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THE MOLECULE MAKER

P.HARI

A.V. Rama Rao's firm Avra Labs has struck gold in contract research, winning deals from the global pharma giants.When A.V. Rama Rao retired in April 1995, it wasn't like he was going to just stop working. After all, the man whoused to be director at the Hyderabad-based Indian Institute of Chemical Technology (IICT) could have his pick of 

 jobs.

Any of the big multinational pharmaceutical companies would have been glad to hire him. And, if he wanted to stayin India, he could have joined one of the big Indian firms as head of research. Or, if he wanted to spread himself wider, he could have set himself up as a consultant. There was even some talk of a fellowship at a reputedinstitution -- he was after all a man with a reputation, having synthesised molecules for firms like Lupin and Cipla.But those who knew Rao weren't surprised when he sought a life of greater adventure -- setting up his own firm.But this was 1995, when contract research was non-existent in India. And, as Rama Rao insists, only one Indianscientist (he has his own rigorous definition of 'scientist') has succeeded as an entrepreneur -- P.C.Ray, theoutstanding chemist who started Bengal Chemicals.

Rao began Avra Laboratories, a pure R&D company, with an investment of Rs 1 lakh, transferring some of hisassets to the company. He also took a loan of Rs 2 crore from the Technology Development Board (TDB) under thedepartment of science and technology (DST). Apart from this, he got a Rs 50-lakh loan from the State Bank of 

India. Avra is a family affair -- elder son Rama Krishna, an MBA, helps run the company. Daughter Radha, adoctor of medicine and a biochemist, is on the research staff. Younger son Chandra Shekhar, who's finishing hisPh.D in inorganic chemistry at Cambridge, is due to join the company.

In four years, Avra has earned Rs 10.2 crore, all from multinational clients, including Rs 3.3 crore as profit. It alsohas four US patents. Says R.A. Mashelkar, director general of the Council of Scientific and Industrial Research(CSIR): "Avra is unique. The entire enterprise is being driven by the knowledge of one scientist."

A.V.Rama Rao (C) & Sons Mashelkar should know, Rao is credited with having turned IICT into one of the leading CSIR laboratories. But

back then, Rao did not know how he would be able to raise the money he needed to start work. Then, on a lecturetour of the US in June 1996, he happened to be at G.D. Searle, which had been looking for a tie-up up with IICT,but only if Rama Rao had stayed at the helm. When Rao told them about his plans, G.D. Searle didn't wait to ask. It

handed him a cheque for $100,000, an advance on the memorandum of understanding which it signed with Rao forresearch collaboration -- worth $200,000 over three years.

During the same trip, Rao also attended the prestigious Gordon conference on biology and chemistry (a rare honourfor an Indian). There he met executives of biotech firm Cytomed, which had discovered a new anti-cancercompound (CMI 392). But with no chemistry expertise, Cytomed was struggling to synthesise it in the laboratory.UK firm Resonance, then a Merck subsidiary, had tried without success. Rao suggested a possible route forsynthesis. On the basis of this he got another $50,000. Now he had the money, Rama Rao bought equipment andstarted work. Dai-Ichi Karkaria of Mumbai offered him land free. But two years later Rao decided that he didn'twant to be tied to Dai-Ichi and relocated to his own facilities in Hyderabad. The Avra campus has four differentlabs and arguably the best pilot plant in the country.

The Cytomed CMI 392 project went as far as phase III of clinical trials and Avra got a contract (worth $950,000) to

make 11 kg of the molecule. All this was done without hiring a single experienced chemist -- Rao's expertise as ateacher came in handy here. Avra has 30 chemists, all of them recruited as fresh post graduates or doctorates. Rao'sdream encompasses his staff -- he wants to make his company a training ground for chemists and entrepreneurs. Itworks like this -- if Avra gets a chance to make a compound on a large scale, he will let one of his scientists (mostof whom are his students) set up a company. "I want at least six such entrepreneurs in the next five years," saysRao.

Rao's current success hasn't come easy: "I am used to struggling and so I was prepared to take risks." Four decadesago, after finishing his BSc degree, Rao had to work as a demonstrator at the AC College in Guntur. He saved somemoney out of that and went to the University Department of Chemical Technology at Mumbai to studypharmaceutical chemistry, later joining the National Chemical Laboratory at Pune. After a short stint of research onnatural products, he went to work with E.J. Corey (a Nobel Prize winner and one of the best chemists of the 20thcentury) at Harvard. There he learned the art of synthesising complex bio-molecules. It's this experience which

came in handy when he was IICT director, and is now employing at Avra. Natural product chemistry is verycomplex, he says. You have to learn to work with a large team, a large number of reagents. What's more, thescientist must also have a very good knowledge of stereochemistry, the science of how molecules orient themselvesin space. Says M.K. Gurjar, deputy director of NCL: "Rao had a sound knowledge of natural product chemistry.

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But he also used this knowledge to make value-added products." For instance, Rao studied nucleic acids, then usedthis knowledge to make the anti-AIDS intermediate beta-cynidine.

At IICT, he pioneered the synthesis of several molecules, helping the Indian pharmaceutical industry to grow. Theanti-inflammatory drug flubiprofen was commercialised by FDC in Mumbai. Cipla got norfloxacin andciprofloxacin, two of the biggest-selling antibiotics in the world. Earlier, at NCL, he had gifted Vitamin B-6technology to Lupin and diazepam (anti-depressant Calmpose is one brand) to Cipla. Again, at IICT, he taughtscientists how to handle poisonous gases like chlorine and hydrogen cyanide. He also developed something totallynew: technology for the production of carbon monoxide and using the gas to produce several chemicals.

Meanwhile, he also introduced an entirely new branch of chemistry to the country: chiral synthesis. Manymolecules exist in two forms -- mirror images of each other. When you synthesise a compound, you get a mixtureof its mirror images. However, the body recognises only one of the two images. Chiral synthesis is the art of making only that compound which is biologically active. This reduces wastage and thus cuts costs. In modernsynthetic chemistry, a scientist is not much good if he cannot handle chiral synthesis. He imparted this knowledgeto several students -- he's trained 100 Ph.Ds, probably the first Indian scientist to do so. Rao's also known as a bit of a character -- what his booming voice and shiny bald pate, apart from a fondness for chicken. And naturally enoughfor a man of such broad talents, Rao is never one to brook naysayers. "I speak my mind," he says. While at IICT, henever spoke to the union leaders because, according to him, they did not exist in his book.

Now, he can't talk to anybody too much about his work. Rao's clients are all multinationals, which do not want toreveal who they are working with, let alone what they are working on. New drug development often starts at a smallbiotech company which spots a new molecule. The firm can conduct toxicology and clinical trials, but usually doesnot have the chemistry expertise to make the molecule. The firm then asks another company which has theexpertise on synthesis to help out.

As the trials go on, the quantity of the drug required also goes up. The chemists then scale up their processes and, if the molecule is introduced in the market, get the first opportunity to make it commercially. During trials, speed, andnot cost, is the important factor. But after commercialisation, economics becomes very important.

The US is full of companies which undertake custom synthesis. In India, the concept is new. The only other suchcompany is Syngene, promoted by the Bangalore-based biotech firm Biocon. Rao says his lab is as good as any inthe world, with a Rs 1.5-crore pilot plant that can simultaneously manufacture eight different products at the same

time (no other such plant exists in the country). It can work at room temperature, and also at very low (-40 degrees)and very high temperatures (300 degrees).

If anything, Rao has broken one canon of common wisdom: that real scientist perish in the Indian system. It may bethe exception to the rule, but if anything, the success of Avra shows that India too can nurture research talent.

Questions for Discussions

1.  Derive the Objectives, Mission, Philosophy and Vision of the organization.

2.  What is the core competency of the company?

3.  How do you view the Business Strategy of the company?

4.  Brief upon the SWOT.

5.  What in your opinion the company must do to be successful?6.  Derive the Business Model

7.  What is the Competitive Strategy? 

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