- a national network of
emergency ambulance services wherein a single phone number can bring medical care help immediately. As per the
company reports, “MLL entered into the branded formulation business a couple of years back so as to hedge itself from
the risks of the low-entry-barrier domestic bulk active business”. Medicus had been formed to address diseases falling
under the specialties of gastroenterology, dermatology, respiratory medicine including ENT disorders, neuropsychiatry,
cardiology, diabetology, infectious diseases and allergic disorders. The business of Medicus enabled it to launch new
products in the market rapidly and was seen as a ‘quick to scale’ model. Some of the key drugs in its product portfolio
were:
DOM-DT (anti emetic), Saltum (antibiotic), Claridin (anti allergy), Orvastin (cholesterol lowering), Pentopen (peptic

disorder) and Lifelyte (oral rehydrate).

Formulations contributed 40% to total sales in FY 02, up from the level of 25% in FY 00. The company had 13
brands and 26 products including some first-time-in-country brands, like Biopro and Syntertic. The company also
entered into heavy promotional activities thus making Dom-DT the Number 2 in its category in ORG-RSA (retail audit)
and also earned for it, the status of 4th largest prescribed brand by the gastroenterologists. Saltum achieved the highest
market share in its category making significant contribution to the total sales turnover of the business.
The formulations business catered exclusively to the domestic market, with generic products (non branded supplies
to hospitals etc.) contributing the largest share of 85%, though MLL’s emphasis was on increasing the share of its
ethical/ branded formulations from the present level of 15% to a much higher level. Medicus was also working on co-
marketing alliances with multinational companies who could leverage MLL’s distribution strengths to market
specialized generics and patented pharmaceutical products in India.
Exhibit 5
Formulations: Therapeutic group wise market (2001) Share Growth

(Rs million) Market size (per cent)
Systemic anti-infectives 39,911 24.64 2.54
Alimentary tract and metabolism 37,732 23.29 5.11
Respiratory system 15,055 9.29 1.66
Cardiovascular system 13,316 8.22 15.29
Central nervous system 11,337 7.00 4.40
Musculo-skeletal system 10,109 6.24 7.07
Dermatologicals 7,409 4.57 5.70
Blood and blood forming organs 6,850 4.23 5.59
Genito-urinary system and sex hormones 6,152 3.80 16.66
Various 3,234 2.00 11.91
Parasitology 2,944 1.82 -5.20
Systemic hormones 2,815 1.74 0.67
Sensory organs 2,533 1.56 4.34
Hospital solutions 1,533 0.95 17.85
Cytostatics 706 0.44 12.40
Diagnostic agents 352 0.22 6.43
Total 161,986 100.00 5.37
The strength of distribution and logistics played a key role and towards this end Morepen achieved significant
milestones in reaching across the country with 22 Clearing & Forwarding Agents (CFAs) with more than 1600 stockists
and a reach to nearly 400,000+ outlets. Its reinforced national network was geared to address a market of Rs 23,660
Mn indirectly and Rs 5000 Mn directly (ORG May 2001). Exhibit 52 gives the share of various therapeutic groups in
the domestic formulations market. According to Cris Infac, the long-term domestic demand would be driven by chronic
therapeutic segments like anti-diabetic, central nervous system (CNS), cardiovascular systems (CVS) and gastro-
intestinal infections.
6. Fast Moving Health Goods (FMHG) – Dr Morepen
Morepen entered the FMHG segment under the umbrella brand of Dr. Morepen. Speaking on the occasion, Mr. Sushil
Suri, Chairman and Managing Director, Morepen Laboratories said, “The decision to create Dr Morepen into a separate
entity has been taken in line with the growth plans of Morepen Laboratories which would now focus on its core business
of pharmaceuticals, concentrating on filling DMF for high value molecules like Desloratadine and ANDAs for foray
into US generics market.” The company brought on board Kartik Raina as the Managing Director of Dr. Morepen to
develop this segment. Raina had over 20 years of experience in sales and marketing and was working with the Unilever
group as a Managing Director responsible for top and bottom lines of its operations in Sri Lanka and Maldives. The
launch of Dr. Morepen brand was considered as the top 5 launches in the year 2001 by a prominent business magazine.
This initiative was designed to market a range of products that could be promoted directly to consumers – using mass

media and retail promotion and thus give access to the end consumer. Traditionally in the pharma business the trend

was for companies to convert some of their existing brands from ethical promotion to OTC. Morepen however took a
different route to achieve this end. A consumer research was launched to study consumer attitudes to health with a thrust
on ‘wellness’ rather than illness. Armed with the research findings, work began on developing a brand that could meet
consumer expectations. This was envisaged as a forward looking, futuristic, lifestyle driven brand that empowers the
modern customers to be in charge of their own health and live life without any stops. And so the brand Dr.Morepen was
born. From the smaller problem- solution OTC market, Dr.Morepen’s scope included the area of lifestyle improvement
(enhancers or boosters and problem solutions for lifestyle inhibitors) and therefore, covered in its purview health
products beyond conventional OTCs. This category came to be known as FAST MOVING HEALTH GOODS
(FMHG). This category of products meant access to a much larger market worth approximately Rs.45 billion annually.
To tap this lucrative market the company made a number of launches and acquired three major brands. The major
acquisitions were:
• ‘Lemolate’, a premium brand of Yash Pharma Laboratories Ltd. in the cough and cold category. The
acquisition was made at a total consideration of Rs. 109.5 Mn. The company had planned to market the brand
under the umbrella of Dr. Morepen. Some of the strategic advantages that this acquisition would bring were:
- Broaden the product portfolio of Dr. Morepen
- Provide strategic entry into the Rs.8 bn cough and cold segment. Rather than creating a totally new
brand in a cluttered category of 112 brands, the advantages of acquiring an established brand could
perhaps outweigh that of a start-up.
- Extend the brand to North and South India where the company had a strong distribution network
thereby increasing the market share considerably.
- Consolidate its position in the western and northern markets.
- An established brand like Lemolate provided tremendous opportunity for brand extension in the cough
& cold segment.
• ‘Burnol’ from Reckitt Piramal Ltd. for Rs. 89.5 Mn. Burnol enjoyed very high awareness (>90%) amongst
urban consumers and had over the years become an essential presence in every household as an antiseptic for
minor cuts and burns. The perceived benefits of this acquisition were:
- A broader and stronger product portfolio.
2. Source: IMS India & Cris Infac

- A significantly increased market presence by leveraging its extensive distribution set up.
- An entry into the Rs 300Mn burns market where Burnol enjoyed strong equity and loyal consumer
franchise.
- Strengthened presence in the Rs 2.1bn antiseptic market by possible line and brand extensions.
- Potential to grow substantial volumes by a focused marketing approach in a segment developed by

competing brands like Soframycin (Aventis) and Silverex (Ranbaxy).
Speaking on the occasion Mr. Sushil Suri, CMD Morepen labs said, “Burnol provides an excellent fit with our
strategy of acquiring and developing strong brands in Indian market. It is a premium brand, well positioned in India
that offers superior volume and value growth potential”.
The other launches under the brand Dr. Morepen during the same year were:
• ‘C-Sip’ instant Nimbu Pani (lemonade). Available in 10gm sachets, C-Sip was easily soluble in plain water
and was targeted at the new generation instant drink segment.

• A campaign called the ‘Kids Tango’ to promote and spread awareness on health in families especially

amongst the children. According to Mr.Kartik Raina, Managing Director, Dr.Morepen Limited. "The activity
is a part of the health initiatives that Dr.Morepen launched at the onset of this year. We have involved young
school kids in this activity as they are perfect spokespersons for a healthy life. Children also tend to influence
their parents and older siblings to adopt a better and healthier lifestyle…. Based on the feasibility of the
program we intend to take the Kid’s Tango to other parts of the country as well.”
• ‘Lifelyte’ – ‘A ready to drink, sterile electrolyte rehydrate’. Morepen was the first Indian company to launch
an Oral Rehydrate Solution in a convenient, ready to drink formulation recommended by the WHO.
• An aspartame based low calorie sweetener ‘Y. Sugar’. Aspartame is an intense sweetener that provides the
sweet taste of sugar at a fraction of calories without leaving a bitter taste in the mouth.
• Dab Fizz – the instant antacid. Soluble in water, the Dab Fizz powder was to relieve acidity instantly.
• Sat Isabgol, a natural laxative made from Isabgol husk and Psyllium husk, which is a necessary fiber that aids
easy bowel movement.
The company’s target was to expand this business to around Rs1 billion by F2004 and Rs2 billion over the next five
years. According to the company, this business was likely to yield a 25% operating profit margin. Together with the
other growth foray, into retail, this business was expected to take a while to break even. The company had planned an
investment of Rs1 bn for the next five years for product development, marketing, distribution etc though this would also
be a function of valuations since brand acquisitions would play a big role in these ambitions.
With the launch of Dr. Morepen, the distribution of Morepen moved beyond pharmacists – to super stores, retail outlets
and neighbourhood shops. Dr.Morepen products were sold through over 100,000 outlets and were available in over 372
towns. These products were distributed by an exclusive sales force, which came from companies in the consumer goods
(FMCG) sector. As a consequence they were able to bring in those skill sets, which are relevant to the FMHG category.
7. Clinical and Home Diagnostics – Medipath
After having established a strong foothold in the pharmaceutical industry, Morepen aspired to set a new precedent and
establish its position as a leading company in the field of clinical diagnostics and self-healthware range. Importing and
marketing these products was seen as an avenue of relatively low risk and yet one that could contribute revenues in a
short time. To achieve these objectives, a new initiative “Medipath” was launched in Feb 2001, which would focus on
exploring and developing the business with a core strategy of consistently offering unique and high end technologies to
its customers (consumers and medical fraternity) backed up by good service and customer support systems thereby
generating long term customer relationship. The size of this market was estimated as Rs 5 bn. The company had targeted
Rs160m in F2003 and Rs1 bn in F2007 as sales revenue from this segment.
Medipath had established a nation wide distribution network with three CFAs, 4 super distributors and over 250 direct
distributors covering the entire country. These distributors catered to 2000 top retailers, 1400 clinical laboratories,
approximately 750 hospitals and end consumers. In terms of sales promotion and coverage Medipath had a strong sales
network with 75 experienced sales professionals divided into diagnostics and devices teams. To effectively cover the
markets, the country was divided in four zones (North South East & West) each with specialist sales (diagnostics &
devices) and application and customer service teams.
7.1. Clinical Diagnostics
Medipath had identified a major potential in the area of point-of-care diagnosis. The category in India was then
unoccupied with competition from mostly unorganized players offering limited products with average to low quality.
In May, 2002 Medipath launched its first brand “Quickchek” rapid tests in the Indian market which would be the first
step towards establishing a wider concept of point-of-care diagnostics. The brand would offer a range of rapid tests for
all laboratory setups. Starting with rapid pregnancy tests in May 2002, the company planned to increase its portfolio in

the infectious disease segment by launching Diamed-Malaria Testing Kits.

7.2. HomeHealth
This category catered to the management of excessive physical and psychological stress due to changing life-styles of
the upper middle class consumer. The company saw a market for self-health and self-monitoring health-ware products.
The market for medical devices had been left largely untapped and happened to have a huge market potential.
According to a company executive, “Existing techniques for making diagnosis in India are still not very
sophisticated. Therefore, there is a big scope in the diagnostics market, which is already growing by about 20 per cent
per annum. We want to set a precedent by bringing into the country the most advanced, qualitative and innovative
products in the field of diagnostics.”
MLL tied up with the following foreign companies to launch diagnostics related products:
• Technology and marketing joint venture with DiaMed AG – This would yield MLL exclusive marketing
rights in India for internationally acclaimed DiaMed OptiMAL® rapid malaria test kits and ID Micro Typing
Systems for blood group serology.
• Signed marketing agreement with PARI GMBH of Germany – MLL would market PARI’s Inhalation
systems. PARI Inhalation Systems were number one in clinical trials. Morepen was one of the first few
organized sector companies to market such advanced technology inhalation systems in the country. According
to Manoj Pahwa, General Manager- Sales, “with launch of such advanced inhalation systems, the market will
expand manifold and would allow doctors to choose the ideal individual therapeutic solution from a series of
inhalation therapy systems in order to enable each patient to inhale the required medication effectively”
• Manufacturing JV with Ameritek – Morepen agreed to manufacture Ameritek’s range of products for India
and all the SAARC countries except Pakistan. A range of rapid diagnostic tests for clinical diagnosis of
various diseases were planned to be introduced under the brand name of ‘dBEST-Morepen’ in these markets.
In the initial few months Morepen would import and test market these products. The dBEST-MOREPEN
products were targeted at two different segments, clinical laboratory tests focused on private labs, nursing
homes & hospitals and home tests sold through retail counters and doctors.
According to Mr Sushil Suri, CMD, Morepen Labs, “Morepen is consolidating its position in the field of
Diagnostics and is seriously exploring the challenging area in the category of Home Diagnostics.”
8. ANDA – The Promising Generics Markets
Drugs with a market of over USD 55 billion were due to come out of patent in the next few years. Generics, with $42bn
in annual sales, constituted more than 10% of the global pharma market in 2002. The USA and Europe, constituting
53% of global generics, were the key markets. The generics market was likely to reach $60bn in 2005, growing at an
annualised 10-12% (compared with 15% over 1996-2001)3. Growth was expected to come from a large number of
patent expiries and successful patent challenges. The legislative focus on cost-containment also encouraged adoption
of generics, which often cost as little as 10-20% of the relevant innovator drugs. Despite the discounts, prices of generics
were seven times as high in the US as in India. The opportunity for the Indian pharma industry, which exported drugs
worth $2.5bn in 2002, was clear. Refer to exhibit 10 for an overview of the US sales of major Indian players. Some of
the strengths that would drive the Indian generic manufacturers were:
• Excellence in product development – Ability to reverse engineer and produce new drugs. It was expected that
by 2005, Indian companies would file about 60 ANDAs.
• Successful in developing non-infringing processes.
• Low-cost manufacturing.

• Good distribution systems.
In order to develop strategic affiliations for accelerated growth, particularly aimed at the US market, MLL formed
a joint venture ‘Morepen Max’ with DrugMax, Inc. DrugMax, Inc. was a leading pharmaceutical distribution company
in the USA with an extensive domestic sales network. Headquartered in Florida, Drugmax had offices in Ohio,
Pennsylvania, Louisiana etc. and was armed with over 20,000 SKUs from leading pharmaceutical manufacturers and
had the license to ship to over 50 states. The objective of the new entity, MorepenMax, was to file and obtain ANDA
approvals for launch and distribution of new products of Morepen in the US market. According to Sushil Suri,
“Morepen Labs is moving up the value-chain and this marketing tie-up will act as a bridge between Morepen products
and the US market place, further strengthening our bottomline.” MLL had recruited some individuals with experience
in the ANDA business from Dr. Reddy’s Laboratories Ltd. to help develop this business segment.
According to Sushil Suri, “the company would file all the ANDAs, which are at various stages of development at
present, by 2009”. Morepen’s ANDAs pipeline had loratadine, fexofenadine hydrochloride (anti-histaminic),
atrovastatin calcium, fluvastain sodium (anti-cholesterol), zafirlukast (anti-asthamatic), cisapride (gastro pro-kinetic),
sultamicillin tosylate (anti-bacterial), sultamicillin base (anti-bacterial) and sulbactam sodium (anti-bacterial).
Production facilities for the ANDA project were being put in place with a target of 2003 for the first USFDA ANDA
filing.
The Filing Process – New drugs are developed under patent protection. The patent protects the investment in the drug’s
development by giving the company the sole right to sell the drug while the patent is in effect. When patents or other
periods of exclusivity expire, other drug manufacturers can apply to the FDA to sell a copy of the original drug. Drug
companies must submit an Abbreviated New Drug Application (ANDA) for approval to market a copy (generic) drug.
The Drug Price Competition and Patent Term Restoration Act of 1984, more commonly known as the Hatch-Waxmann
Act, made ANDAs possible by creating a compromise in the drug industry. As a result, generic drug companies gained
greater access to the market for prescription drugs, and innovator companies gained restoration of patent life of their
products lost during the FDA’s approval process. Drug substitution laws further aided the generic market by allowing
pharmacists to substitute generic drugs for brand-name drugs unless the doctor were to specify “dispense as written”.
The ANDA process does not require the drug’s sponsor to repeat costly animal and clinical research on ingredients or
dosage forms already approved for safety and effectiveness. However, to gain FDA approval, a generic drug must:
• Contain the same active ingredients as the innovator drug (inactive ingredients may vary).
• Be identical in strength, dosage form, and route of administration.
• Have the same use indications.
3. Source: Cris Infac

• Be bioequivalent.
• Meet the same batch requirements for identity, strength, purity, and quality.
• Be manufactured under the same strict standards of FDA’s good manufacturing practice regulations that are
required for innovator products.
This bioequivalence study would cost anything from US$500,000 to US$ 2 Mn. For the various ways of filing
ANDA look at Exhibit 2 in the Appendix. One of the ways of filing ANDA was Paragraph IV application where the
generic manufacturer could challenge the patent claiming that patent was invalid or unenforceable or it wouldn’t be
infringed by the applicant. The law allowed the patent holder to sue the applicant within 45 days of application, in which
case it automatically got a 30 month stay.
A successful application would lead to a 180 day marketing exclusivity to the applicant. Drug prices of generics during
the exclusivity period would generally be around 60% to 70% of the original patented drug. After the expiry of the
patent and the exclusivity period the prices typically dropped to 15% to 20% of the peak price. There was also a chance
of the applicant losing the case after it had won the 180 day marketing exclusivity. In this case it would have to shell
out huge penalties.

9. Retail
As a continuation of the corporate desire to move closer to the consumer, Dr.Morepen implemented its initiative of
entering the organized retail industry. This was done with the acquisition of the ‘Life Spring’ chain of health and beauty
stores in New Delhi at a consideration of Rs.120 Mn from Total Care Pvt. Ltd.
Lifespring was the first health and beauty store chain launched in North India and had six stores in Delhi at South
Extension, Rajouri Garden, Basant Lok, Greater Kailash, Karol Bagh & I.P Extension. MLL had aggressive plans to
expand this business to 200 outlets spread across the country in the next 3 years. This was expected to significantly
enhance the level of operations (revenue of Rs150 million expected in the financial year ending 2003).
The organized retail was just 2% of the total retailing industry. It was expected to capture a market share of 10% of
the industry as per Fitch, a global ratings and information services provider. According to Fitch, the total private final
consumption expenditure of India stood at Rs 15,000 bn in 2001-02. Of this, close to 65% was spent on goods and
services bought off the shelf. Currently, the Indian retail industry was estimated to be close to Rs 9,000 bn and the
market estimated the size of the organised retail industry at close to Rs 175 bn accounting for close to 2% of the overall
retail industry4. The break up of the organized retail market is given in Exhibit 6.
Exhibit 6: Organized Retail Market
Durables
21%
Pharmacies
15%
Cloth & Textiles

15%
Food, Grocery & Jewellery & Watches

Tobacco Furnishings Beauty
Books, Music & 6%
30% 1% Foootwear 4%
4%
4%
4. Source: Fitch Rating Report

The industry was still in an investment phase and required heavy funding in real estate and a good supply chain
system. Fitch estimated that the industry as a whole would add close to one million sq. ft. every year. At an average
investment of Rs 2,400 per sq. ft., this would mean an investment of Rs 2.4bn per annum over the next few years. In
addition, basic infrastructure like parking, real estate, etc., would require over Rs1 bn investment per annum. Most of
the players were regional in nature and only if they grew as a national chain they would be able to reap the benefits of
supply chain synergies. The key success factors for this industry were:
• Access to good quality real estate in terms of location.
• Infrastructure in terms of systems for logistics management.
• Technology for information storage and retrieval to manage inventories.
• Quality of manpower at the top management level.
17. The Financials

In the last the three years MLL had raised resources through issue of shares as well as through borrowings. In the year

2000, MLL had privately placed equity shares of Rs 10 each (subsequently split into five shares of Rs 2 each) at a
premium of Rs 640 per share. MLL was reported to be in discussions with credit rating agencies though it did not lead
to a formal rating. Much of MLL’s borrowings were of short term nature – from banks, fixed deposits etc. Based on the
date of expiry of Schering’s patent on claritin (dosage form of loratadine) and expected revenues by then, Morepen had
committed repayments worth Rs 2,630 Mn (50% of Morepen’s revenues of Rs 5162.4 Mn in 2001-02) by September
2002. This included payments to banks, unsecured loans from investors and payments to creditors. In its scheme of
things, MLL had crafted what seemed to be a perfect plan, as Geneva Pharma would place bulk orders beginning April-
May 2002, the proceeds of which could be used to pay off the debt. The company had deferred its plan to go for an
international equity offering by way of a global depository receipt (GDR) listings in March 2003 even though the Board
had approved the same in 2002. The share price was Rs 60 then. Mr. Suri was expecting that the time when the
loratadine orders started coming in late 2002, the price would rise to Rs 80. The target amount to be raised was about
Rs. 3,000 Mn. Exhibit 7 shows the repayment schedule and the projected revenues. Exhibit 8 contains the financial
comparison with the industry leaders.
Share price movement and total traded quantity of Morepen Laboratories for the period April 2001 – March 2002
are depicted in Exhibit 95. Look at Exhibit 11 for MLL’s financials of the last three years.
Exhibit 7
Rs. Billions
5.17
6 5.16
4.74
5
4
2.63 Repayments
3
Revenues (P)
2
1
0
2002 2003
5. Source: Bseindia.com
Exhibit 8: Key ratio comparison with industry leaders
40%
35%
30% M or e pe n
25%
Ranbaxy
20%
15% Cipla
10% DRL
5%
0%
EBITDA EBIT M ar gins PAT to Sale s ROCE ROE
M ar gins
1.6
5
1.4
1.2 Morepen 4
M ore pe n
1
Ranbaxy 3 Ranbaxy
0.8
0.6 Cipla 2 Cipla
0.4 DRL DRL

1

0.2

0 0
As s e t Turnove r
Debt equity
Exhibit 9: Share price movement during FY 2002
140 25000
120
20000
100
80 15000
Turnover
60 10000 Morepen
40 Sensex
5000
20
0 0
Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar-
01 01 01 01 01 01 01 01 01 02 02 02
Exhibit 10: Generic sales of Indian companies in the US market – 2001-02
Company Sales ($ Mn) Comments

Ranbaxy 296 40% of sales from Cefuroxime Axetil
Dr. Reddy’s 70 60% of sales from Fluoxetine
Caraco (Sun’s affiliate) 22 40% of sales from Metformin
Cipla <5
Wockhardt 3 Supply agreement with Ranbaxy
Exhibit 11: Financial Statements
INCOME STATEMENT (Rs / Million)

1999-2000 2000-01 2001-02
Sales and other income 3,317 4,359 5,161
Accretion / (Decretion) to Stocks -24 -22 141
INCOME 3,293 4,337 5,303
EXPENDITURE
Materials 1,984 2,486 2,855
Personnel 68 99 152
Manufacturing and others 250 339 525
Total 2,303 2,925 3,533
OPERATING SURPLUS 989 1,411 1,769
Interest cost (net) 332 392 599
PROFIT BEFORE DEPRECIATION 656 1,019 1,169
Depreciation 147 225 303
PROFIT BEFORE TAX 509 794 866
Provision for Tax 62 70
Provision for Deferred Tax - - 256

PROFIT AFTER TAX 509 732 540

BALANCE SHEET Rs / Million
1999-2000 2000-01 2001-02
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Equity Shares (2/- per share) 181 181 181

Cumulative Preference Shares (100/- each) 389 376 308
Reserves and Surplus 3,572 4,161 3,813
4,142 4,718 4,302
LOAN FUNDS
Secured Loans 2,159 2,745 4,579
Unsecured Loans 1,177 2,113 1,441
3,336 4,857 6,020
DEFERRED TAX LIABILITIES (Net) - - 1,033
Total 7,478 9,576 11,355
APPLICATION OF FUNDS
FIXED ASSETS
Gross Block 3,875 5,538 7,273
Less : Depreciation 319 544 847
Net Block 3,556 4,994 6,425
Capital Work-in-progress 327 292 319
3,884 5,286 6,744
INVESTMENTS 1,521 1,208 756
CURRENT ASSETS, LOANS AND ADVANCES
Inventories 550 787 1,110
Sundry Debtors 761 1,015 1,429
Cash and Bank Balances 666 890 562
Loans and Advances 563 859 1,244
2,540 3,551 4,345
Less : CURRENT LIABILITIES & PROVISIONS
Current Liabilities 429 395 453
Provisions 73 92 141
501 487 595
NET CURRENT ASSETS 2,039 3,064 3,750
MISCELLANEOUS EXPENDITURE 34 18 105
Total 7,478 9,576 11,355
CASH FLOW STATEMENT Rs / Million

1999-2000 2000-01 2001-02
A. CASH FLOW FROM OPERATING ACTIVITIES :
Net Profit before Tax and extraordinary items 509 794 866
Adjustments for :
Depreciation 147 225 303
Amortization 15 15 15
Interest (Net) 332 392 599
Dividend Received (50) (30) (1)
Operating Profit before Working Capital changes 9,55 1,396 1,784
Adjustments for :
Trade and Other Receivables (416) (550) (799)
Inventories 89 (236) (322)
Trade Payables 129 316 58
Cash generated from operations 757 925 720
Interest (Net) (332) (392) (599)
Direct taxes paid (including dividend tax) (16) (22) (76)
Cash Flow before extraordinary items 408 510 44

Extraordinary items / Misc.Expenditure (.45) (102)

NET CASH FROM OPERATING ACTIVITIES 407 510 (57)
B. CASH FROM INVESTING ACTIVITIES
Purchase of Fixed Assets incl.Capital work in progress (1,183) (1,627) (1,761)
Purchase of Investments (1,492) (1,169) (203)
Sale of investments/others 9 1482 655
Dividend Received 50 30 1
NET CASH USED IN INVESTING ACTIVITIES (2,615) (1,283) (1,308)

C. CASH FROM FINANCING ACTIVITIES
Proceeds from issue of share capital (net) 75 (13) (67)
Shares Forfeited .017
Increase in Share Premium Account 1533 .007 .306
Proceeds from Long Term borrowings (net) 464 645 1,833
Proceeds from Short Term borrowings (net) 785 526 (671)
Dividends paid (93) (162) (56)
NET CASH FROM FINANCE ACTIVITIES 2,765 996 1,037
Net Increase in cash and cash equivalents 556 223 (328)
Cash and Cash equivalents on the year beginning 109 666 890
Cash and Cash equivalents on year end 666 890 561
18. Current Developments
In recent times, MLL had been approached by a large European generic manufacturer for exploring a possible strategic
alliance. Some global companies were also in discussions to tie up for a sales and distribution facility to enter the Indian
market or for contract manufacturing. Preliminary talks had been conducted for stake sale in any of the existing
businesses and simultaneously, MLL had held exploratory talks with investment banks with ‘sell side’ mandates of
brands (like ‘Burnol’). Biotech had been another area of interest for MLL Sushil Suri had his plate full in the business
plan review but vital recommendations and decisions had to be taken in the pursuit of the desire to transform into a
healthcare company.
Abbreviations used (Glossary):
3H: Help, Healing and Happiness

ANDA: Abbreviated New Drug Application
API: Active Pharmaceutical Ingredient
CFA: Clearing & Forwarding Agents
cGMP: current Good Manufacturing Practices
DMF: Drug Master Files
FMHG: Fast Moving Health Goods
IND: Investigational New Drug
MLL: Morepen Laboratories Limited
NDA: New Drug Applications
OTC: Over the Counter
SP: Schering Plough
USFDA: US Food and Drug Administration
References:
Annual Reports of the industry leaders - Ranbaxy, Cipla and Dr. Reddy's
Business World
CMIE- Prowess
Company Annual Report (2002)
Company Website

Cris Infac industry reports

Fitch Report on Retail Industry
National Stock Exchange, Bombay Stock Exchange
Press releases
Appendix
Exhibit 1
The Pharmaceutical Industry 6
In 2002, the world pharmaceutical market was estimated at US$ 364 billion and was expected to grow to US$ 550
billion by 2005. On an inflation adjusted compound annual growth rate over the last two decades, this market had
significantly outstripped global economic growth. The US was the largest single homogenous market, generating
around US$ 182 billion in annual pharmaceutical sales.
Despite the huge, and growing, size of the global market, the industry continued to enjoy consistently high return
on invested capital – even after capitalising the huge R&D investments. Several factors had contributed to these high
returns, but the chief among them were low levels of competition. This showed up at several levels. First, there were
huge entry barriers, and over the last few years there had been a contraction in the number of international players owing
to consolidation and concerted mergers and acquisitions. Second, in sharp contrast to other industries, drug companies
narrowly competed with each other. There were more complementarities in product portfolios rather than direct
substitutes. Third, patents created significant periods of product protection from generic products. Thus, in a particular

therapeutic segment, the typical global scenario was one where only three or four products competed with each other

in mass consumer markets with powerful underlying growth. And, while generics constituted a very large and rapidly
growing market throughout the world, it was occupied by distinctly different pharmaceutical players. There were hardly
any international companies that were strong in both new drug discovery and in generics. In value terms, generics
constituted a small proportion of global pharmaceutical sales however this segment was increasingly significant in
terms of volumes as also growth.
Despite having a very large number of players, India accounted for only 1.3 per cent of the global pharmaceutical
market. Sale of the domestic industry was expected to exceed Rs. 260 billion in 2001-02. Bulk drugs (Active
Pharmaceutical Ingredients or APIs) business accounted for 21 per cent of domestic sales, while formulations accounted
for the remainder. Over 20,000 registered pharmaceutical manufacturers existed in the country. The leading 250
pharmaceutical companies controlled 70 per cent of the market. The market share of multinational corporations (Indian
subsidiaries) had fallen from 75 per cent in 1971 to around 35 per cent in 2002; while the share of Indian companies
(controlled by Indian groups) had increased from 20 per cent to nearly 65 per cent. The MNCs typically addressed the
domestic market and were focused more on the formulations segment whereas the Indian companies operated in a wide
spectrum of the pharmaceutical industry. The leaders like Ranbaxy or Dr Reddy’s had strengths in bulk drugs,
formulations and OTC products; in manufacturing, marketing and in R&D; domestic market as well as export markets.
More than 60 per cent of India’s APIs production was exported. The balance was sold locally to other formulators. Over
85 per cent of the formulations produced in the country were sold in the domestic market, which made India largely self
sufficient in formulations. While India was a small player in the global context, two factors stood out. First, seen in the
perspective of the world wide generics segment, India was a serious competitor. Second, with strong growth in the
domestic markets and growing access to overseas markets (the developing world with low patent protection as also the
developed markets where huge opportunities were unfolding in generics), strong Indian companies could anticipate
high growth prospects.
Major Players
Dr Reddy’s Laboratories Ltd (Dr Reddy’s):
Dr. Reddy’s corporate vision was to move up the value chain to become a global, innovation led company. On August
2, 2001, with fluoxetine capsules (Eli Lilly’s Prozac) 40 mg, Dr. Reddy’s became the first Indian company to launch a
generic drug with 180-day marketing exclusivity in the US. Dr Reddy’s was on its way towards building a direct
marketing presence for its generics business in the US. Another factor that contributed to the rise of Dr. Reddy’s
international presence was the 17 per cent growth of APIs revenue overseas. This growth was led by the US (21 per
cent) and Europe (54 per cent).
6. Source: Dr. Reddy’s and Ranbaxy’s Annual Report (2002) & UBS research report
During the year, the Company filed 8 drug master files (DMFs) in the US, taking the total to 26. As far as
international revenue of APIs was concerned, Dr. Reddy’s supplied to the world’s largest generic players. With the
anticipated growth in the global generics business after 2005 – when a large number of formulations were to go off-
patent – the Company’s APIs business would see significant growth
In another overseas market-related development, in the fourth quarter of 2001-02, Dr. Reddy’s signed an agreement
to acquire the UK-based BMS Laboratories and its subsidiary, Meridian Healthcare, for £9.05 million. Successfully
completed on April 11, 2002, the acquisition would serve as a vehicle for entering the European markets and, thus,
jumpstart its generics business.
Dr. Reddy’s total revenue increased to Rs15, 578 million in the year 2002; a growth of 58%. For the first time
international revenues had outstripped the Indian revenues. The international revenue grew by 113% to Rs 9,537
million. The reasons for this stupendous growth have been enumerated above. In India, Dr. Reddy’s total revenue grew
by 13 per cent – from Rs. 5,362 million in 2000-01 to Rs. 6,041 million in 2001-02. This was driven by a 15 per cent
growth in the revenue of APIs (from Rs. 1,433 million to Rs. 1,641 million), and 11 per cent in that of branded
formulations (from Rs. 3,642 million to Rs. 4,042 million).
Dr. Reddy’s (Revenue Break up 2001)

Ranbaxy Laboratories Ltd (Ranbaxy):
Globally, Ranbaxy was the twelfth largest generics company in 2001, with a share of 1%. It was ranked eight in the UK,
fifth in Brazil, and third in India.
While most Indian drug makers were still grappling with their generics strategy, Ranbaxy was fast moving to the
specialty/branded space. It was developing 15 products, of which about eight or nine were new delivery-based products.
For instance, it had developed ODs (once-a-day dosage for ease of administration) billion-dollar antibiotics like
Ciprofloxacin (licensed to Bayer). These products would first be launched in India and in other non-regulated markets,
followed by the US and then Europe. The company was scouting for co-marketing tie-ups for most of these products.
Meanwhile, on the R&D front, the company was also working on discovering analogue compounds to secure long-
term growth. Its therapeutic focus in this area had so far been antibiotics and urology, and had now been extended to
metabolic disorders and oncology. It had outlicensed its first analogue compound to Schwarz Pharma, which was
expected to pay Ranbaxy up to $42mn in milestones. Ranbaxy had already received upfront fees of $6.3mn, and
royalties would follow once the drug has been commercially launched.
The fiscal year 2002 for Ranbaxy had shown a significant improvement. Sales increased by 38% to Rs. 37,140 bn
($ 764 Mn). Share in the revenues of overseas market increased to 72% from 62% in the previous year. This was mainly
attributable to developed countries led by the US that recorded sales of $296 mn- a growth of 162%.
In the year 2002 Ranbaxy also made an entry into the consumer health care arena, to participate in the trends of self-
medication and consumer preference for ‘Naturals’. A new business unit was set up with its own FMCG sales and
marketing structure to cater to this industry.
Ranbaxy (Revenue Break up 2001)
Exhibit 2

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Journal of International Business Education 3.

© 2007 NeilsonJournals Publishing Ref. No.: JIBE3-0CS3

Morepen Laboratories Limited: Transforming to a

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Distributed by The Case Centre North America Rest of the world

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Mr. Sushil Suri Chairman & Managing Director

Mrs. Kanta Suri Whole Time Director

Exhibit 2: Shareholding Pattern

Promoters & Relatives Promoter's

1. Source: Company Annual Report

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Exhibit 4: Comparison of Investments

Company Plant Locations Investments As of December 2002

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4.3. Other Drugs

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4.4. Domestic Market

5. Branded Formulations – Medicus

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Formulations: Therapeutic group wise market (2001) Share Growth

6. Fast Moving Health Goods (FMHG) – Dr Morepen

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- Broaden the product portfolio of Dr. Morepen

- Consolidate its position in the western and northern markets.

- A broader and stronger product portfolio.

2. Source: IMS India & Cris Infac

- Potential to grow substantial volumes by a focused marketing approach in a segment developed by

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7. Clinical and Home Diagnostics – Medipath

7.1. Clinical Diagnostics

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8. ANDA – The Promising Generics Markets

• Successful in developing non-infringing processes.

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• Be identical in strength, dosage form, and route of administration.

• Have the same use indications.

3. Source: Cris Infac

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Exhibit 6: Organized Retail Market

Cloth & Textiles

Food, Grocery & Jewellery & Watches

4. Source: Fitch Rating Report

• Access to good quality real estate in terms of location.

• Infrastructure in terms of systems for logistics management.

• Technology for information storage and retrieval to manage inventories.

17. The Financials

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Exhibit 8: Key ratio comparison with industry leaders

0.4 DRL DRL

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Exhibit 9: Share price movement during FY 2002

Exhibit 10: Generic sales of Indian companies in the US market – 2001-02

Company Sales ($ Mn) Comments