145;Ranbaxy has created a high benchmark for future deals146;

Even at our first meeting with Daiichi Sankyo, we discussed possible alliances. Eventually, the discussion evolved to a stage where they said: 8216;we think we can do great work together; we would like to take a majority stake in your company8217;. It gradually became evident to us that if our family did not sell its entire shareholding, the probability of Daiichi Sankyo getting this majority stake was low. Emotionally, my first response was that I was not interested in selling my equity. But as a CEO, it was important that I took the right call for the company. The cost of this would be that I wouldn8217;t have any equity left in a company that my grandfather had started, that my father had taken global and that I was continuing to build on in an environment that is hostile to generics.

If this deal took the company to a different level, it would put us in a stronger position to fight back many of the challenges. I asked myself, if my father had been in my shoes, what would he do? The answer was loud and clear: take the right call for the company. It was a tough call. But once I was convinced, I carried the rest of the family with me. But the company hasn8217;t changed; it won8217;t change except it will become much stronger. The company8217;s core, its culture and Indianness have not changed.

8226;Sunny Verma: Can you clarify the amount of inflow resulting from this deal and how its approvals are going through?

Everything is on track. Approvals are also coming in on time. Actually, this deal has seen one of the fastest clearances for an open offer and the system has worked very efficiently in this case. In terms of value, the inflow figure is around

Rs 22,000 crore. At Rs 737 a share, we did not get a bad price. In fact, we got a fantastic price. There are two separate aspects here. I continue to be in the business, continue to run Ranbaxy as a professional CEO. This is the largest transaction in Indian Inc for any listed company. It8217;s a path-changing transaction in the pharma landscape, globally. It8217;s the first time that a young man of 35 years, who has been very aggressive in buying companies, decided to become a manager in the company he had previously owned. The great thing is that we put our terms on the table; we didn8217;t budge where we didn8217;t want to budge and we got what we wanted, whether this was in terms of price or in terms of the management of the company.

8226;Soma Das: Did it cross your mind that this is a Japanese company and that Japanese companies have a reputation of being scrupulous?

When you make a deal, you don8217;t look at anything in isolation. Instead, you consider the hard facts and the soft facts together. As for Japan as a country, it8217;s certainly relationship focussed. Word and trust matter, they are part of Japanese culture. Actually, they are a part of Asian culture in general, not just Japan.

8226;Kakoli Chatterjee: Japan is the second largest pharma market in the world. How will the Daiichi Sankyo alliance help you in this market?

The Japanese market has been stagnant at around 70 billion for some time now. It8217;s very hard to enter the Japanese market but Ranbaxy has already done this successfully. I see a big opportunity for growth as there is a huge healthcare deficit in Japan, which is helping to bring in many pro-generics reforms. Ranbaxy and Daiichi Sankyo will add up to be the second largest pharma company in Japan.

8226;Malvika Chandan: How will this deal make a difference to Ranbaxy employees?

Ranbaxy will not be run and managed by Daiichi Sankyo, but by a board that will be chaired by me. So firstly, there is absolutely no change in the running and management of the company. Secondly, I don8217;t look at this as an acquisition but as a coming together of two companies. Daiichi Sankyo has around 15,000 employees and Ranbaxy has around 12,000. And there is going to be no change in how the employees are going to work. What must happen is that the series of opportunities that we have identified as ones we can exploit together must be exploited.

8226;Anandita Singh Mankotia: When the deal was announced, how did your peers in the industry respond?

We are focussed on our own goals instead of on what people are saying around us. As for my peers, some of them told me that Ranbaxy has created a very high benchmark for any future deals. Broadly speaking, the industry understands that this is the way to go forward to the next level. Whatever they may or may not admit to the media, this is what8217;s being said in boardrooms8212;that Ranbaxy has shown a futuristic vision.

8226;Soma Das: You have now got a huge sum of money. Where will you invest this money?

Over the last seven years, while a part of the family8217;s wealth was in Ranbaxy shares, we had also traded in healthcare and financial services. With the Ranbaxy part of the family8217;s business converted from shares into cash, the money will be added on to whatever other opportunities we have been pursuing. Every business can make money, but the question is, why are we in healthcare? This goes back 10 years: in the mid-nineties, we had a very clear sense that healthcare facilities in India were not up to the mark. My family8217;s goal was to redefine the space, bring in the best capabilities, doctors, and equipment and make world-class healthcare available to our people at affordable prices. If we can make the experience of receiving healthcare both non-threatening and affordable, which is what we have tried to do and hence reached the second spot within seven years, we will soon be in the top spot.

In financial services, when we started out, we were flying under the radar. But one fine day, people woke up to see how we had a pan-India retail network. What we at Ranbaxy have been able to do by taking pharma global, I see happening at Religare with financial services.

8226;Soma Das: Do the recent FDA restrictions pertain only to the manufacturing process or does it also cover the efficacy of your products?

The FDA8217;s testing and review has led the agency to conclude that there is no reason to question the safety, quality or effectiveness of Ranbaxy8217;s drugs. FDA has advised the US consumers to continue using medication manufactured by Ranbaxy as there is no evidence of harm being caused to the patients. We will continue to cooperate with the FDA to resolve the issues swiftly.

8226;Dhiraj Nayyar: Did price control perversely play a role in the internationalisation of the Indian pharma industry, driving it to look to foreign markets because the domestic ones were quite limited?

I think the process patent regime since the seventies has certainly been one of the cornerstones of why the Indian generics industry has evolved. But Indian companies have gone global because of their vision and entrepreneurship rather than because of government policy. Our growth was driven by Dr Singh8217;s clear and simple vision that if we wanted to be a global player, we couldn8217;t restrict ourselves to a market that was only one per cent of the global market. That8217;s what took Ranbaxy outside India. Also, we believe that price control is not the best way to manage the pharma industry in today8217;s environment. Today, we have more than 20,000 pharma companies in India and there are more than 5,200 competing brands for every single product. Such a competitive and fragmented market doesn8217;t call for price controls.

8226;Dhiraj Nayyar: What are your comments on Trade-Related Aspects of Intellectual Property Rights TRIPS?

On TRIPS, Ranbaxy8217;s stand is WTO compliant but we also recognise that protecting innovation should not take the form of undue protections.

8226;Dhiraj Nayyar: Is it difficult to convince American doctors to prescribe Indian generics?

Ranbaxy is a global company and our products are sold in 150 markets. In many markets we have a field force. Of course, many developed markets are substitution markets, where it8217;s not the doctor but the pharmacist who has a significant say in the choices. The pharmacist goes by many factors like pricing and supply, where we already enjoy a strong position. Coming together with Daiichi Sankyo will put us in a better position.

8226;Radhika Sachdev: Research and Development is a key driver of the pharma industry. How will you ensure that you maintain a strong pipeline of talent, given the restraints in the Indian education sector?

The supply side of talent8212;technical talent8212;needs a lot of work, especially because the industry8217;s demands are only going to increase in the coming years. Also, the gestation period between taking the right decisions, creating the right institutes and arming people with the right degrees is not insignificant. In the face of this time lag, there is no short-term answer. We need more public-private partnerships to create institutes like the one Manmohan Singh had created in Mohali, which is the first institute for pharmacy in the country. I think the industry needs to play a proactive role with the government to create such institutes and give employment to their graduates. Secondly, as far as companies like Ranbaxy and others are concerned, since we are the leaders in the pharma sector, we will not really suffer because the best talent will always first come to us.

8226;Mihir Sharma: Do you think there is enough scientific research being done in India?

Basic scientific research is at an evolutionary stage in India, although you will see a lot of things happening in the next 10-15 years. Frankly, where the research happens doesn8217;t make a difference. What8217;s important is its outcome, how quickly you patent it and bring it to the market and make it commercially successful. Of course if the research happens in India, it can happen faster and in a more cost-effective manner. However, the cost of the innovation is not that important, because you can use the patent time to maximise your gains. What we need are more efficient processes of interaction with academic institutions in India and abroad.

8226;Radhika Sachdev: Would you say Indian pharma has been concentrating on re-engineering rather than innovating?

The process patents have certainly helped the Indian industry evolve to its current scale and size. But as the industry has evolved, it8217;s important for companies to move up the value chain, from generics to drug delivery to biotechnology to drug discovery. Ranbaxy has been a proponent of the product patent regime. But we need to have a balance, encouraging innovation but also ensuring that generics come into the market at the right point in time. The company mission that we put out in 1993 is very clear on the fact that we want to become a research-based international company and leverage revenues from proprietary products.

8226;Radhika Sachdev: When taking medicines, many patients find it hard to understand their benefits and their possible harmful effects. Your comment?

On over-the-counter products, things are a lot simpler. On prescription products, our system, like most systems in the world, depends on the doctor8217;s advice. Most patients accept whatever is prescribed to them by the doctor. The more informed patients might get into a dialogue with their doctor to understand the prescription and maybe even get it changed. Many pharma companies today, including Ranbaxy, also have helplines, websites and leaflets to help educate the consumers. Patients are also researching various ailments on the Internet these days. Perhaps we can make this information more patient-friendly, but the doctor8217;s word is the final word.

8226;Sunny Verma: Do you think you have overplayed the manager8217;s role and underplayed the entrepreneur8217;s role?

Due to my upbringing and the fact that I have seen my father at work and Ranbaxy evolve in front of me, step by step, I am keenly aware of my responsibilities. When I walk into office, it is never with the mindset of an owner. Instead, I always operate from the perspective of an executive, an entrepreneur and a businessman. Of course, it helps that I work with a board that is very demanding and independent.

Transcribed by Renuka Bisht