The Medicine Men

The Indian pharmaceutical industry has spawned many fascinating stories of entrepreneurs, who started out with limited or no resources but went on to build multinational operations and highly profitable companies, seizing opportunities in India and abroad as they came along. Two of the more fascinating stories are those of Ranbaxy Laboratories, and Dilip Shanghvi’s Sun Pharmaceuticals. Over the past two years, the two stories have become intertwined after Shanghvi took over Ranbaxy in 2014 from Daiichi Sankyo, which had bought it from the Singh brothers – Malvinder and Shivinder – in 2008.

But to start with, Ranbaxy was the much older and more prominent name in the pharmaceutical industry, and until about a decade ago, it was also the bigger and more profitable of the two. Ranbaxy was started in the 1930s as a distributor of some drugs by two entrepreneurs – Ranjit Singh and Gurbux Singh. In the 1950s, Bhai Mohan Singh bought out the two and became the promoter of the company. He grew the company but it was his eldest son, the late Parvinder Singh, who actually turned Ranbaxy into the powerhouse it became in the 1980s and 1990s. Parvinder Singh joined Ranbaxy in the late 1960s, became managing director in 1982, and chairman in 1993. He expanded Ranbaxy’s operations aggressively, expanded into international markets, and also made research a priority. It became one of the better-known generics players in the US market under him. His untimely death in 1999 saw his long-time friend and colleague D.S. Brar take over at the helm of the company initially. In 2008, Parvinder Singh’s sons – Malvinder and Shivinder – decided to sell Ranbaxy to Daiichi Sankyo for $4.6 billion. They wanted to focus on health care through the Fortis brand rather than stick to the pharmaceutical business, even though Ranbaxy was till then considered the flagship of the group. Shortly after Daiichi took over the company, it was found that some of the Ranbaxy factories had fudged quality data, and the US FDA imposed huge fines and restrictions on them. Thus began the long decline of Ranbaxy, and in 2014, Daiichi finally decided to sell the company to Shanghvi with Sun taking over the outstanding stock of Ranbaxy for $ 3.2 billion and assuming $800 million in debt. Shanghvi’s own story started in the 1980s, when he opened a small business with just two employees. He focused on niches, which were being ignored by the big players, and developed several highly profitable lines in psychiatry, cardiovascular, oncology and neurology drugs. He was adept at takeovers, often picking up factories and brands from rivals at bargain basement prices and turning them around. By early 2000, Sun had become a force to reckon with in the pharma industry. In 2007, he bought Israel’s Taro Pharmaceuticals after a takeover battle with the management. Shanghvi is low key to a fault, hates giving interviews, and is known as a turnaround artist. But critics wondered whether he had bitten off more than he could chew with the Ranbaxy acquisition, given its many troubles with the US FDA and its ever growing losses.

In the past one and a half years, Shanghvi has slashed costs, rationalised the brand lines and closed down factories. He has changed the strategic direction of the erstwhile Ranbaxy. The fact that the turnaround is in progress can be seen from the rising revenues and improving bottom line. By the time it is complete, the Ranbaxy brand will have been extinguished – and the Ranbaxy story will finally end. In the future, it will only be a Sun story. Senior Associate Editor Joe C. Mathew and Senior Editor P.B. Jayakumar track how Shanghvi is going about turning around the loss-making operation he has bought.