Cipla Global Ltd.

Cipla Global Ltd.:Generic versus Drug Discovery

Case Analysis by: Osho KharbandaDelhi School of Management,

Delhi Technological University

Let’s Start with a Story…•Martin Shkreli, Co-founder MSMB Capital,former CEO Retrophin & Turing Pharmaceuticals.•His company recently acquired the rights to Daraprim,Developed in the 1950s, People with weakened immune systems, such as AIDS patients, have come to rely on the drug.•Cost about $13.50 a dose.But Mr Shkreli announced he was raising the price to $750 a pill. •That’s more than 5,000% increase.

Cipla Global Ltd.: Generic versus Drug Discovery Page 02

Let’s Start with a Story…


Cipla•Yusuf Hamied, the chairman of Cipla, inherited a domestically focused company from his father K. A. Hamied, and transformed it into an Indian multinational with revenues of $1.58 billion & a market capitalisation of $8.4 billion in 2014.


Cipla•Cipla ranked among the top three companies in the domestic market, with a reputation for waging price wars against global drug •34 manufacturing facilities in eight locations, a presence in 170 countries and 53% of its revenues from overseas sales


CIPLA-A Pioneer•HIV treatment and making anti-retrovirals5 (ARVs) are made available for less than a ‘dollar a day’ by the company and it had become the darling of bottom-of- the-pyramid customers.•Cost of HIV treatment fell dramatically, from $12,000 to $300 per patient per year, causing a revolution in the pharmaceutical industry.


CIPLA-A Pioneer•2006- won the Dun& Bradstreet American Express Corporate Award.•2005- Forbes included Cipla in the 200 ‘Best Under A Billion’ list of small Asian companies.•2012, Cipla received Thomson Reuters India Innovation Award.•2013, former US President Bill Clinton praised Cipla for supplying inexpensive drugs.


CIPLA-TRIPS Compliant•Thanks to India's process patent regime (1970-2005), Dr. Yusuf Hamied, chairman, managed to catapult the company to its position as a leading generics manufacturer. •However, in 2005, India changed its Patents Act to make it TRIPS compliant.•The most prominent being the shift from a process patent to a product patent4 regime.


CIPLA- A Crusader for affordable Medication

•Faced with Western pharmaceutical companies' 'ever-greening', CGL became a prominent crusader against multinationals. •It fought and won patent cases in Indian court•Cipla took advantage of government policy authorising Indian companies to manufacture copies of patented drugs without the patent holder's permission.


CIPLA-India Vs The West•This infuriated Western pharmaceutical companies because they saw this provision as an infringement on their rights, which would lead to decreased revenues. •As a consequence, they started lobbying their respective governments to put pressure on the Indian government.

Cipla Global Ltd.: Generic versus Drug Discovery

Hamied’s Ambitions•Hamied’s ambition was to transform Cipla into a $3-billion, globally oriented MNC by 2020. •His company, which had grown from $532 million to $1.58 billion in about nine years, was strategizing to reach the $3-billion mark in the next five years, which appeared extremely challenging.


Strengths•Low cost producer and certified by worldwide regulatory authorities •Strong workforce•Wide range of products •Sold in more than 170 countries


Weakness•Insufficient resources for innovation•Dependent on partner technologies to market products globally•Being from a developing country , it is not considered as a quality drug manufacturer rather as a generic drug manufacturer


Opportunities •Patent cliff to allow for more generic versions of many drugs in 2016.•Growing population of elderly people.•Increasing healthcare costs in developed nations.•increasing demand for generics in global markets.•Possibility of compulsory licensing by indian government.


Threats•Drug approval is slow and highly selective.•entry barriers are low in generic drugs•High cost of innovation. •Lobbying by MNC’s to formulate universal patents.•Increasing cost structure due to increase in cost of raw materials.


Market Potential•Developed economies with spiralling healthcare costs, particularly in North America, Europe, and Japan, were looking to rein in healthcare expenditures. One option was to procure generic drugs from low-cost manufacturing locations, particularly in emerging markets. •The global generics market was estimated to be worth $225 billion in 2011 and was expected to rise to $358 billion by 2016 at a compounded annual growth rate of 9.7%


Market Potential•Canada and the US, for example, demand for generics grew by 12% between 2004 and 2009, while in Japan it was even higher, at 14%. While the generics component of the US and UK markets stood at 88% and 71% respectively.•In contrast, Japan’s market was largely an innovator-based market,with the generic component representing about 25%. This highlighted a potential market for generics.


Challenges in innovation •In order to achieve its target and to create an image of quality drug manufacturer its imperative for Cipla to innovate. CIPLA faces lot many challenges in innovating its drug.•The cost of developing a new molecule had increased drastically to between $75 million and $4 billion and it took anywhere from 10 to 15 years to develop and launch a new molecule commercially. •Price controls by governments were on the rise. The degree of regulation depends on the country and type of product.


Challenges in Partnerships•Partnering with a Western MNC to engage in collaborative research and thereby gain the status of a research-oriented drug manufacturer seemed more plausible. •Each option required careful consideration before a decision could be taken.


Challenges in Boosting sales•Generics market is extremely competitive with low entry barriers•Thin profit margins •Lack of distribution network to increase sales volume in other countries•Increasing cost structure due to rise in prices


Suggestions: Off-Shoring•Off-shoring and milestone based research partnership with other MNC.•Cipla is well poised to take advantage of the large amount of human resource available in India•Lower production costs •It will help Cipla in building up its capabilities


Suggestions: Growth•Growth in business via Drug development clinical trials and sale of drugs •Will help In license molecules by other MNC’s in future as its R&D capabilities improve.•Like Jubilant Biosys entered into 3 year deal with Endo Pharmaceuticals to develop oncology drugs.


Suggestions: Generic Intellectual•Become a supplier of drugs for foreign MNC’s looking for opportunity to buy or in-licence molecules from Indian companies.•Gain a title of generic intellectual contributor rather than a cheap manufacturing base company.•Help to gain more market internationally.•Strengthen its presence in markets where Cipla has less market share using the goodwill image.•Take advantage of Compulsory licensing provisions with help of indian government.


Suggestions: M&A•Acquire small pharmaceuticals companies(Generic Manufacturers) in USA, Japan to increase it’s market share in developed countries.•Acquire supply chain in developed countries to increase profit.


THANK YOU

ANY QUESTIONS? Cipla Global Ltd.: Generic versus Drug Discovery

Cipla Global Ltd.

Education

Transcript of Cipla Global Ltd.