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When the Ranbaxy Drug Company was formed in 1962 by a Sikh refugee who had fled to India from the new country of Pakistan, it wasn't much more than a large drugstore. The transformation into something much bigger began when Parvinder Singh, the American-trained son of the founder, took control of the company in 1982. Today Ranbaxy is a significant manufacturer of so-called generic drugs--medications whose patents have expired, making them fair game for whoever can produce them most efficiently. The company spends $15 million a year on research, has annual revenues of half a billion dollars and makes drugs in seven countries, from China to the United States. When Parvinder Singh died earlier this year, killed prematurely by cancer at 56, he left his heirs a multinational company. And he left India proof that information technology isn't the only industry where low costs and high educational levels can add up to a competitive advantage.
Singh was a pioneer. He took then-unknown Ranbaxy into Nigeria and into minority partnerships in Thailand and Malaysia, to get the company name known and trusted outside India. "He saw where the future was, and invested very aggressively overseas in the '80s," says Ranbaxy vice president Bimal Raizada. "That was very unusual for an Indian company in those days. Why would you risk going abroad when you could make money at home in a completely protected market?"
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Today Ranbaxy gets half its income from abroad--a balance that's likely to shift further in favor of the overseas divisions as the developed world grows older and needs more medical care, and at lower prices. "There's a tremendous generic opportunity opening up in the developed world," says the company's new CEO, D.S. Brar. "Being India-based where salaries are lower gives us a real advantage in the generic sector." R&D is concentrated in Ranbaxy's home base of New Delhi. Building-block chemicals are made in India, too. Final manufacturing, though, takes place where most of Ranbaxy's developed-world patients are--in the United States and Britain.
But these days Ranbaxy does more than copy existing drugs. It also improves them. Earlier this month Ranbaxy sold a process it had developed to the giant German drug company Bayer. One of Bayer's most successful drugs is an antibiotic called ciprofloxacin, but it had to be taken several times a day. Ranbaxy's pharmacologists developed a new tablet that's taken only once a day. This seemingly small improvement was worth $10 million up front, with future installments worth an additional $50 million and a royalty of up to 10 percent on every new pill swallowed.
This is one way a small company (by world standards) can thrive in a world dominated by big players like Bayer, which has annual sales of $30 billion and a research budget of close to $2.5 billion. Improving known drugs, Brar says, is "the natural stepping stone" to drug-discovery research. A brand-new drug, developed from basics to over-the-counter sales, might cost $300 milllion. Ranbaxy doesn't have that sort of money--yet.
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