Thursday, June 12, 2008

Croc tears from Drug barons

Sticking with the Ranbaxy Daiichi-Sankyo deal. Industry experts get emotional.

Here goes Swati Piramal, Director at Piramal Healthcare using the occasion to beat the national drug policy –

"If the promoters of India's largest drug company felt it better to exit business after many years of attempts to make it one of the largest in the world, then there must be serious issues with our drug policy… The government and other authorities should seriously think about it. We have always maintained that Pharma companies should be allowed to invest their profits in research rather than squeezing them with more price controls for more drugs. Nicholas Piramal always felt the generic business model is unsustainable in the future…".
Oh, really…?

Since when did Indian Pharma companies commit serious investments in proprietary research (not sponsored or contract research funded by others)? They had always scavenged from expired patents of other MNCs or come up with some `spray paint' incremental innovation. I look up FY 2007-08 results of Piramal Healthcare (Nicholas Piramal). It’s just 5% of annual sales of about Rs.2850 crores. Rounding error? That is apparently including the spend from its in-house R&D division - that too is now demerged. So next year its R&D budget would be in decimals.

A better perspective could be gotten by analyzing the SG&A with sufficient break-up of payoffs to doctors (in cash or by way of free foreign junkets for their family, picking up the tab of decking up their clinics' interiors, free supply of expensive surgical equipments and other freebies) in return for liberal prescriptions.
"World beater DNA is different, Ms.Piramal!".
It’s Research with a capital R. Any short cuts would mean huge patent infringement lawsuit costs. [Ask Dr.Anji Reddy, he came closest]. Invest in scientists that invent (not Doctors that splurge), lab equipments and in strategic partnerships with global research institutions. I would go with the pragmatic opinion of Dr.D.S.Brar, co-architect of Ranbaxy as it stands today. He has been an insider, knew the turf, didn’t mince words nor held any moral high ground. Here he goes.

“The dynamics of the global pharma industry is changing. Generics businesses across the world [are] becoming highly competitive and companies operating only in the generic space are facing strong growth challenges. Global pharma firms want a mix of generics, a strong research and development (R&D) pipeline and bio-generics. The deal with Daiichi will help Ranbaxy to tap all the growth opportunities in the global pharma market.”

But I do understand the ROI compulsions of Ms.Piramal and her ilk. They should either stick with bulk generics and sponsor-the-doctor strategies. Or smartly cash out like Malvinder did in Ranbaxy when he felt enough is enough. For a change, I love the Government drug policy. Don’t beat the government for price controls, but for that Drug companies would be selling a strip of paracetamol for Rs.500/-. Remember Cement and Steel cartels...?
Here’s more

“Commercially, it is an awesome deal. However, Ranbaxy was the all-conquering Indian hero and should have been the last man standing instead of being the first to capitulate. A huge positive for Ranbaxy but a negative for Indian pharma.” says Sanjiv Kaul of M.D. of Chrys Capital (Ex-V.P - Ranbaxy.... hi...hi...hi...)
("So why did you cross over form Ranbaxy to Private Equity, Mr.Kaul?")

Instead why not give Malvinder some usable tax advise in these windfall times?

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