When betapharm was bagged by Dr Reddy’s two years ago no one could imagine what was coming. In less than two months after the deal was bagged (after a hot chase from fellow Indian company Ranbaxy), the German government came out with its sweeping generic drug pricing reforms.

Branded generics became less attractive and the power of prescription generation virtually shifted from doctors to pharmacists. With sales of around 140 million euros annually, betapharm suddenly looked very expensive at a deal value of 480 million euros. 

The dynamics of the new generic pricing put Dr Reddy’s in its toughest situation ever. The siutation cannot get worse than what we saw last week. Dr Reddy’s had to write down losses to the tune of RS 231 crore due to betapharm and the company slipped in the red with losses of Rs 85 crore for its third quarter of 07-08.

When asked if Dr Reddy’s was doing the fire fighting to save betapharm, an ever-positive G V Prasad rephrased the word smartly saying it was “problem solving”.  For those who have worked with G V Prasad regard him as the most potent weapon in the armoury of Dr Reddy’s.  G V Prasad has orchaestrated many successes for Dr Reddy’s global expansions and for sure betapharm will also be tackled with his sharp management skills.

As part of the drive, Vasudevan, now Europe’s head of Dr Reddy’s is busy moving most of the Salutas (the contract manufacturer for betapharm) products to India. This move may save huge costs and de-bottleneck the supplies to betapharm.  G V Prasad says by the end of 2009,  about 80% of betapharm products will be sourced from India. When that happens, costs will be under control and a turnaround can become visible for the beleaguered betapharm.

Dr Reddy’s has by now developed an uncanny ability to bounce back. When Novartis and Novo Nordisk, returned two molecules back to Dr Reddy’s many years ago as a fallout of adverse clinical findings, the morale in Dr Reddy’s turned very low.  Scientists left and many painted a gloomy picture of the company

Then came the part-separation of the discovery research unit (a novel idea and a brain work of G V Prasad again),  and some swift moves like the authorised generic deals with Merck on Zocor and Proscar. Dr Reddy’s managed to cross the billion dollar sales mark and grew stronger. Through the betapharm problems, Dr Reddy’s even looked at a possibility of buying Merck’s generic unit. Short term blips did not impact the company’s long term vision.

betapharm may now be seen as a painful association for the company but its a management challenge to see that the company make profits. With G V Prasad’s deftness, betapharm over the next few quarters, may well become an enviable asset.  Through the entire phase of the betapharm gloom, Prasad  has never shown signs of cracking. He looks composed and in control while tackling those tough questions and that says something subtle. 

Early this month when Mylan sent a mail out to all its employees that N Prasad will play a advisory role to Mylan management and has, in effect, resigned from his position as the head of global strategy for Mylan, it shocked many. I am counted in.

Matrix vice-chairman, N Prasad had turbo-driven the company into a treasure-trove in less then ten years. Through a series of acquisitions right from Belgium’s Docpharma (which was its biggest) to MChem in China and even buyouts as varied in interest as Concorde Pharma in India and a Swss research firm, Prasad had drawn up a integrated map to allign with a global major many years before his peers could ponder over such a mega association.

So, stung by cheap generic drugs from the likes of Ranbaxy and Dr Reddy’s, when Mylan expressed its desire to have its first ever cheap manufacturing base outside of the US, Matrix fitted into its plan impeccably.  Aggressive as always, Mylan chairman Robert Coury clinched the deal and Matrix overnight had a global parent. In the process, Prasad made a personal wealth of a mind-numbing Rs 570 crore !!

Now, Prasad continues to be on the board of both Mylan and Matrix but why has he relinquished his post ? The reason sounds mysterious but many say after Mylan’s takeover of the generic division of German firm Merck for $ 6.7 bln , Prasad had very little left to do for Mylan. That’s too simple to believe and does not sound too convincing to me.

Coury could have always benefitted from Prasad’s genius in identifying start-up companies and fitted those into Mylan’s future goals. Remember, there came a time in the life of Matrix when Prasad announced three big acquisitions in three consective months!

Now, juxtapose that with how Teva is buying small biologics and bolstering its future to the extent that its former chief Israel Makov had said that from 2010 onwards Teva’s pipeline will be more robust than that of the Big Pharmas. Mylan may need to do exactly that. Yes, being third in the global generics space is fine but does the chemical drug pipeline suffice to keep Mylan at that position. Even if it does, that may not keep Mylan going for too long.

Prasad may have volunteered to be out of his coveted position. And may be thinking of creating the next big splash. Known for his charitable nature, Prasad partly runs a hospital chain called Care Hospitals in Andhra Pradesh. He has also invested in Maa TV. Is the next healthcare czar in the making. Time will tell and that should not be very far. Prasad is a fast mover and history is the proof.

Being young, Ranbaxy’s Malvinder Singh is more open to experiments than his staid industry peers. He has settled two patent disputes, one on Tamsulosin (Flomax) and the other on Valtrex (valacyclovir) and the third one is expected anytime! Though many may not agree with the strategy, thats monetising research effectively, he says.

But, Malvinder Singh is thinking more creative than just these patent settlements. After making up his mind on hiving off his drug discovery outfit, Malvinder may be looking at one more round of business separation.

Malvinder Singh has indicated that he will look at removing his Indian prescription operations and merging it with another good Indian company. As a result, Ranbaxy may continue to have a majority stake while the merged company can benefit from a larger product basket and wider geographic presence.

Malvinder may be right. The fragmented domestic market needs a strong dose of consolidation. With just 5.04% market share in India (and that’s only second to Cipla), Ranbaxy will do well to increase its share by 3 to 4%. That will give Ranbaxy a leadership position by getting a formidable 9% to 10% of the  $ 6 billion Indian market. This will be difficult to get by organic growth. Remember, the drug industry growth in India is around 15% currently.

But, will Indian promoters, who are never willing  to give away their controls, see sense in this mega merger theme. Bankers feel they should do so sooner than later as valuations may show signs of rapid erosion if market shares dip. The move will be a daunting one but that will also need a lot of creative and agile thinking from the two sides.

For me, there will be something really exciting to report on ! 

Its been sometime that Dr Yusuf Hamied has been keeping low and I was wondering if all the crusades have ended. Remember, how drug MNCs had to bend and slash prices of anti-AIDS drugs in late nineties when Cipla offered its own cocktail drugs to combat AIDS.  

Now, the unstoppable Dr Hamied is taking up a even more tricky patent fight. He is set to launch Roche’s erlotinib branded Tarceva in India. Tarceva received product patents last year and Roche has been among the first to get that status for its drug in India. 

Cipla sources say, there is enough to substantiate that the drug patent is pre-1995 and thats where the fight is likely to get interesting. Natco Pharma had earlier filed a pre-grant patent opposition on the same drug and its application was rejected.  Some in the company say that the case was heard in a very hasty manner and the patent was granted to Roche in less than three days of hearings.

That raises a big question. Is it possible to challenge Roche’s patent now. At the face of it, this looks difficult for Cipla but going by Dr Hamied’s record in cracking tough patents held by multinational companies, there could be some basis to his claims.

There is one more important issue. Sources say that the Drug Controller has already granted the drug license for Tarceva to Cipla and if thats true then the company may even explore the launch immediately.

Its all set to become a bitter patent battle as Roche will not let its rights get infringed. And if Cipla has its way many patients will stand to benefit. The bigger problem will be that being part of the WTO, Indian laws may weigh heavily against Cipla on this case.

Fingers crossed.   

MNC drugmakers are stretching to any extent to grow their toplines. According to news reports , Glaxo and Astra Zeneca are being probed by the UK’s Serious Fraud Office for possible breaches of the UN’s oil-for-food program in Iraq.