Cipla Global Ltd. faces the challenge of balancing its generic drug business with investments in drug discovery to become an innovator. As a large Indian generics manufacturer, Cipla relies on low-cost production but lacks resources for R&D. It could partner with Western companies on drug development and boost overseas sales through acquisitions or building distribution networks abroad. Partnering would help Cipla gain recognition as a research firm and take advantage of the large, low-cost talent pool in India to become more integrated in the global pharmaceutical industry.

1. Cipla Global Ltd.:
Generic versus Drug Discovery
Case Analysis by: Osho Kharbanda
Delhi School of Management,
Delhi Technological University

2. Let’s Start with a Story…
•Martin Shkreli, Co-founder MSMB Capital,former
CEO Retrophin & Turing Pharmaceuticals.
•His company recently acquired the rights to
Daraprim,Developed in the 1950s, People with
weakened immune systems, such as AIDS patients,
have come to rely on the drug.
•Cost about $13.50 a dose.But Mr Shkreli announced he
was raising the price to $750 a pill.
•That’s more than 5,000% increase.
Cipla Global Ltd.: Generic versus Drug Discovery Page 02

3. Let’s Start with a Story…
Cipla Global Ltd.: Generic versus Drug Discovery Page 03

4. Cipla
•Yusuf Hamied, the
chairman of Cipla,
inherited a domestically
focused company from
his father K. A. Hamied,
and transformed it into
an Indian multinational
with revenues of $1.58
billion & a market
capitalisation of $8.4
billion in 2014.
Cipla Global Ltd.: Generic versus Drug Discovery Page 04

5. Cipla
•Cipla ranked among the
top three companies in the
domestic market, with a
reputation for waging
price wars against global
drug
•34 manufacturing facilities
in eight locations, a
presence in 170 countries
and 53% of its revenues
from overseas sales
Cipla Global Ltd.: Generic versus Drug Discovery Page 05

6. CIPLA-A Pioneer
•HIV treatment and making anti-retrovirals5 (ARVs)
are made available for less than a ‘dollar a day’ by the
company and it had become the darling of bottom-of-
the-pyramid customers.
•Cost of HIV treatment fell dramatically, from $12,000
to $300 per patient per year, causing a revolution in the
pharmaceutical industry.
Cipla Global Ltd.: Generic versus Drug Discovery Page 06

7. CIPLA-A Pioneer
•2006- won the Dun& Bradstreet American Express
Corporate Award.
•2005- Forbes included Cipla in the 200 ‘Best Under A
Billion’ list of small Asian companies.
•2012, Cipla received Thomson Reuters India
Innovation Award.
•2013, former US President Bill Clinton praised Cipla
for supplying inexpensive drugs.
Cipla Global Ltd.: Generic versus Drug Discovery Page 07

8. CIPLA-TRIPS Compliant
•Thanks to India's process patent regime (1970-2005),
Dr. Yusuf Hamied, chairman, managed to catapult the
company to its position as a leading generics
manufacturer.
•However, in 2005, India changed its Patents Act to
make it TRIPS compliant.
•The most prominent being the shift from a process
patent to a product patent4
regime.
Cipla Global Ltd.: Generic versus Drug Discovery Page 08

9. CIPLA- A Crusader for affordable Medication
•Faced with Western pharmaceutical companies' 'ever-
greening', CGL became a prominent crusader against
multinationals.
•It fought and won patent cases in Indian court
•Cipla took advantage of government policy
authorising Indian companies to manufacture copies
of patented drugs without the patent holder's
permission.
Cipla Global Ltd.: Generic versus Drug Discovery Page 09

10. CIPLA-IndiaVsTheWest
•This infuriated Western pharmaceutical companies
because they saw this provision as an infringement on
their rights, which would lead to decreased revenues.
•As a consequence, they started lobbying their
respective governments to put pressure on the Indian
government.
Cipla Global Ltd.: Generic versus Drug Discovery Page 10

11. Hamied’s Ambitions
•Hamied’s ambition was to transform Cipla into a $3-
billion, globally oriented MNC by 2020.
•His company, which had grown from $532 million to
$1.58 billion in about nine years, was strategizing to
reach the $3-billion mark in the next five years, which
appeared extremely challenging.
Cipla Global Ltd.: Generic versus Drug Discovery Page 11

12. Strengths
•Low cost producer and certified by worldwide
regulatory authorities
•Strong workforce
•Wide range of products
•Sold in more than 170 countries
Cipla Global Ltd.: Generic versus Drug Discovery Page 12

13. Weakness
•Insufficient resources for innovation
•Dependent on partner technologies to market
products globally
•Being from a developing country , it is not considered
as a quality drug manufacturer rather as a generic
drug manufacturer
Cipla Global Ltd.: Generic versus Drug Discovery Page 13

14. Opportunities
•Patent cliff to allow for more generic versions of many
drugs in 2016.
•Growing population of elderly people.
•Increasing healthcare costs in developed nations.
•increasing demand for generics in global markets.
•Possibility of compulsory licensing by indian
government.
Cipla Global Ltd.: Generic versus Drug Discovery Page 14

15. Threats
•Drug approval is slow and highly selective.
•entry barriers are low in generic drugs
•High cost of innovation.
•Lobbying by MNC’s to formulate universal patents.
•Increasing cost structure due to increase in cost of raw
materials.
Cipla Global Ltd.: Generic versus Drug Discovery Page 15

16. Market Potential
•Developed economies with spiralling healthcare costs,
particularly in North America, Europe, and Japan,
were looking to rein in healthcare expenditures. One
option was to procure generic drugs from low-cost
manufacturing locations, particularly in emerging
markets.
•The global generics market was estimated to be worth
$225 billion in 2011 and was expected to rise to $358
billion by 2016 at a compounded annual growth rate of
9.7%
Cipla Global Ltd.: Generic versus Drug Discovery Page 16

17. Market Potential
•Canada and the US, for example, demand for generics
grew by 12% between 2004 and 2009, while in Japan
it was even higher, at 14%. While the generics
component of the US and UK markets stood at 88%
and 71% respectively.
•In contrast, Japan’s market was largely an innovator-
based market,with the generic component
representing about 25%. This highlighted a potential
market for generics.
Cipla Global Ltd.: Generic versus Drug Discovery Page 17

18. Challenges in innovation
•In order to achieve its target and to create an image of
quality drug manufacturer its imperative for Cipla to
innovate. CIPLA faces lot many challenges in
innovating its drug.
•The cost of developing a new molecule had increased
drastically to between $75 million and $4 billion and it
took anywhere from 10 to 15 years to develop and
launch a new molecule commercially.
•Price controls by governments were on the rise. The
degree of regulation depends on the country and type
of product.
Cipla Global Ltd.: Generic versus Drug Discovery Page 18

19. Challenges in Partnerships
•Partnering with a Western MNC to engage in
collaborative research and thereby gain the status of a
research-oriented drug manufacturer seemed more
plausible.
•Each option required careful consideration before a
decision could be taken.
Cipla Global Ltd.: Generic versus Drug Discovery Page 19

20. Challenges in Boosting sales
•Generics market is extremely competitive with low
entry barriers
•Thin profit margins
•Lack of distribution network to increase sales volume
in other countries
•Increasing cost structure due to rise in prices
Cipla Global Ltd.: Generic versus Drug Discovery Page 20

21. Suggestions: Off-Shoring
•Off-shoring and milestone based research partnership
with other MNC.
•Cipla is well poised to take advantage of the large
amount of human resource available in India
•Lower production costs
•It will help Cipla in building up its capabilities
Cipla Global Ltd.: Generic versus Drug Discovery Page 21

22. Suggestions: Growth
•Growth in business via Drug development clinical
trials and sale of drugs
•Will help In license molecules by other MNC’s in
future as its R&D capabilities improve.
•Like Jubilant Biosys entered into 3 year deal with
Endo Pharmaceuticals to develop oncology drugs.
Cipla Global Ltd.: Generic versus Drug Discovery Page 22

23. Suggestions: Generic Intellectual
•Become a supplier of drugs for foreign MNC’s looking
for opportunity to buy or in-licence molecules from
Indian companies.
•Gain a title of generic intellectual contributor rather
than a cheap manufacturing base company.
•Help to gain more market internationally.
•Strengthen its presence in markets where Cipla has
less market share using the goodwill image.
•Take advantage of Compulsory licensing provisions
with help of indian government.
Cipla Global Ltd.: Generic versus Drug Discovery Page 23

24. Suggestions: M&A
•Acquire small pharmaceuticals companies(Generic
Manufacturers) in USA, Japan to increase it’s market
share in developed countries.
•Acquire supply chain in developed countries to
increase profit.
Cipla Global Ltd.: Generic versus Drug Discovery Page 24

25. THANK YOU
ANY QUESTIONS?
Cipla Global Ltd.: Generic versus Drug Discovery Page 25