Last week, Ranbaxy, India’s largest drug maker by sales, recalled batches of the generic version of cholesterol-lowering drug Lipitor from the US market, after it suspected the presence of foreign particles in some batches. The company, which is still trying to end its troubled phase in the world’s biggest drug market, is investigating the matter. Despite challenges, it says it is determined to set things right and move ahead with an agenda for growth. In an interview with Sushmi Dey, Ranbaxy CEO & Managing Director Arun Sawhney speaks about the changes in the past four years and how the company plans to address the US concerns. Excerpts:
What has changed at Ranbaxy since it was acquired by Japan’s Daiichi Sankyo? The big shift has been in the company’s culture. It’s not that something was not right earlier or what we are doing now is absolutely the right way. It’s about the difference in the way we conduct ourselves. It is not unknown or unreal to expect there would be some difference at a company when it is run by professionals from when it was run by a promoter or a family. Those positive differences have begun to show at Ranbaxy.
Are you saying there was lack of professionalism at Ranbaxy before Daiichi Sankyo came on board? Not at all. When it’s a company of Ranbaxy’s size, it does need professionals even when it is a promoter-driven or a family-driven one. However, in spite of professionals, the work culture could be different.
The promoters invested a lot of money in acquiring assets abroad. Has there been a shift from that strategy too? Yes, in certain respects. We will not shy away from more acquisitions in the future, but we will be very sensible in those. We do not want acquisitions to expand our global footprint. Our acquisitions would be either business- or strategy-accretive, or those that bring new technology. Unlike in the past, we would not be too passionate about acquisitions to increase top lines or be present in more geographies. How confident are you about resolving issues in the US, given that you have repeatedly stumbled on that front? I am very confident we will meet all the obligations in the consent decree, with timeliness. And, I think, the business agenda should be occupying our minds now. The consent decree will run parallel with our business agenda. But your confidence, unfortunately, does not get reflected in practice. The recent recall of Lipitor batches seems to have reversed the positive and forward-looking sentiment you built over the past year. It is an unfortunate incident. No company would like to have a recall. It has happened, we will deal with it with positive energy. Do you suspect sabotage? Had I known in advance, obviously, it would not have happened. The investigations are on and we will be able to say further only after it’s completed. Will the investigation also look into the sabotage possibility? It will look at every aspect.
I don’t think we should go down that path. If you want to be a respectable company, the first thing you need to see is that everything you have done is alright. Let that be clarified in the investigation. What about the historical issues in the US? Have you ever conducted an investigation into those issues? For historical issues, I would not blame anyone outside Ranbaxy. We have to own up. In the consent decree, we actually owned up and said we would set the system right. It’s a setback for Ranbaxy. How do you plan to deal with it? We should be strong enough to deal with the situation. Of course, there would be setback for sales, and results, but we would make a comeback over a period of time. I would say, we have reset the clock. There was a trouble period we went through. What was 2007 is 2012, what we then wanted to be in 2012 will be 2017. Apart from setback in terms of sales and investor sentiment, has the recent recall also impacted the company’s ongoing consent decree? No. Even if there is no consent decree, a recall would have a normal process to go through, we are going through that process. So far, Ranbaxy’s strategy in the US was mostly focused on Para IV fillings which helped you get 180-days of exclusive sale. Would it continue to be the same? Para IV opportunities themselves would be fewer but that is where we had already decided a few years ago to make the shift and also build the branded franchisee business in the US. We would be more driven in the future by innovation, innovation would offer you exclusivity, Para IV could be one way of securing exclusivity. What are your plans for India? India would remain the most important market, after the US. It’s a home turf. We have to move to the next wave of initiatives and decisions to improve our business in India. We were not growing as we were planning because some things were not working out. However, for the last one and a half years, you will see a improvement every six months over the last six months. Do you think after the new pharma policy Indian pharma industry would evolve and valuations would change? I think this would drive innovation in India. Given the circumstances, good part of the policy is it removed uncertainty. Obviously policy makers should be conscious of good health of the industry. Going forward what is your overseas strategy? There are certain key markets that we have identified where Ranbaxy will intensify its presence and where we will make investments. Investments could be in our own facilities, it could be through acquisitions, new technologies, in new business areas that we want to be present in.
Talking specifically of regulated markets, the most regulated market today is the US. We very clearly said that in USA we would be continuing with our generic strategy we would additionally build a branded franchisee in derma. What is Ranbaxy’s business strategy for the next decade? We would definitely drive the business more on innovations than on vanilla generics. We would get into areas that we are not present in today notably biosimilars and vaccines. We have made some investments in vaccines and biotech. What is the role of the parent, Daiichi Sankyo? Is it of a big brother or a big boss? It supports Ranbaxy in its agenda. In certain respects it is more knowledgeable, in certain respects we are more knowledgeable. In certain respects they have a certain reach, Ranbaxy is also a very evolved global company so we also bring a lot of value and benefit to the parent organisation.