RANBAXY LABORATORIES LIMITED:

CHANGING ASPIRATIONS
The dark side of leadership

Group 2, Section B
Aman, Maitri, Ritik, Siddharth, Soubhagya, Varnika

LEADERSHIP AND CHANGE MANAGEMENT

About Ranbaxy Laboratories Limited

Started in early 1950s

One of India's largest pharmaceutical company
Major chunk of revenues from exports
Fully Domestic Company till 2008
Daiichi Sankyo acquired 34.8% stake
Daiichi sold its stake after 6 years to Sun Pharma
Currently running under Sun Pharma
Under constant radar of US FDA for non-compliant practises since 2008
 RANBAXY
A brief history
India’s largest foreign
exchange earner in the
field of drugs and Raised USD 100
Ownership Changed pharmaceuticals million through the
to Bhai Mohan Singh national award from the issue of Global
and Family Ministry for R&D Depository Receipts

1930 1950 1961 1990 1993 1994 1995

Started Manufacturing Market Leader in India Acquired Ohms

Promoted by Ranjit and Drugs after Government Dr. Parvinder Singh took Laboratories Inc (Ohms)
Gurbax Singh banned Import of Drugs over as chairman Marketing joint venture with
Started business as trading in 1959
Eli Lilly
and distributing
pharmaceutical
 RANBAXY
A brief history

acquired the alliance with GSK Raised USD 100

company Basics – Dr. Brian Tempest million through the
the generics arm took the charge of issue of Global
of Bayer the company Depository Receipts

1999 2000 2002 2004 2006 2009 2014

Vision GARUDA aimed at Malvinder Singh became the Acquired Ohms

Brar took over the position making Ranbaxy a US$5 company’s CEO & MD Laboratories Inc (Ohms)
after the death of Dr billion company by 2012 The target of USD 2 Billion Marketing joint venture
Parvinder Singh
by 2007 with Eli Lilly
Started business as trading
three overseas acquisitions:
and distributing
Ethimed NV, GSK’s Allen SpA
pharmaceutical
and Terapia
 CHANGES IN LEADERSHIP

1950 - 1993
Bhai Mohan Singh
1993- 1999
Parvinder Singh
1999 - 2004
D. S. Brar
July 2004 - Jan 2006
Dr. Brian Tempest
Jan 2006 - May 2009
Malvinder Singh
May 2009 - April 2014
Dr. Tsutomu Une
April 2014 onwards
Dilip Shanghvi
BHAI MOHAN SINGH (1950- 1993)
Business Strategies:
Started Manufacturing Drugs-
After the govt. bans on the import of pharmaceuticals in 1961 Ranbaxy started
manufacturing drugs

Export Drive to Neighbouring and similar market countries

Nepal, Sri Lanka, South East Asia, and the look-alike markets of East and West Africa.

India’s largest foreign exchange earner in the field of drugs and

pharmaceuticals
.JV in Nigeria, Malaysia and Thailand. The former Soviet Union, China and a
subsidiary in Hong Kong
DR PARVINDER SINGH (1993 - 1999)
Business Strategies:

A research-driven Selected six core Recognizing the The company then Ranbaxy
international markets based need for finance to bought Ohms entered the UK
pharmaceutical on achieve its new Laboratories Inc by acquiring a
firm" and set a regulatory/mark goals, the business (Ohms), a generic small Irish firm
revenue target of eting complexity, raised USD 100 formulations with production
$1 billion by cost/returns, million in 1994 company based in and marketing
2004. through the sale of New Jersey. also licences for the
Global Depository formed a marketing UK and Ireland.
Receipts. alliance with Eli Lilly.

Negatives in Strategic Planning

He started involving as many as 40 senior managers
in critical issues and rarely sets the legislation which
was contradictory to his own behaviour.
Multiple market pursuits and huge investments in R&D
and ground presence resulted in a severe fall in the
company's return on capital employed. It decreased
from 40% in 1994 to 17.2% in 1998, attracting the
attention of financial analysts and regulators.
D. S BRAR (1999 - 2004)
Business Strategies:

Sustained To realize objective Made timely entries in Crystallized

momentum in US of 1Bn he realized international markets aspiration of
market by company needed like Brazil. GARUDA aiming to
launching a number not only to develop In domestic market make Ranbaxy a
of niche products products but also launched latest US$5Bn company
defend its position if products, gave away by the year 2012
challenged. company's tag of late
entrant

Positives in Strategic Planning

Timely entry in markets, for instance company became beneficiary of the "genericization" of markets
by Brazilian government
Adoption of judicious blend of strategies, for instance perfect mix of low-risk NDDS and high risk NDDR
projects
MALVINDER SINGH (2006 - 2009)
Business Strategies:
Emphasis on Inorganic growth route (M&A)-
Nine acquisitions of value $450Mn in 2006 itself

Shift in focus, Concentrated not on doing everything inhouse

Increased out of court settlements-

To make better use of resources, increase speed, more certainty

Increased alliances with drug majors-

For instance- Deal settlement with Pfizer (Lipitor) generated $500mn in profits alone

Entry into high growth areas in domestic market-

Entered high growth fields such as oncology, biologics
 Positives of Malvinder's Leadership

Company reached new heights under his leadership

1. Retained rank 1 amongst Indian Pharma companies in late 2007
2. ROCE increased 3 times, RONW increased 2.5 times
3. Increased contribution from emerging markets

Unfazed in face of adversity

Continued pace of growth & collaboration even after FDA searches, one with Mersk

Dynamic leadership
Changed old norms to increase speed, make best use of resources by increased off-
court settlement and collaborated with big pharma's to reach company objectives
 Negatives of Malvinder's Leadership

Lost faith of FDA in senior management

In Feb 2009, FDA issued regulatory action invoking AIP halting all scientific review of
data from co's Poanta facility alleging fraudulent practices and falsifying test reports.
FDA commented that they don't trust the senior management anymore under his
leadership

Inadequate due diligence

Considering the size of deal between Daiichi and Ranbaxy due diligence was inadequate
and warranties were not carefully drafted

Lost contracts, market share, share price

Ranbaxy suffered a marked to market loss of INR 7.7Bn for qtr ended Mar 2009, shares
fell by more than two-third since deal. Company even lost first launch opportunity for a
drug due to delayed FDA approval
 Negatives of Malvinder's Leadership

Unfair practices in company under his leadership

FDA concerns were raised about adherence of quality standards at Poanta facility
FDA concerns about practices in Dewas facility
FDA filed suits for false claims, issued warning letters along with import alert

Changed Domestic Status

Malvinder sold his family stake of 34.8% in June 2008 as a result of which company lost
its domestic status and people started viewing it as Japanese subsidiary which affected
the company perception
DR TSUTOMU UNE (MAY 2009 - APRIL 2014)

Import alerts for 30 medications were issued soon after the Daiichi + Ranbaxy agreement.
The FDA barred Ranbaxy from supplying drugs made with APIs
Joint task force involving Daiichi, Ranbaxy, and attorney groups to resolve FDA problems
Share Prices were dropped by two third post the merger.

Negatives in Strategic Planning

Direction less leadership and inability to leverage the asset acquired

Inadequate due diligence in respect of deal between Daiichi and Ranbaxy
Inability to ensure correct practices within the company, hence continuous notices of
regulatory body
THANK YOU!