Business Strategy Assignment Case Study on Dr.

Reddys Laboratories
.

Background note

Dr. Reddy's Laboratories Ltd. Founded in 1984 by Dr. K. Anji Reddy, has become India's second biggest pharmaceutical company. Dr. Anji Reddy had worked in the publicly-owned Indian Drugs and Pharmaceuticals Limited, Hyderabad. Reddy's manufactures and markets a wide range of pharmaceuticals in India and overseas. The company has over 190 medications, 60 active pharmaceutical ingredients for drug manufacture, diagnostic kits, critical care, and biotechnology products. Dr. Reddy's began as a supplier to Indian drug manufacturers, but it soon started exporting to other less-regulated markets that had the advantage of not having to spend time and money on a manufacturing plant that that would gain approval from a drug licensing body such as the U.S. Food and Drug Administration (FDA). By the early 1990s, the expanded scale and profitability from these unregulated markets enabled the company to begin focusing on getting approval from drug regulators for their formulations and bulk drug manufacturing plants in more-developed economies. This allowed their movement into regulated markets such as the US and Europe. By 2007, Dr. Reddy's had six FDA-plants active pharmaceutical ingredients in India and seven FDAinspected and ISO 9001 (quality) and ISO 14001 (environmental management) certified plants making patient-ready medications five of them in India and two in the UK. In 2010, the family-controlled Dr Reddy's denied that it was in talks to sell its generics business in India to US pharmaceutical giant Pfizer, which had been suing the company for alleged patent infringement after Dr Reddy's announced that it intended to produce a generic version of Atorvastatin, marketed by Pfizer as Lipitor, an anti-cholesterol medication. Reddy's was already linked to UK pharmaceuticals multinational Glaxo Smithkline.

Introduction
Established in 1984, Dr. Reddy's Laboratories Ltd. (NYSE: RDY) is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products Dr. Reddys offers a portfolio of products and services including Active Pharmaceutical Ingredients (APIs), Custom Pharmaceutical Services (CPS), generics, biosimilars, differentiated formulations and News Chemical Entities (NCEs).

Purpose
Committed to providing Affordable and Innovative medicines for healthier lives.

Providing Affordable Medicines

Dr. Reddys Laboratories global generics business helps reduce drug costs for individuals and governments by bringing generic drugs to market as early as possible, and making them available to as many patients as possible. Company market both generic small-molecule drugs and generic biopharmaceuticals. In markets with guidelines for approval, Biologics business offers more affordable and equally effective generic biopharmaceuticals or biosimilars. Company supply pharmaceutical ingredients to other generic companies through the API arm of its PSAI business, which contributes to its goal of providing affordable medicine. The company will continue to promote affordability in significant ways and work to expand its product offering of generics, focusing on increasing access to products with significant barriers to entry. We will continue to look for new opportunities to take generics to more patients, in collaboration with other companies.

Developing Innovative Medicines

Despite the great advances of medical science, there are still many unmet medical needs. The companys proprietary products businesses address some of these unmet medical needs, by developing and bringing to market new drugs. Through innovation in science and technology, combined with a deep understanding of underlying disease pathways, Dr. Reddys Laboratories develop and commercialize new formulations of approved products. It also develops new chemical entities with improved and well-characterized safety and efficacy profiles. It focuses on its research on the therapeutic areas of pain, anti-bacterial and metabolic disorders. Its Custom Pharmaceutical Services arm of Its PSAI business helps innovator companies get their proprietary medicines to patients faster, by providing a range of technology platforms and services.

Vision.
To become a discovery led global pharmaceutical company

Board of Directors of Dr. Reddys Laboratories.

1- Dr. K. Anji Reddy. (Chairman) 2- Mr. G.V. Prasad (Vice- Chairman and CEO). 3- Mr. Satish Reddy (Managing director and COO). 4- Mr. Anupam Puri. 5- Dr. Bruce Carter. 6- Ms. Kalpana Morparia. 7- Dr. Omkar Goswami. 8- Mr. Ravi Bhoothalingam. 9- Dr. Ashok Ganguly. 10- Mr. Sridar Iyengar

Board Committees
1- Audit committee. 2- Nomination, Governance and compensation committee. 3- Risk Management committee. 4- Science, technology and operations committee. 5- Shareholders and grievance committee. 6- Investment committee. 7- Management committee.

Marketing in Dr. Reddys LaboratoriesMarketing in Pharmaceutical industry is totally different from other industries like FMCG. Industrial goods etc. because of following reasons : The pharmaceutical product does not reach directly as the patients consume only those brands which are being prescribed by the doctor so as we know companies cant sell directly to patients i.e the end users of the products is away from companies. So there cant be concept of direct seeking in the pharma market. So it is doctor who is the customer for companies. Pharma marketing is also different as the product is technical in nature as compared to any consumer product. The product has to undergo various clinical trails, medical test, before it is introduced in the market.

Strategies are followed by pharmaceutical companies: Personal Selling Symposium Sample Gifts Promotional Literature Conferences Direct Mailing

Dr. Reddys follow the all types of methods mentioned above.

New Marketing initiatives taken to tackle competition

Dr Reddy's has decided to focus on five markets: the US, India, Germany, Russia and the United Kingdom For smaller markets, it has tied up with GlaxoSmithKline which has a distribution network in place. (This perhaps could be the reason why there have been rumors of GSK buying into Dr Reddy's - a charge Prasad denies.) Drug discovery research (now called proprietary products) has been brought together with research on existing molecules and bio-similar, so that all eggs are not in one basket. The Indian market, to be sure, is not easy. It is complex and tough. There are over 20,000 registered pharmaceutical companies in the country; each molecule has at least 50 brands in the market. As a result, the market is extremely fragmented. The market leader, Cipla, has a share of just 5.4 per cent. Dr Reddy's is 12th with a 2.2 per cent share of the pie. Most of companys products were in special therapies like oncology and dermatology, while its real strength was in mass market products prescribed by general practitioners and consultant physicians Dr Reddy's supplies active pharmaceutical ingredients across therapies to the world's top companies, and also sells a variety of generics in several markets. So, it was small work to develop a robust pipeline of products for India. So far in the current financial year, Dr Reddy's has launched 65 brands - ten of these have been in-licensed from abroad. While market leader Cipla covers 75 per cent of the molecules (drugs and medicine) sold in India and newcomer Mankind Pharma covers 60 per cent, Dr Reddy's count is only 40 per cent. While 70 per cent of the market is acute disorders which require shorter medication, 30 per cent is chronic disorders where drugs are prescribed for a longer period. Smart companies therefore try to sell more in the chronic disorders market. Sun Pharma, for instance, sells 70 per cent in that space. That perhaps is the reason why it is India's most valuable pharmaceutical company. Company is planning to alter the ratio from 70:30 in favor of acute disorders to 50:50.

Apart from products, the other leg of the pharmaceutical business in India is the access to doctors who write the prescriptions. Here, medical representatives play a crucial role. Dr Reddy's has ramped up its field force to 2,500; though it is larger than Ranbaxy (2,000), it is way short of rivals like Mankind Pharma (5,000). But, productivity per medical representative at Rs 400,000 per month is better than the industry average of 300,000. There are about 6000,000 doctors in the urban markets; men and women are in touch with about a third of them. In other words, there is still a long way to go. Dr Reddy's can thus be expected to expand its field force further in the days to come. Dr Reddy's knows that the urban market is tough to crack - that's where all companies have focused so far. So, it has readied an aggressive push into rural markets. About a quarter of annual pharmaceutical sales worth Rs 35,000 crore (Rs 350 billion) in the country happens in villages. But the market is scattered thin. There are not more than 200,000 rural doctors, and not more than a fifth of them hold an MBBS degree. But Dr Reddy's sees an opportunity here. "This market is highly under-penetrated. The incomes are going up. The government is spending a lot of money in the National Rural Health Mission," says a companys correspondent It has put together a new brand portfolio for such markets (Redikate, Redihealth and Redihope, to name a few) based on the insight that rural prescriptions are often different from urban prescriptions. It has engaged 600 medical representatives from two external agencies (Ma Foi is learnt to be one) especially for the rural markets. The challenge here is to reach the customers. To address that problem, Dr Reddy's is trying three models: The first plan is to use local entrepreneurs who can diagnose ailments like hypertension and refer patients to doctors. They could be paid for every referral. The model, like Hindustan Unilever's Shakti, is self-sustaining and scalable.

The second plan is to link people through health camps. In fact, Dr Reddy's has held anaemia camps in the last three months for 50,000 villagers, of which 40 per cent were found anaemic. The third plan is to use the infrastructure of agencies and programmes which are already there in villages, like the World Health Foundation and ITC's e-choupal. The models will be rolled out in Andhra Pradesh, Uttar Pradesh and Maharashtra, which together account for around a quarter of the rural market. The rural market is still small for Dr Reddy's -- this year it will contribute around Rs 75 crore (Rs 750 million) to revenue. But the number could rise in the future. It will be a homecoming of sorts for the prodigal. The problem is, every pharmaceutical company, Indian as well as multinational, is ready to join the rural bandwagon.

Finance

Comparison with competitors

Competetion

Operations Capabilities

No of capabilities in major chemistries: 24

Reaction volume with concurrent scaling up and piloting: over 2.3 million litres

State of the art equipment and instruments Six UFDA approved plants in India. One USFDA approved plant in Mexico. One USFDA inspected plant in Mirfield, United Kingdom. Fully integrated Operations Supply chain and SAP R/3. Environmental compliance Contributing to a sustainable world with zero liquid discharge systems. HPAI Developed and commercialized Highly Potent Active Ingredients for Oncology formulation. R&D Facilities 3 centers with over 300 chemists and engineers well skilled, separate labs for formulation 21 organic chemistry labs. 3 analytical labs. 1 KILO lab Unique manufacturing capabilities for Steroids and cytotoxics. Excellent control over supply chain Cost effectiveness and high speed development.

Human Resources
World wide employees: 9500+ Employees India: 7878 Germany: 394 Rest of Europe: 101 North America: 109 Mexico: 322 Rest of the world: 771 Research and scientific staff: 1700+ Marketing and sales force: 4000+ Manufacturing staff : 3000+ Nationalities: 40+

Company lays emphasis on Attracting, developing and retaining multi skilled high performers. Creating a learning organization. Developing young and mature leaders. Promoting teamwork and collaboration Building a diverse workforce and meritocracy

Tools used in HR 1234567Talent management. Learning and development. Perfect (Performance enhancement and coaching tools.) Organizational Climate Survey. Annual celebrations to recognize excellence. 360 degree feedback survey Alumni Network.

Analysis SWOT Analysis Strengths:

API Facilities Capabilities in Major Chemistries-24 Six FDA-Inspected plants in India One FDA-Inspected plant in Mexico One FDA-Inspected plant in Mirfield More than 2.3 million litres reaction volume Finished Dosage Units Six in India, With ISO 14001 and ISO 9001 certifications, Approved by USFDA, MHRA (UK), MCC (South Africa), TGA (Australia), ANVISA (Brazil), TPP (Canada) One FDA-Inspected plant in USA Biologics Facility One in India, audited by multiple regulatory agencies Research And Development PSAI 3 Technology development centers (2 in Hyderabad, INDIA; 1 in Cambridge, UK) Product development Integrated Product development Capabilities that includes API, Formulations and analytical development skills. NCE Conducts research in the areas of metabolic disorders, cardiovascular indications and Cancer. Biologics development center

Weakness:
Drug discovery is unpredictable business. Cost of innovation is very high and for Dr Reddys it has to be funded from a Generic business where the margins are low. Need to build downstream skills for Drug discovery in development, clinical trials, global registration and marketing. Challenge is to find the right collaborator to achieve strategic vision of becoming a discovery led global pharmaceutical company and at the same time building generic business to a critical mass.

Opportunities:
Niche Therapeutic Area-Global Oncology Strong Biologics & Cytotoxic Manufacturing Infrastructure to address the need of Oncology Market Need to find products, which will be less competitive in the market, like niche products or ones that have IP and technology barriers. Partnerships to accelerate the discovery and development of new therapies focusing on Biosimilar development. Betapharm (Germany) acquisition will help penetrate other European markets

Threats:
Being in Generic business achieving critical mass is challenge. Considerable investments in USA & Europe and neither of these markets has reach significant volumes. USA market is getting overcrowded by Indian players. Additionally, the price pressure and the presence of international giants like Sandoz and Teva are considerably slowing down the performance of the Indian generic pharmaceutical companies in this market.

PEST Analysis
Political:
With amendment of patent laws, products under patent cannot be launched in India. Innovator companies are lobbying for making more stringent patent laws which could make selling of patented products more difficult e.g-Seizure of drug consignments in transits belonging to some of reputed Indian manufacturer meant for African countries at Neitherland port by Excise

Developed countries are constantly making stringent regulatory systems (GMP) resulting in increased in manufacturing cost.

Economical:
As cost of healthcare is shooting up in developed countries there will be want for quality generic drugs in USA, UK, and Europe. Dr reddys with its brand name can penetrate these markets.

Social:
Cost effective generic drugs are needed by developing and under developed countries for healthcare therefore demand should rise. As disposable income of people is rising and are becoming more health conscious, demand for products such as nutraceuticals ,multi vitamins are rising. Eg Success of Rivital by Ranbaxy lab.

Technological:
Initial investment for Drug discovery is very high and about 15-20 years are required for developing one drug molecule. New molecule has to go through clinical trials. If clinical trials fail whole investment is lost. High end technology is required for selecting desired molecule. Thus Dr Reddys has to continuously upgrade technology and synchronize all the areas of drug discovery for minimizing failure risk.