Ques : Why has Dr. Reddy's been successful in the past (up to 2003)? Ans : Dr.

Reddys lab has been successful in the past i.e. between 1977 to 2003 due to following initiatives/actions taken : 1. The main reason for their success is they grab all the upcoming opportunities at right time and enchased them to the full. a). The company is originated to grab the prevailing opportunity aroused due to Govt. Policy of process patent regime for Indian Drug Industry. b). An opportunity of supply of high quality of bulk actives to western countries is availed by constituting a separate entity named Cheminor Drugs. 2. a). Diversified business in origin country and become industry leader in three therapeutic areas i.e. pain management, gastroenterology & Cardio-Vascular. Also started making position in other segments like neutraceutical, womens health care & dental. Apart from these diversified business in diagnostic & instruments also. b). Expanded business in other countries and made strategic alliances/ joint-ventures with home companies of the country, 76:24 in Russia & 51:49 in China. Establishments made in countries like USA & France. c). Targeted American market, taking advantage of low-cost targeted this market, supplied high quality bulk drug and took advantage. Made use of American drug policy for generic drugs i.e. ANDAs, filled many ANDAs and capitalized this opportunity also. 3. Research & Development programme: Sidewise concentrated on Research & Development of new formulas also and established Dr Reddys Research Foundation. Developed new molecules and keeping in view companys limitations Out-licensed molecules for clinical trials to other companies (2 molecules to Nova Nordisk & one to Novaritis) and got milestone payment for each.

4.

Fund Generation : Generated funds for organization in a better fashion, raised the same by issuing GDRs & ADRs.

5.

HR initiative: Established relations with collages & universities and employed bright talents directly. Experienced & skilled executives from other origins are brought in the company and placed in senior positions. Priority for talent management is given. Development & skill enhancement of employees is done by various programmes like exchange programmes, trainings, advanced studies etc.

It can be concluded that the main mantra behind Dr. Reddys Success is timely grabbing of Opportunity and Making Internal Environmental Change as per External Environment Change.

Ques: What do you think of Dr. Reddy's daring new vision:"To become a discovery led global pharmaceutical company"? Is it realistic / achievable? What are the pros and cons?

Ans: Presently Dr. Reddys laboratories are able to establish itself as a successful pharma company, it new vision to become a discovery led global pharmaceutical company is really tough. The major source of companys revenue is Bulk actives, intermediates Generics & Branded formulation, Drug Discovery is minimum. Although a major breakthrough in this i.e. Drug Discovery had change the whole scenario but the probability is thin despite of the fact that they are investing huge in R&D i.e. 8% of their earnings.

As a upcoming strategy this strategy is good, reason being other Indian companies had also entered strongly in Bulk Active & Branded Formulations and these companies had also an advantage of low cost production and posses good distribution network. Generic segment is also very competitive as two of the largest generic companies (Novartis & Teva) had only 5.5% share each. Pros- Having established good R & D and experience in developing APIs and with clear focus and vision of discovering new drugs there are ample chances of Dr. Reddys to succeed.

Cons- The strategy of the company is half hearted, as it wants to do only pre-clinical trials and not the entire clinical trial post drug discovery. This approach of company in cutting lead time and cost will not lead to required success in drug discovers, resulting in their not achieving leading discovery led drug company status.

3.

Develop a 5-yr projection (2003-2008) for revenue growth for each of the business segments listed in the table on page 5 of the case. Explain the assumptions underlying your projections. Does your analysis imply that DRL will become an innovator or remain an imitator?

Dr. Reddys Business segment revenue projections (2003-2008) (All figure in USD 000)
Branded Formulations Bulk Actives and intermediates Generics Diagnostics, critical care, biotech Drug discovery Others Total 2003 149130 137848 93130 9304 0 3413 392825 2004 168517 165418 91267 9769 3370 6789 445130 2005 193794 196847 93093 10258 11200 10184 515375 2006 217050 242122 100540 10771 5640 12220 588342 2007 251778 292967 110594 11848 7890 15886 690963 2008 287027 357420 116124 12322 0 13503 786395

In branded formulations the company is doing strong and its year on year growth will be in range of 10-14% in next five years. In Bulk actives and intermediates the company shall achieve around 20% growth year on year for next five years. Generics the company shall continue around 10% growth year on year as it has five year window open for the pending litigation in its favour, during this period it will generate the above projected revenues. The company will not achieve significant drug discovery, but there will marginal growth due to certain drug discovery and its rights selling to drug majors. This will be lower than the companys vision of being discovery led drug company.

4.

Given your answer to the previous questions, what organization and people challenges do you foresee? How would you meet these challenges? The company has employee from very diverse cultures geling them together as team is an uphill task for the team. The motivation of the old employees is down as the limelight focuses on the new recruits. Compensation of employees is an area of concern as the company has model of employee agility, whereas there is chance of loss of employee if they are transferred from USA to India as their compensation package shrinking. The biggest organizational challenge is to transform its image from imitator to innovator.

This can be overcome by Restructuring the SBU structures. Employee competency profiling and talent management, providing ample opportunity to all employees of learning and growth. Allow employee to experiment and take risk without the fear of failure. This is an important characteristic as drug discovery has a very low hit and conversion rate. Have strong knowledge management practices in the organization and provide platform of sharing of best practices and ideas with good reward and recognition.