With Malvinder out, inevitable has come to pass at Ranbaxy

In 1937, Ranjit Singh and Gurbax Singh started a drug distribution company for Japanese drug maker Shionogi. Through years of continuous evolution and determination to grow, that small distribution company has come to be known as Ranbaxy of today.

Bhai Mohan Singh, the person who led Ranbaxy into becoming a full-fledged manufacturing company, brought in his illustrious son Dr Parvinder Singh in the late sixties to take the Ranbaxy flag forward.
Known as a strong pillar for the emerging Indian healthcare industry, Dr Singh passionately drove Ranbaxy into a global force, but succumbed to cancer before fulfilling his dream of transforming the company into a research-based global drug company. By the time of Dr Singh’s demise in 1999, his two sons —- Malvinder and Shivinder —- were getting ready for the next stage.

Malvinder Singh, then a young man, took control of the company, having gone through years of training in several departments of the large-sized drug company. Malvinder had always been a man in a hurry. Being young, he did infuse a lot of energy into the company through acquisitions, but lacked his father’s flair to understand pharmaceutical sciences and relate to the subject naturally. Dr Parvinder Singh, by virtue of having a doctorate from Michigan University and a pharmacy degree from Washington, was a legend with a global vision.

In June last year, when Malvinder Singh agreed to sell his entire 34% stake in Ranbaxy to Daiichi Sankyo, the signals of what was coming became very clear.

While every industry old-timer went through a state of shock, Malvinder Singh was impressing hard that he was taking his father’s vision forward of making Ranbaxy a global company. From a generic company, Ranbaxy was to evolve into a discovery-based drug company through Daiichi’s edge in research. Malvinder Singh was to stay and drive the company for the next five years.

Singh may have tried all the persuasion tricks about his being at Ranbaxy, but the world knew that the legacy of Bhai Mohan Singh and Dr Parvinder Singh had been sold and it was a matter of time before the Singh family would be completely out of the company their forefathers built laboriously, brick by brick.

Now, with Daiichi Sankyo firmly in the saddle, Ranbaxy will see a transformation. There is no taking away from the Japanese management’s abilities will get the maximum out of Ranbaxy, but there are real thorny issues like the US Food and Drug Administration (FDA) allegations of falsification of data from the Paonta Sahib plant, which needs to be resolved. Restoring confidence of the FDA will be a big goal for Daiichi in the short term.
In terms of domestic market, Daiichi may continue with the same strategy as it has placed Ranbaxy among the top three players, but overseas markets may be looked at differently by the new management. Daiichi has been able to develop a portfolio of strong brands in the global markets and to tap the unconventional market through Ranbaxy’s  distribution network will be a high priority.

Daiichi is in the middle of launching its potential blockbuster Prasugrel —- an anti-coagulant —- in several key markets including the US and Europe, and it will be interesting to see how Ranbaxy’s network helps Daiichi get to the numbers quickly. It is becoming increasingly challenging for the Japanese company to justify the $4.6 billion that it spent to buy Ranbaxy. Never in its history has Daiichi taken a hit of $3.45 billion and that has resulted in a major dip in the company’s share prices in Japan.

Atul Sobti, a man known to have strong management insight, will be seen as the trouble shooter for Ranbaxy. While most important markets for Ranbaxy, excepting India, are performing below expectations, Daiichi will want new approaches to be taken on rationalising manufacturing and making that department even more efficient.

The Ranbaxy share closed Rs 45.80 higher on Monday at Rs 266.70, hinting the markets have basically given a thumbs-up to Malvinder’s exit and think more salutary gains are ahead.

Which brings us to the other question: Will Daiichi increase stake in Jupiter Biosciences, Zenotech and Orchid Pharmaceuticals or make the local entity just a pure contract manufacturing facilitator? Time will tell.

Pillman is an executive closely linked to the global pharma industry