A Study To Determine Whether New Product Launch

Process Is The Key Success Factor For A Pharmaceutical Company In The Domestic Market, Done At Dr Reddys Laboratories Ltd, Hyderabad. Organization Study
Submitted to

Mahatma Gandhi University, Kottayam

In partial fulfillment of the requirements for the award of

Masters Degree in Business Administration (2010 - 2012) By Nima Muraleedharan, Reg No:21833

Rajagiri College of Social Sciences Rajagiri P.O. Kochi - 683104

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DECLARATION

I, Nima Muraleedharan, hereby declare that this project report entitled A Study To Determine Whether New Product Launch Is The Key Success Factor For A Pharmaceutical Company In The Domestic Market is prepared in partial fulfillment of the requirement for the award of the degree in Master in Business Administration during the academic year 2010 - 2011 under the guidance of Prof. Jose Varghese, Faculty Member, Rajagiri Center for Business Studies and Mr. Sunil Menon Associate Director, SCM, Dr Reddys Laboratories Ltd. I also declare that this project has not been submitted to any other institution for the award of any other degree.

Place: Cochin

Date: Nima Muraleedharan

ACKNOWLEDGEMENT

I am forever indebted to the Lord Almighty for being with me throughout and in all my endeavors. His grace was sufficient for me. I express my sincere and heartfelt gratitude to my Project guide Mr. Sunil Menon, Associate Director, SCM, Dr Reddys Laboratories LTD for providing me an opportunity to fulfill my dream of doing my summer project at Dr Reddys Laboratories LTD.

I am thankful to Mr. Somasundar (Deputy Manager, SCM) Mr. K Sudhakar (Senior Manager, SCM) Mr. Umangg and Ms Gita environment to conduct the study. for all the facilities they provided for a conducive

I am greatly indebted to my faculty guide, Prof. Jose Varghese, Rajagiri Center for Business Studies for his kind guidance and helpful suggestions in every stage of this project. I am thankful to all the personnel at Dr Reddys Laboratories Ltd who participated in my study for sparing their time and valuable comments without which I would never have been able to complete this project. I acknowledge my indebtedness to my parents and friend and fellow intern Mr Joffin Raju Joseph for their constant love and support rendered. I express my sincere gratitude to other countless people who have been generous with time, their support and encouragement.

TABLE OF CONTENTS

Chapter No.
Chapter 1

Particulars
Executive summary Organizational study - Industry profile - Company profile

Page No. 5 6- 38 6-19 20-38 43-46 47-76 77-78 79

Chapter 2 Chapter 3 Chapter 4 Chapter 5

Research methodology Data analysis and interpretation Findings Conclusion Bibliography Annexure

EXECUTIVE SUMMARY
Dr Reddys Laboratories (DRL) Ltd. founded in 1984 by Dr K Anji Reddy is one of the leading pharmaceutical companies in India. The company has a strong product portfolio of more than 140 products, including niches like oncology and hormones, and Dr Reddys is the third ranked API player globally. DRL caters to a number of markets worldwide including India, US, Canada, Europe, Japan and Russia. Dr Reddys India market contributes 1044 crores (13.9%) of overall revenue. New product launches in domestic market is considered to be a key success factor in growing top & bottom lines. Considering the last three financial years of DRL it is evident that the revenue generated from the new products has been significantly increasing. In the last financial year (2010-11) the revenue generated by the new products formed 31.2% of the total revenue(domestic market). This shows that new product launches are important to the companys continuing viability. In the scenario of such a success, it was an ideal time to conduct a study on the New Product Launch Process for the domestic market and understand the key areas where the process can be improved to ensure the continuing success of the launches. The study was conducted over a time period of 6 weeks in which the necessary data was collected through personal interviews and the analysis of annual reports & other data. Key people from all the departments involved were met and discussions with the various personnel helped understanding that during the execution of the launch (from selection to marketing) the Company faces a large number of challenges. The key challenges are detailed in the report. At the end of the study, statistics gathered from the annual reports and marketing department showed that new product launches are indeed the key success factors for the Company in the domestic market. A new product launch is an extremely complex process with integrated work from various departments. Though the key challenges were identified, due to time constraint, a deep study of the process could not be done to identify the solutions. The report ends with further scope to conduct a study on the solutions that can be considered for the key challenges identified.

ORGANIZATIONAL STUDY

INDUSTRY PROFILE

Introduction: Indian pharmaceutical industry has been growing at record levels in the recent years but now has unprecedented opportunities to expand in a number of fields. The domestic industrys long established position as a world leader in the production of high quality generic medicines is set to reap significant new benefits as the patents on a number of blockbuster drugs are scheduled to expire over the next few years. In addition, more and more governments worldwide are seeking to curb their soaring prescription drug costs through the greater use of genetics. These opportunities are presenting themselves not only in Indias traditional wealthy client markets such as the US and European Union nations but also in emerging economies with vast populations such as Africa, South America, Asia and Eastern and Central Europe. In addition, Indias long established position as preferred manufacturing location for multinational drug manufacturers is quickly spreading into other areas of outsourcing activities. Soaring costs of R&D and administration are persuading drug manufacturers to move more and more out of their discovery research and clinical trial activities to the subcontinent or to establish administration centers there, capitalizing on Indias high level of scientific expertise as well as low wages. Both multinational and local drug manufacturer could eventually benefit from the market potential of Indias population of over one billion. A large market will likely open up as the result of a projected boom in health insurance, an area in which the country is currently woefully underdeveloped. New government initiatives seek to enable the majority of the population to access the life saving drugs they need, while even greater opportunities may be presented by the rise of the new Indian consumer. This group- urban, middleclass and wealthy- live fast-paced Western-style life and as a result they are beginning to suffer from western life lifestyle related illnesses, for which they want and can afford, innovative drug treatments. This untapped

domestic market is also highly attractive to the MNCs, which recently have returned to India in large numbers.

Now, MNCs and domestic companies are starting to work together, utilizing each others strength for their mutual benefit. For the foreign firms this includes not only the Indian companies research and manufacturing capabilities and their much lower operational cost levels, but also comprehensive marketing and distribution networks operating through Indias vast territories.

Industrial Background The Indian pharmaceutical sector has come a long way, being almost non-existent before 1970 to a prominent provider of healthcare products, meeting almost 95 per cent of the country's pharmaceuticals needs. The Industry today is in the front rank of Indias science-based

industries with wide ranging capabilities in the complex field of drug manufacture and technology. It ranks very high in the third world, in terms of technology, quality and range of medicines manufactured. From simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously. Indian Pharma Industry playing a key role in promoting and sustaining development in the vital field of medicines, boasts of quality producers and units approved by the regulatory authorities of USA and UK. International companies associated with this sector have stimulated, assisted and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world. The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units with severe price competition and government price control. It has expanded drastically in the last two decades. There are about 250 large units that control 70 per cent of the market with market leader holding nearly 7 per cent of the market share and about 8000 Small Scale Units together which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical formulations. Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. 8

Technologically strong and totally self-reliant, the pharmaceutical industry in India has low costs of production, low R&D costs, innovative scientific manpower, strength of national laboratories and an increasing balance of trade. The total Indian production constitutes about 13 per cent of the world market in value terms and, 8 per cent in volume terms.

A brief history The first Indian Pharmaceutical Company, the Bengal Chemicals and Pharmaceutical Works, which still exist as one of 5 government owned drug manufacturers, appeared in Calcutta in the 1930. The other four are: Indian Drugs and Pharmaceuticals Ltd.(IDPL) Rajasthan Drugs and Pharmaceutical Ltd. (RDPL) Karnataka Antibiotics and Pharmaceuticals Ltd. (KAPL) Hindustan Antibiotics Ltd. (HAL)

For the next 60 years, most of the drugs in India were imported by multi nationals either in fully formulated or bulk form. The government started to encourage the growth of drug manufacturing by Indian companies in the 1960s, with the Patents Act in the 1970, enabled the industry to become what it is today. The patent act removed the composition patents from food and drugs, and though it kept process patents it was reduced to a period of 5 to 7 years. The lack of patent protection made the market undesirable to the multinational companies that had dominated the market, and while they streamed out Indian companies started to take their places. They carved a niche in both Indian and world market with their expertise in reverseengineering new processes, for manufacturing drugs at low cost.

The Changing Prescription As per WTO, from the year 2005, India granted product patent recognition to all new chemical entities (NCEs) i.e., bulk drugs developed then onwards. This introduction of product patent

regime from January 2005 is leading into long-term growth for the future which mandated patent protection on both products and processes for a period of 20 years. Under this new law, India will be forced to recognize not only new patents but also any patents filed after January 1, 1995. Under changed environment, the industry is being forced to adapt its business model to recent changes in the operating environment.

R&D
Model 1 - Integrated operations

Manufacturing

Marketing
Traditiona l Business models in Indian Pharma Industry

Model 2- In-house manufacturing and marketing of own product

Model 3Contract R&D Model 4manufacturing for CM & Supplies Model 5Contract and co marketing alliance

DD &D

CT O

Emerging Business models in Indian Pharma Industry

Indian pharmaceutical industry is mounting up the value chain. From being a pure reverse engineering industry focused on the domestic market, the industry is moving towards basic research driven, export oriented global presence, providing wide range of value added quality products and services, innovation, product life cycle management and enlarging their market reach. The old and mature categories like anti-infective, vitamins, analgesics are de-growing while; new lifestyle categories like Cardiovascular, Central Nervous System (CNS), and Anti Diabetic are expanding at double-digit growth rates. The Indian companies are putting their act together to tap the generic drugs markets in the regulated high margin markets of the developed countries. The

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US market remains to be the most lucrative market for the Indian companies led by its market size and the intensity of blockbuster drugs going off patent. Outsourcing in the fields of R&D and manufacturing is the next best event in the pharmaceutical industry. Spiraling cost, expiring patents, low R&D cost and market dynamics are driving the MNCs to outsource both manufacturing and research activities. India with its apt chemistry skills and low cost advantages, both in research and manufacturing coupled with skilled manpower will attract a lot of business in the days to come. The Indian Government's decision to allow 100 percent foreign direct investment into the drugs and pharmaceutical industry is expected to aid the growth of contract research in the country. MNCs in India are facing the problem of having a very high Drugs Price Control Order (DPCO) coverage, weakening their bottom lines as well as hindering their growth through the launch of new products. DPCO coverage is expected to be diluted further in the near future benefiting the MNCs.

Emerging Trends: The Indian pharmaceutical industry is now discovering new opportunities of growth in clinical research, contract research, manufacturing and innovation opportunities. This path can lead the Indian pharmaceutical industry to huge success endeavors. 1. Research & Development Research & Development is the key to the future of pharmaceutical industry. The pharmaceutical advances for considerable improvement in life expectancy and health all over the world are the result of a steadily increasing investment in research. There is considerable scope for collaborative R & D in India. India can offer several strengths to the international R & D community. These strengths relate to availability of excellent scientific talents who can develop combinatorial chemistry, new synthetic molecules and plant derived candidate drugs.

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The R & D expenditure by the Indian pharmaceutical industry is around 1.9 per cent of the industrys turnover, which is a little low as compared to foreign research based pharmaceutical companies. However, now that India is entering into the Patent protection area, many companies are spending relatively more on R & D. Indian Pharmaceutical Industry, with its rich scientific talents, provides cost-effective clinical trial research. It has an excellent record of development of improved, cost-beneficial chemical syntheses for various drug molecules. Some MNCs are already sourcing these services from their Indian affiliates. 2. Product Development For years, firms have made their ways into the global market by researching generic competitors to patented drugs and following up with litigation to challenge the patent. This approach remains untouched by the new patent regime and looks to increase in the future. However, those that can afford it have set their sights on an even higher goal: new molecule discovery. Although the initial investment is huge, companies are lured by the promise of hefty profit margins and the recognition as a legitimate competitor in the global industry. 3. Domestic Demand The industry has enormous growth potential. Factors listed below determine the rising demand for pharmaceuticals. The growing population of over of a billion Increasing income Demand for quality healthcare service Changing lifestyle has led to change in disease patterns, and increased demand for new medicines to combat lifestyle related diseases More than 85 per cent of the formulations produced in the country are sold in the domestic market. India is largely self-sufficient in case of formulations. Some life saving, new generation under-patent formulations continue to be imported, especially by MNCs, which then market them in India.

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Fig 2

Market Share of Different Pharmaceutical Product Categories

4% 2% 5% 5% 5% 5% 10% 10% 10% 11% 10% Anti Infective 7% 17% Gastro Intestinal Cardiac Respiratory Vitamins/Minerals/Nutrients Pain/Anagesic Dermatological Gynaecology Nuro Psychatry

Demand for drugs for treatment of lifestyle-related diseases such as diabetes, cardiovascular diseases, and central nervous system are on the increase. Historically, the low cost of domestically produced drugs together with government controlled prices, and the absence of patent regulations had made the market less attractive for foreign players. With the new patent laws in place the market scenario has changed. Indian market has become attractive for foreign companies.

Opportunities and challenges: Opportunities: The main opportunities in the Indian Pharmaceutical Industry are in the areas of: Generics Biotechnology 13

Outsourcing Contract manufacturing

1. Generics: By the year 2007-2008, drugs worth $40 billion in the US and $ 25 billion in the Europe lost their patent protection. Indian firms have taken over 30% of the global generics market. Low production costs give India an edge over other generics world markets, especially China and Israel. It will be easier for Indian firms to win larger generics market shares overseas than at home, particularly in the US and Europe. Indian manufacturers export their products to more than 65 countries in the world. The largest customer of the Indian pharmaceutical company is the US.

2. Biotechnology: In the past years, biopharmaceuticals accounted for 60% of Indias total biotechnology markets, which was worth an estimated $709 million- up 39 % over the previous period. With 200 biotech companies and total revenues of $500 million annually, Indias biotechnology sector is still in the developmental stage. However, it is growing fast with initial emphasis on vaccines and bioservices. The industry is situated mainly in Karnataka, although there are operations in Andhra Pradesh, Hyderabad, Kerala, Maharashtra and West Bengal.

3. Outsourcing: Indias status as an information technology superpower, with access to specialized skills and 24X7 work hours is a huge advantage, as it strengthens its position as the destination of the choice for contract research including drug-discovery. Eighty-two percent of US companies overall rank India as their first choice in IT outsourcing destination. IT and IT enabled services (ITES) have been expanding their activities in India to new business segments such as bioinformatics and life sciences: those doing so or planning to do so include Accenture, Intel, Satyam, Cognizant, IBM, Oracle and TCS. 14

Indias other advantages for off shoring Low cost skill base Current Good Manufacturing Practice (GMP) and US FDA compliance level High Visibility in generics High quality, compliant manufacturing Strong financial position with ability to scale up Manufacturing capacity Access to new technologies Cost efficiency and track record Industry position Recognition of product patents

4. Contract manufacturing: The global pharmaceutical market is estimated to represent a $48 billion opportunity for India, in terms of: Manufacturing outsourcing supply of Active Pharmaceutical Industry (API) and Intermediates Development outsourcing conducting clinical and pre-clinical trials. Customized chemistry services- contract research services for compounds pre-launch.

Challenges: 1. Underdeveloped new molecule discovery program The main weakness of the industry is an underdeveloped new molecule discovery program. Even after the increased investment, market leaders such as Ranbaxy and Dr. Reddys Laboratories spent only 5-10 per cent of their revenues on R&D, lagging behind Western pharmaceuticals like Pfizer, whose research budget last year was greater than the combined revenues of the entire Indian pharmaceutical industry.

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2. Hue & cry against exploitation In clinical testing persons from developing countries will be used to generate data about possible effects of a drug. A feeling of unrest among them or some section of society might develop that we are being used as guinea pigs. It might lead to demonstrations or legislations which will hamper the growth of industry. 3. Back lash against outsourcing Similar to BPO there might be unrest in developed nations that outsourcing of clinical trials will lead to job loss culminating into legislation banning the whole procedure. 4. IP leakage IP leakage is one of the major concerns by companies outsourcing research work to India. So any major incident of IP leakage by Indian company can taint the image of whole industry. 5. Restricted items There are a lot of items that are restricted under the EXIM policy from free trading. These restrictions are a weakness for the industry and hence pose to be a threat for its development. 6. Reservation for small scale industries Some drugs are reserved for exclusive manufacture by the small scale units. These are Niacinamide, Paracetamol, Glycero Phosphates, Nicotinic Acid. Corporate Catalyst India Indias Pharmaceutical Industry. The present investment limit for units to qualify as a small scale unit is Rs. 30 million. 7. No brand value India has a low beep on the radar screen of MNC drug companies as no potential clinical testing has been ever outsourced to India. So we have a low brand value in global arena.

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Growth drivers: Indias population is just over one billion at present and projected to rise to 1.6 billion by 2050 and India will become the worlds most populous country. It is estimated that by 2025, 189 million Indians will be 60 or older up. This projection shows the demand of pharmaceutical drugs will rise in coming years. Indian government has framed a favorable policy to boost foreign investment in the pharmaceutical sector. Tax holidays are offered to industrial operations established in specified Special Economic Zone or under developed areas, deduction of profits earned from exports, liberal depreciation allowances, deduction of capital R & D expenditure; and relief on all contributions to approved domestic research institutions are some examples. Foreign Direct Investment up to 100 per cent is permitted through the automatic route and Automatic approval for Foreign Technology Agreements also is available in the case of all bulk drugs cleared by Drug Controller General (India), all their intermediates and formulations, except those restricted by the Government of India. India has excellent skilled and educated manpower. There are 115,000 scientists with their masters degrees and 12,000 with Ph.D. in chemistry alone pass out every year. Clinical trials account for over 40 per cent of the costs of developing a new drug, and Rabo India Finance (a subsidiary of the Netherlands based Rabo Bank) estimates that a standard drug could be tested in India for as little as $ 90 million 60 per cent of the sum it would cost to test in the US. Maximum US FDA approvals outside USA are with Indian Companies approximately 197. Largest No. of US Drug Master Files (DMF) 213 (38 per cent of DMFs filed in First half of 2005 are from India)

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Vision 2020: 1. Responsibilities and Resources would make an important beginning in the transition of efficient and effective use of pharmaceutical in building a prosperous and healthy India. 2. The Government should take immediate steps to remove the anomalies in the Indian Pharmacopoeia Commission created by it, and give necessary teeth to truly function as an independent and autonomous scientific body. 3. The Indian pharmaceutical industry shall ensure that essential drugs at affordable prices are available to the vast population of this sub-continent and also continue providing employment for millions. 4. India shall implement all the rules and regulations, which guide, monitor and control the activities of the providers of the healthcare system in the country and shall Corporate Catalyst India, Indias Pharmaceutical Industry examine the way to bring them up to international standards. The government should implement the recommendations of Mashelkar committee and constitute the Central Drug Authority at the earliest. 5. The basic course of education should be designed to ensure that the newly qualified pharmacist has the necessary knowledge and skills to commence practicing competently in a variety of settings including community and hospital pharmacy and the pharmaceutical industry. Concept of National schools of pharmacy should be established to develop and introduce model curriculum. 6. Pharmacists should become knowledgeable to participate in medication management and outcome monitoring. Pharmacy profession should orient concept of pharmacy practice at community and hospital pharmacies through appropriate training and compensation. 7. India will emerge as a major global player in the field of pharmaceuticals exports and as a provider of quality medicines at low costs. It shall also emerge as a major player in the generic drugs market in USA and Europe.

8. The pharmacy profession will make the clinical trial industry in India to grow to over a billion dollars in the next five years and position itself as a destination of choice for CRO services by way of strict implementation of patent laws, single window clearance of clinical trial protocols by regulatory clearances and shall accord industry status to this sector.

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9. India shall attain new heights in herbal drugs research in shaping Indian Systems of Medicine into a popular system of medicine of the future for holistic health care and ensuring health care for all - especially for the welfare of the poor. 10. Indias Patents Act should ensure that it does not exceed the requirements of TRIPS, and that prioritizes access to medicines and public health, while retaining the right to

participate in the compulsory license scenario. India should lead a movement of developing nations and create a TRIPS south and G-20 alliance is a step in that direction. 11. The Government should take immediate steps to remove the anomalies in the Indian Pharmacopoeia Commission created by it, and give necessary teeth to truly function as an independent and autonomous scientific body.

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COMPANY PROFILE

Introduction: Dr. Reddy's Laboratories Ltd. founded in 1984 by Dr. K. Anji Reddy, has become Indias biggest pharmaceutical company. Reddy's manufactures and markets a wide range of pharmaceuticals in India and overseas. The company has over 190 medications, 60 active pharmaceutical ingredients for drug manufacture, diagnostic kits, critical care, and biotechnology products. Dr Reddys transformed industry sobriquet from Imitators to Innovators. It was the 1st Indian Pharma Company to take up Drug Discovery research. Dr. Reddy's began as a supplier to Indian drug manufacturers, but it soon started exporting to other less-regulated markets that had the advantage of not having to spend time and money on a manufacturing plant that that would gain approval from a drug licensing body such as the U.S. Food and Drug Administration (FDA). By the early 1990s, the expanded scale and profitability from these unregulated markets enabled the company to begin focusing on getting approval from drug regulators for their formulations and bulk drug manufacturing plants in more-developed economies. This allowed their movement into regulated markets such as the US and Europe. By 2007, Dr. Reddy's had six FDA-plants producing active pharmaceutical ingredients in India and seven FDA-inspected and ISO 9001 (quality) and ISO 14001 (environmental management) certified plants making patient-ready medications five of them in India and two in the UK.

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About the founder: Dr. K. Anji Reddy did his B.Sc. tech in Pharmaceuticals and Fine chemicals from Bombay University and PhD in Chemical Engineering from National Chemical Laboratory, Pune, (1969) the founder Chairman of Dr. Reddys Laboratories Limited (Dr. Reddys). He served in the stateowned Indian Drugs and Pharmaceuticals Limited (1967-73), was founder-Managing Director of Uniloids Ltd (1976-80) and Standard Organics Limited (1980-84). Under Dr. Anji Reddys leadership, Dr. Reddys has become a pioneer and a trendsetter in the Indian Pharmaceutical industry. Dr. Reddys has become the first company to take up drug discovery research in India (1993) and has led the industry from being- dubbed as copycats for several years to now being acknowledged as Innovators. Dr. Reddys was listed on the New York Stock Exchange the first non-Japanese Asian pharmaceutical company to list on NYSE in April 2001 (RDY). Dr. Reddy is a serving member of the Prime Ministers Council on Trade & Industry, Government of India, and has been nominated to the Board of National Institute of Pharmaceutical Education and Research (NIPER). He is also a Member of the Board of Governors of Institute of Chemical Technology, University of Mumbai. Dr. Reddy chairs the Governing Body of Hyderabad Eye Research Foundation. Naandi Foundation, a not-for-profit development institution that strives for eradication of poverty has Dr.Reddy as its founding father. He is also founder-Chairman of Dr Reddys Foundation for Human & Social Development, a social arm of Dr. Reddys. Dr. Reddy has been the recipient of several awards and honors. Notable among them are the Sir P. C. Ray award, twice conferred on Dr. Reddy by Indian Chemical Manufacturers Association (1984, 1992) and the Federation of Asian Pharmaceutical Associations (FAPA)s FAPA-Ishidate Award for Pharmaceutical Research in 1998. He was voted Businessman of the Year by Indias leading business magazine Business India in the year 2001. For his pioneering work and introduction of affordable medicine, CHEMTECH Foundation has bestowed on him the Achiever of the Year award in the year 2000 and the Hall of Fame award in 2005, for his Entrepreneurship, Leadership and thrust on Innovation.

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Corporate Overview: Dr Reddys is an integrated global pharmaceutical company. They define the purpose of their existence as Providing Affordable and Innovative Medicines for Healthier Lives. Dual Impact Approach of the Company: Improve accessibility through generic pharmaceuticals Satisfy unmet medical needs through new and improved pharmaceuticals

Dr Reddys is committed to progressive governance and as a part of this adopted international governance practices & processes. The Company gas vowed commitment to highest standards of disclosures & transparency. Dr Reddys is the only Pharma company from India to be listed on the New York Stock Exchange. The hierarchy of the governance is as follows:

Board Board Committees Management Council Corporate Business Corporate Business Level Bottom- Up

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Work Culture and Work values: At Dr. Reddy's we foster a culture which is: Customer Focused and High Performance Entrepreneurial and Innovative Egalitarian and Trusting Flexible and Adaptive

Journey to excellence: Dr. Reddys Execution Excellence Model Enable execution excellence by simplifying business/enabling processes while adopting global best practices, design flexibility & scalability to meet changing business needs/ambitious growth plans Lean Manufacturing Drive Emphasis on reduction of process variation, Goal is to incorporate less low value human effort, less inventory, less time to develop products, and less space to become highly responsive to customer demand while producing top quality. Viable Vision Provide a Partnership to clients that deliver superior Inventory Turns, when all other parameters remain same for the Global Generics business. Substantially increase the productivity of the R&D resources while significantly improving the ability to complete projects on time.

DRL Headquarters: DRL World Headquarters is located in Hyderabad (Andhra Pradesh). The headquarters is beautifully designed according to environment of Hyderabad. The manufacturing units consist of all the essential facilities which are necessary for an organization. The collection of works is focused on major twentieth century art, and features works by masters. The gardens originally were designed by the world famous garden planner, Russell 23

Page, and have been extended by Franois Goffinet. The grounds are open to the public, and a visitor's booth is in operation during the spring and summer.

Company profile at a glance:

Type Traded as

Public NSE: DRREDDY BSE: 500124 NYSE: RDY NASDAQ: RDY

Industry Founded Headquarters Key people

Pharmaceuticals 1984 Hyderabad, Andhra Pradesh K Anji Reddy. Chairman GV Prasad, CEO

Revenue

`74,393 million Worldwide employees : 10900+

Employees

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Board and Management: The directors are experts in the diverse fields of medicine, chemistry and medical research human resource development, business strategy, finance, and economics. They review all significant business decisions, including strategic and regulatory matters. Every member of the Board, including the non-executive directors, has full access to any information related to The Company.

The board of Directors includes: Dr K Anji Reddy Mr. G V Prasad Mr. Satish Reddy Dr. Omkar Goswami Mr. Anupam Puri Dr. J P Moreau Ms. Kaipana Morparia Dr. Brucella Carter Dr. Ashok Sekhar Ganguly Chairman Vice Chairman, CEO Managing Director, Chief Operator Officer Independent Director Independent Director Independent Director Independent Director Independent Director Independent Director

Alliancing and Partnership: Dr. Reddys is actively pursuing a wide range of partnering interests that leverage its diverse product development activities, broad commercial presence, and unique infrastructure and capabilities. 1. Commercial Partnerships: Dr Reddys has a strong commercial presence in some of the largest and fastest growing pharmaceutical markets such as the US, UK, Germany, India, Russia, CIS, Romania and Venezuela. In all these markets, our strong product pipeline and customer focus have delivered successful product launches and increase in market share. In the unbranded generic markets, the Company has built a broad customer base, including all major retailers, wholesalers/ distributors, pharmacy benefit managers, regional/non warehousing

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chains and independents. Reddys have successfully in-licensed, co-developed, and acquired products with various partners in the US. Contract/ Outsourcing services: Custom Pharmaceutical Services (CPS) business is today a partner of choice for all the strategic outsourcing needs of innovators worldwide. With strengths in IP - advantaged product development & scale up, world-class manufacturing capability and a strong network of strategic partners, CPS provides integrated services to their partners, including extensive Chemistry & Process R&D expertise (including steroids, cytotoxic and hormonal APIs), cGMP compliant API & USFDA inspected finished dosages manufacturing. 2. Product Development partnerships: Dr. Reddys vertically-integrated product development platform includes an R&D team of over 950 professionals that develop products across the entire pharmaceutical value chain Active Pharmaceutical Ingredients, Branded/Generic Formulations, Specialty Pharmaceuticals,

Biologics, and New Chemical Entities.

Partners and Acquisitions:

Partners: CLINTEC INTERNATIONAL: Dr. Reddy's and Clintec International are partners in the co-development of Anti-Cancer Compound DRF 1042. MERCK Dr. Reddys launches authorized generic versions of MERCKs Proscar and Zocor RHEOSCIENCE: Dr. Reddys Laboratories (NYSE: RDY) announced today that the Company has entered into a co-development and commercialization agreement with Denmark based Rheoscience. ROCHE: Dr. Reddys signs definitive agreement to acquire Roches API business at its Mexico facility Acquisitions:

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GlaxoSmithKline Penicillin Bus: In 2011, Dr. Reddy's Laboratories Ltd acquired the oral penicillin business of GlaxoSmithKline PLC, a London- based manufacturer of pharmaceuticals.

Jet Generici Srl: Reddy Pharma Italia SpA, a unit of Dr Reddys laborites Ltd of India, acquired Jet Generici Srl, a wholesaler and retailer pharmaceuticals and generic finished dosages.

Betapharm: In 2006, Dr Reddy's Laboratories Ltd of India acquired Betapharm Arzneimittel GmbH (BA), an Augsburg-based manufacturer of pharmaceuticals.

Trigenesis Therapeutics Inc: In 2004, Dr Reddy's Laboratories Ltd acquired Trigenesis Therapeutics Inc, a manufacturer of dermatology prescription pharmaceuticals.

Dr Reddys Businesses: Indias largest pharmaceutical company by revenue, Dr Reddys Laboratories Ltd (DRL) .The Company consists of Active Pharmaceutical Ingredient Business (API),Custom Pharma Services (CPS), Generics, Generics Biopharmaceuticals, Differentiated Formulation, New Chemical Entities (NCEs).

PSAI & Custom Pharmaceutical Ingredients

Global Generics

Proprietary Products

AN INTERGRATED GLOBAL PHARMACEUTICAL COMPANY

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PSAI (Active Pharmaceutical Ingredients): Dr. Reddy's offers an unparalleled portfolio to the customers, who include innovators and generic formulators worldwide. With a strong product portfolio of more than 140 products, including niches like oncology and hormones Dr Reddys today the third ranked API player globally. More than 25 Products have been commercialized in Regulatory Markets and more than 100 in the near- regulatory markets. Strong relationships with the top tier global and regional generic players in key markets have also added to their success. Dr Reddys has a strong customer base servicing more than 800 customers spread over 100 countries and 6 continents.. Operation capabilities: The details regarding the operation capabilities of Dr Reddys in this field are: Capabilities in Major Chemistries State-of-the-art equipment and Instruments 24 8 FDA-inspected plants, 6 in India, 1 in Mexico and 1 in Mirfield, UK Fully integrated Operations Environmental Compliance Supply chain and ERP systems(SAP R/3) Contributing to a sustainable world with zero liquid discharge systems

Custom Pharmaceutical Ingredients1: Custom Pharmaceutical Services (CPS) business serves several innovators, both Big Pharma and emerging biotech, and a large number of emerging Pharma companies. Within a short span, The Company has become the largest CPS player from India and a partner-of-choice to innovators, offering top-end technical expertise, tailor-made Pharma solutions and a track record of bringing innovations to the market quickly, efficiently and economically.

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Operation capabilities: R&D Facilities Three Centers with over 300 chemists & engineers well-skilled in cGMP requirement Separate Labs for Formulation development. Total strength of 60 scientists Organic Chemistry Labs Formulation Development Analytical Labs Unique Manufacturing Capabilities 21 3 3 Steroid and Cytotoxic

Generics: There are two kinds of generic drugs: 1. Branded Generics: Branded Generics portfolio offers over 200 products in the major therapeutic areas of gastrointestinal, cardiovascular, pain management, oncology, anti-infectives, paediatrics and dermatology. Brands like Omez, Ciprolet, Nise, Enam, Ketorol, Exifine and Cetrine enjoy leadership positions in several key markets, including India, Romania, Venezuela, Russia & the CIS countries. 2. Unbranded Generics: In the unbranded generics space, the Company has capitalized on every opportunity to bring the high-quality products to more people around the world. The generics offerings deliver quality at cost-effective prices in the highly regulated markets of the United States, UK and Germany. In the US, Dr Reddys rank among the top 12 generic companies, with 34 product families being marketed and a large pipeline pending approval. In the UK itself, there are more than 30 products of the company in the market. The acquisition of betapharm, Germany's 5th largest generics company, further consolidated their presence in the European Union (EU), with 145 products in the market.

29

Global oncology - niche therapeutic area: Dr Reddys has the leading position in India in the area of oncology and the growth rate is estimated at approximately 40%. The company is leading in the Filgrastim and Oxaliplatin markets and has secures the second position in the Gemcitabine, Docetaxel and Temozolomide markets. The company is operating in US, Europe, India, Russia, South Africa & Brazil. Strong Biologics & Cytotoxic Manufacturing Infrastructure helps the Company to address the need of Oncology Market. Infrastructure Capabilities: API Facilities Six FDA-Inspected plants in India,one FDAInspected plant in Mexico, one FDA-Inspected plant in Mirfield Finished Dosage Units Six in India, With ISO 14001 and ISO 9001 certifications, Approved by USFDA, MHRA (UK), MCC (South Africa), TGA (Australia), ANVISA (Brazil), TPP (Canada) One FDA Inspected plant in USA One in India, audited by multiple regulatory agencies Custom Pharmaceutical Services Two Technology Development Centers (TDC) in India and one in Cambridge, UK

Biologics Facility

Key global markets: A Synopsis: Focus on US, Germany, India and Russia Wholly-owned subsidiaries in the USA, UK, Russia, Brazil, New Zealand, Turkey and Mexico Joint Ventures in China, South Africa and Australia Representative Offices in 16 countries

30

 India:

3rd party Distribution setups in 23 countries

Dr. Reddys began as an API manufacturer in 1984, producing high-quality APIs to first the Indian, and later, the international markets. In 1987, Dr Reddys started our formulations operations and, after becoming a force to reckon with in the Indian formulations market, went international in 1991. In India, The Company has a product portfolio of over 200 brands in major therapeutic areas, with an emphasis on gastro-intestinal, cardiovascular, pain management, oncology, antiinfectives, probiotic, pediatrics and dermatology.With a range of over 200 brands across 13 therapeutic areas, Dr. Reddys aims to further consolidate its position as an industry leader in the Indian pharma market. Germany: In Europe, Dr. Reddys is an emerging player in the generics space. Dr. Reddys Laboratories (UK) Ltd. was created through the acquisition of BMS Laboratories Ltd., and its wholly-owned subsidiary Meridian Healthcare, in April 2002. Within a short span of time, Dr. Reddys succeeded in taking a leading position in key genericized molecules. In other important markets like Italy, Spain, France, Nordic countries and the Netherlands, Dr. Reddys has partnered with established companies, thereby expanding its reach across the EU. North America: Established in 2001, Dr. Reddys North American Generics began marketing its finished dosageform products in the United States and Canada. Under the Dr. Reddys label, the company currently markets 38 prescription products in 168 dosing presentations (ie, strengths and package sizes). In addition, Dr. Reddys Private Label OTC Group, which was established in 2007, markets 8 different products in 139 packaging presentations. The Dr. Reddys North American Generics operations purpose is to provide affordable and innovative medicines for healthier lives. Dr. Reddys North American Generics understands and appreciates that every customer of pharmaceutical products the purchasing wholesaler/chain/retailer/pharmacy, the prescribing physician, the patient, and the payer has a choice. They have a choice of products, as well 31

as a choice of where to acquire those products. Knowing this, The Company strives daily to provide the best products at the best value (product, price, quality, service level, timing, etc.).

Shareholders: DRL (symbol: RDY) shares are traded principally on the New York Stock Exchange in the United States. The company is also listed on the NSE (symbol: DRREDDY) and BSE stock exchanges. DRL has consistently paid cash dividends since the corporation was founded. Share Holding Pattern on June 3, 2011 Promoters holding Individuals Companies Sub Total Indian Financial Institutions Banks Mutual funds Sub Total Foreign Holding Foreign Institutional Investors NRIs ADRs/Foreign National Sub Total Indian Public& Corporates TOTAL 169,391,818 100.00 2,692,699 31,712,668 78,657,673 24,165,434 1.59 18.72 46.44 14.27 44,252,306 26.12 444,048 9,369,468 23,150,899 0.26 5.53 13.67 No. Of Shares 4,289,484 39,128,328 43,417,812 13, 337, 383 % of Shares 2.53 23.10 25.63 7.87

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Integrated Product Development a strong platform: Dr Reddys has state of the art facility in IPDO the first of its kind in India. The IPDO has helped the company in creating a Prolific Global Generics Development Engine. The IPDO in the Bachupally Campus located in Hyderabad consists of

NO. OF PERSONNEL R&D Team Over 700

FUNCTIONS

Integrate the product development activity of APIs and Finished Dosages

Regulatory Team IP Team

Over 55

Increase speed, flexibility and reliability

Over 50

Effective combination of chemistry and formulation skills with legal, regulatory and IP expertise

Financial snapshot: Consolidated revenue for 2010-11 grew by 6% to `74,693 million. In the ten years between 2000-01 and 2010-11, your Companys revenue has been rising at a CAGR of 21%. The Companys EBITDA in 2010-11 was ` 16,789 millions, which was higher than the previous years EBITDA of `15,828 millions. Profit after tax at ` 11,040 millions in 2010-11 was also significantly greater than what it was in the previous year. Global Generics grew by 10% to ` 53,340 in 2010-11 from ` 48,606 in 2009-10. Revenues from PSAI de-grew by 4% to ` 19,648 millions in 2010-11 from ` 20,404 millions in 2009-10. Dr Reddys revenue in the various markets:

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Revenue From Global Markets

3% 6% 17% 16% Europe North America India

201 1
22% 36%

Russia CIS Others

Human Resources: The statistics of the employees of Dr Reddys is as follows: World Wide Employees India Germany Rest of Europe North America Rest of the world Research and scientific staff Marketing & sales force Manufacturing staff Nationalities 10900+ 8600+ 300+ 900+ 300+ 8600+ 1200+ 3800+ 3700+ 370140+

The aim of HR department at Dr Reddys is to Attract, Develop and Retain multi-skilled high-performers Create a learning organization 34

Develop and nurture young leaders Promote teamwork and collaboration Build a diverse workforce and meritocracy people

Corporate Social Responsibility: Dr Reddys is committed to access and affordability of medicines through a business model that prioritizes the manufacture of affordable generic medicines and investment in discovery of new molecules that meet unmet and poorly met medical needs. Reddys engage with the community at two levels, one being in and around the campuses with the active involvement of the employees and the other where-in The Company channels the wide network of social activities through Dr. Reddys Foundation (DRF) the social arm of Dr. Reddys Laboratories. Activity of DRF spans two broad areas of social intervention: Livelihoods and Education. The Company is also building the necessary capabilities and soft skills among medical support professionals, through Dr. Reddys Foundation for Health Education (DRFHE) programs with an aim to strengthen the healthcare delivery system.

Achievements: In the year 2011: NHRD Inspire award 2011 for Learning & Development for organization best practices in the area of competency framework in the Non-IT sector Best CSR in the Pharmaceutical Sector at the India Shining Star CSR Awards 2011 Dr. Anji Reddy conferred with Padma Bhushan the third highest civilian award by the Government of India. In the year 2010: NDTV Profit Business Leadership Awards 2010: Business Leader in the Pharmaceutical Sector Employer Branding Awards 2010 & Best HR strategy in line with Business. Scrip Award for Best Company in an Emerging Market.

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TRIPLE BOTTOM APPROACH:

Core Purpose

Business Operations

Communities

Society

Dr Reddys Foundation Livelihoods & Education Patient Assistance Programs & DRHFE Employee Engagement - Volunteer Program & Power of Ten Customer: FDA approved, Product safety (Pharmacovigilance) Zero Liquid Discharge & SHE technologies Environment: ISO 14001 & OHSAS 18001certified facilities Suppliers: my SAP business Suite Corporate Governance Employees: Policies / Talent Mgmt Board / Leadership Development / BPE

To help people lead healthier lives through global access to medicine

36

SWOT analysis:

1. Strength Wholly owned subsidiaries in US and Europe. Joint ventures in China and South Africa. Markets pharmaceutical products in 115 countries. Partnerships with global pharmaceutical companies like Novartis, NOVO Nordisk, etc. Strong product portfolio. Manufacture and market over 250 medicines targeting a wide range of therapies. Wide range of anti-cancer drugs developed. Over 100 APIs developed. Six New Chemical Entities (NCE). Low cost base. Contributes to companys high profit margin of around 34% of sales. Partnerships with key players in the market maintain its cost base down. Research Driven & Global Talent. Expertise in developing innovative product formulations. 6120 employees worldwide including 951 scientists in which 323 are dedicated towards new drug discovery research.

2. Weakness: High amount of revenues from overseas. India - a rich source of Active Pharmaceutical Ingredients (APIs), hence major source of revenue is exports of APIs. May loose out to western world, especially Europe, where currency is much more stable than the Indian Rupee. Over-reliance on partnerships. In order to compete effectively in global markets, strategic partnerships required to develop products. Lack of resources similar to US and Europe based competitors to develop a drug to marketing stage. 37

Generic drugs smallest focus. Smallest portion of revenues from generics at around 20%. Lack of patent legislation in India harms sales of its products.

3. Opportunities: Take a drug all the way to market. Take a molecule from its pipeline all the way to the market place cost-effectively market. Buy back of the integrated drug development company from ICICI Ventures and Citigroup. Domestic Generic drugs market. In another 4-6 years, many product patents obtained after the 2004 legislation will go off providing an opportunity to the company increase its domestic footprint in Generics.

4. Threats: Needs to gain FDA approval for all sources and products. Products have to pass strict FDA trials before going to market, which can be costly and time consuming. This may delay the company entry to particular markets which affects revenue. Competition from US and European Companies. Based in lucrative markets e.g. Novartis, Merck & Co. Revenues running into billions which dwarfs Reddys annual turnover Litigation charges. Reddys lost the case against Pfizer for the use of generic form of Norvasc drug. Legal cost $10m and also loss of market opportunity. Heightened concerns about profitability of German generics business of Betapharm.

38

GENERAL INTRODUCTION OF THE STUDY

39

INTRODUCTION
The medications or drugs, which are used in various medical treatment procedures, are commonly termed as Pharmaceuticals. These medications are usually distributed and prepared by pharmaceutical companies. Pharmaceuticals are prescribed by medical practitioners for treating both human and animals. The unbelievable development in the field of science and technology has influenced Pharmaceuticals industry immensely. Malaria, Cholera and Diphtheria that were considered as deadly or incurable diseases few decades ago, are now treated successfully with modern pharmaceutical products. Scientists are trying hard to help those patients who are suffering from lethal diseases by furthering their experimentation on various pharmaceutical products. Extensive research and experimentation is conducted before launching a pharmaceutical product in the market. If this crucial issue is not heeded with proper care and caution, it may generate some serious repercussion in future. A patient may suffer from serious and severe side effects as well. This is the reason why the quality and affectivity of a medication needs to be ensured at any cost. A pharmaceutical product is usually tested on animals for ensuring its affectivity and safety before it is sold in the market. Without the prior permission of Food and Drug Administration, a medication cannot be sold in the market. A pharmaceutical company can hold the patent of a pharmaceutical product, if the drug is solely developed or invented by the scientists of that company. Nowadays, pharmaceutical products have become an integral part of human life. They are bettering public health by recovering patients from the deadly clutches of lethal diseases. Pharmaceutical products are elongating the lifespan of living beings by launching new medications in the market. With the drug prices high in most OECD (Organization for Economic Co-operation and Development) member states, health services came to rely on generic versions of the drug rather than branded originals. A generic drug is a pharmaceutical product, usually intended to be interchangeable with an innovator product, which is manufactured without the license from the innovator company and marketed after the expiry date of the patent or other exclusive rights. Generic drugs are manufactured under a non- proprietary or approved name rather than a generic or brand name. Generic drugs are frequently as effective as, but much cheaper than, brand-name drugs. 40

Problem statement:
The study had been conducted to map the new product launch process and hence understand its contribution to the total revenue of the Company in the Indian market. Innovations and new products are always considered to be the key success factors of any company. The study helps to analyze the launch process and its importance in the success of a pharmaceutical company.

Need for the study: The study helps in understanding the various processes involved in the launch of a drug and its marketing. The study also helps to determine whether new products essentially form the key success factors. While the study progresses the key factors which reduces the efficiency of the process can also be identified.

Significance of the study: The back bone of Dr Reddys is the range of generic products it offers to the public at a lower price. The profitability of the company is highly dependent on the quality and diversity of the products, thus it is very essential to maintain the sales of the existing products as well as bring out new products to ensure the success of the company

Title of the study: A study to determine whether new product launch process is the key success factor for a pharmaceutical company in the domestic market. Objective: Primary objective: To map the product launch process for a new drug in the domestic market and determine its contribution to the success of the company. Specific objective: To understand the key challenges faced during the product launches. To understand the integrated functioning of various departments in a pharmaceutical firm. To understand marketing and sales in the pharmaceutical industry.

41

RESEARCH METHODOLOGY

42

Research methodology is a systematic way for solving any research problem. It is a science of analyzing how research is done scientifically. It studies the various steps that are generally adopted by the researcher in studying the research problem.

Research Design: The research design is descriptive in nature. Since the purpose of the research is well known and clear, descriptive research design has been chosen. Descriptive research design is used when the characteristics of certain group or association of certain variable are to be determined.

Sources of Data: The data required for the project is collected through two main sources namely primary source and secondary source.

1. Primary data: It refers to the data that is fresh and collected for the first time. It refers to the data collected by the researcher himself and original in character. The primary data were derived from the answers respondents gave in the structured interviews prepared by the researcher. The primary data is collected from Department Heads and Project Managers. The researcher had to fix appointments and visit the respondents and conduct interviews. 2. Secondary Data: The Secondary data, on the other hand, is those which have already been collected by someone else and which have already been passed through statistical processes. Secondary data is the information that already exists. For collecting secondary data researcher used internet, magazines, news papers and various books. However, the main source of secondary data was the Company Annual Reports. Researcher also consulted faculties for getting valuable information.

43

Tools and Techniques of Data Collection: Research Instrument: The tool used for the collection of data was the interview schedule. For this study, structured interviews were prepared as the research instrument and were presented to the selected respondents. Depending on the personnel being interviewed the schedules differed. Data Analysis Procedure: 1. Percentage analysis method The statistical tool used in this research is PERCENTAGE ANALYSIS = SALES DERIVED FROM NEW PRODUCTS x 100 TOTAL REVENUE IN THE DOMESTIC MARKET Percentage refers to a special kind of ratio and is used in making comparison between two or more series data. They are also used to describe relationships. This kind of analysis gives a clear picture of the research study in terms of how many of the respondents are involved in the interview and what type of opinion they are having etc. and the interpretation of all this is done mainly based on the percentage analysis. 2. Scatter Diagrams and Regression Analysis A Scatter Diagram examines the relationships between data collected for two different characteristics. Although the Scatter Diagram cannot determine the cause of such a relationship, it can show whether or not such a relationship exists, and if so, just how strong it is. The analysis produced by the Scatter Diagram is called Regression Analysis, which develops an estimating equation that is, a mathematical formula that relates known variables to the unknown variable. Sample Design: 1. Population: Department heads and project managers. 2. Sampling Frame: Employee, Dr Reddys Laboratories LTD including:

44

Name R Adhikesavan Dr Prashanth Varma A Ramakrishnan K Sudhakar Sunil Menon T P Vijayarahavan Balaji

Designation Deputy Manager, Contract Manufacturing Senior Manager, Marketing Associate Director, Logistics Senior Manager, Delivery Planning Associate Director, Delivery Planning Manager, Research and Developement Deputy manager, Regulatory Affairs

3. Sample Size: 7 4. Sampling Method:

Field Work The field work was done in this project by using a well structured interview schedule. The interview schedule was answered personally by the respondents as the researcher conducted the interview. The survey was conducted in the DR REDDYS LABORATOIES CAMPUS. The responses were recorded and analyzed to build a structured report.

45

Data Analysis and Interpretation

46

Data analysis:
The research was conducted to map the steps involved in the launch of a new pharmaceutical product and hence understand its contribution to the total revenue of the company in the domestic market. Analyzing the whole process it was found that the product development and launch takes place in 11 steps. It can be illustrated as followed: STEPS IN DEVELOPMENT DEPARTMENT(S) INVOLVED

Selection of a generic drug product for Manufacture

Marketing department

Preparation of a business case of the molecule Marketing, finance, selected operations department Integrated product development

and

Integrated product development organization (IPDO) IPDO IPDO

4 5 6

Formulation of product delivery teams Making of the drug master file

Getting approval of drug for manufacture from Regulatory Affairs Department DCGI Selecting the site for manufacture Contract manufacturing department , IPDO Marketing department Marketing Department Global Distribution centre

8 9 10

Selection and approval of brand name and packages Marketing of the drug Distribution of the drug

The functions of each steps and its contribution to the process are explained below.

47

STEP 1 - SELECTION OF A GENERIC DRUG PRODUCT FOR MANUFACTURE The main driving force for the selection of generic drug products for manufacture is the estimated sales volume for the branded product and the potential market share that the firm expects to have once the generic drug product is manufactured and approved for marketing.

Information About A New Molecule The launch of every new product starts with acquiring of the basic idea about a new molecule in the market. Hence a pharmaceutical company must have strong ears and eyes to study its environment and to understand every minute changes and developments in it. The basic idea about a new molecule is acquired through various sources. These include: Scientific journals Medical conferences Doctors From other companies Research centers Patents

Out of these the patent expiry is the most important source of information for the generic drug market. A patent usually refers to an exclusive right granted to anyone who invents any new, useful, and non obvious process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof and claims that right in a formal patent application. Examples of a particular patent include biological patents, business method patents, chemical patents and software patents. When a pharmaceutical company first markets a drug, it is usually under a patent that, until it expires, allows only the pharmaceutical company that developed the drug to sell it. Generic drugs can be produced without patent infringement for drugs where: Patent has expired

48

The generic company certifies the brand companys patents as either invalid or unenforceable For drugs which never held patents In countries where the drug does not have a current patent protection.

An expired patent cannot be renewed. Once a patent expires, other drug companies then have the right to manufacture and market the generic drug. However, they must market it under a different brand name or its generic name. Scientific journals are another source which gives the developments and findings in the field of science. A scientific journal is a periodical publication intended to further the progress of science, usually by reporting new research. When a medical representative visits a doctor, he may get information about a drug another company is marketing. This information may be useful as the drug may have the potential to bring profit if marketed. Another small company marketing a drug can approach a larger company and offer the company the right to market it. The availability of technology and the cost of acquiring technology to manufacture the product will also impact on the choice of generic drug. The decision to proceed with the development of a generic drug product should therefore be based on well-researched data that primarily indicate market value together with a sound knowledge of patent expiry dates, predicted market share, and growth rate for the product, amongst others.

Selecting the Product List Pharmaceutical companies rely on new products and line extensions to differentiate and maintain a competitive advantage in the marketplace. Under ever greater pressure to deliver safe, effective products in shorter time frames, pharmaceutical companies are placing more emphasis on the new product planning function. Before launching a new product the marketing team must: Define target markets, customers, competitive strengths Define an overall strategy for pharmaceutical products to guide selection of development projects 49

Develop brand strategy and differentiated positioning. Rationalize and prioritize competing development projects. Plan the product launch

The marketing team does an extensive research through literature search and patent search. Some other key activities are also involved: Defining the Active Pharmaceutical Ingredient (API) Brand procurement Ensure there is sound source of raw materials necessary Devise the formulation strategies.

Based on these factors the Marketing Department selects from the list of available molecules, those molecules which it can consider for production.

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STEP 2 - PREPARATION OF THE BUSINESS CASE

A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document. Preparation: The business case is prepared mainly by the Marketing Department and the Finance Department. Once the final product list is prepared by the Marketing Department it is forwarded to the Medico marketing Team who gives useful inputs to the making of the business case. All the details regarding the current generic products in the market and in the company is maintained by the Global Generics Portfolio Management (GGPM). The integrated efforts of the four department s help in building a strong business case. The logic of the business case is that, whenever resources such as money or effort are consumed, they should be in support of a specific business need. Formal business cases are evaluated to ensure:

The investment has value and importance The project will be properly managed The firm has the capability to deliver the benefits The firms dedicated resources are working on the highest value opportunities Projects with inter-dependencies are undertaken in the optimum sequence. Answers the question "What happens if we take this course of action?" Answers the question "Should we invest in this market?"

Components of a business case: The various parts of a business case are: 1. Part One: Executive Summary This part of the business case gives a concise summary of each part of the business case including the purpose of the business case, the goals and objectives of the business, and an explanation of how the project goal and objectives align with the organizations strategic priorities.

2. Part Two: Introduction 51

The introduction provides the problem or opportunity the proposed project seeks to address and an overview of how other organizations have responded to similar situations. It also provides the project goal and objectives and explains how these align with the organizations strategic priorities. 3. Part Three: Methods And Assumptions This section outlines the methods used to arrive at the conclusions and recommendations in this document. Authors use this section to explain and defend their conclusions and recommendations. This section allows readers to judge how data was gathered and analyzed and, ultimately, the validity of the Business Case. 4. Part Four: Impact Analysis The extent of financial analysis captured in this section of the business case depends on the rigor of the financial model used. Common measures used include the following: Cash flow, new cash flow, cash flow stream. Payback period. Return on Investment (ROI). Discounted Cash Flow (DCF) and net present value (NPV). Internal rate of return (IRR). It analysis Non-Financial Impacts Sensitivity and risk

5. Part Five: Achievability This section provides an assessment of how challenging it will be for the organization to complete the project successfully. It provides: (i) an assessment of organizational capability to complete the project (ii) an overview of procurement considerations (iii) (iv) (v) recommendations on how the project should be governed and managed an explanation of how risks will be managed available funding for the project.

The business case thus prepared is presented before the top managers of the Company who analyze this carefully before giving approval for the project. STEP 3 - INTEGRATED PRODUCT DEVELOPMENT 52

Strategic planning is one prerequisite for successful drug development which is applicable to both conventional medicinal products and to biopharmaceuticals. One key element is an integrated development plan which includes pharmaceutical manufacture and control, nonclinical and clinical aspects, the Target Product Profile (TPP) and marketing and commercial factors. The essential aim of this Integrated Product Development Plan is to define the targets and key claims of the medicinal product and to set up the strategic framework at an early stage of development.

Role of IPDO: Once the product is approved the Integrated Product Development Organization (IPDO) is responsible for the further processes. Integrated product development is a team approach involving experts from manufacturing, quality control, quality assurance, preclinical and clinical research, regulatory affairs, project management and commercialization. IPDO is responsible for strategic planning of the drug analysis and approval. Key topic to be considered in strategic planning includes: What is the specific value of the drug, such as medical need, better safety and tolerability, improved efficacy, better pharmacokinetic profile What are the label claims Does the planned clinical development program ( type and design of clinical study) support specific product claims What are the target markets What are the regulatory challenges What are the trends in pricing and reimbursement What are the parameters/ metrics of the decision making process

STEP 4 - FORMULATION OF THE PRODUCT DELIVERY TEAMS The product delivery team is responsible for the pre-formulation works. The team consists of a project manager and his team members. Their functions include: Developing a plan for the pre-formulation works and gathering preliminary information about the API. 53

Responsible for the analytical procedures and clinical trials They have to provide a specific timeline under which the works happen Responsible for calculating the date of dispatch of the first stock- the launch stock They decide on the root of development of the molecule after the primary analysis and approval.

Pre- formulation is a stage of development during which the physicochemical properties of drug substance are characterized. Pre-formulation is a case of learning before doing. Active Pharmaceutical Ingredient (API) Active Pharmaceutical Ingredients (API) is also known in regulatory and pharmacopeial parlance as Drug Substance. Additional terms frequently employed in business are Bulk Pharmaceutical Compounds (BPC), Bulk Actives and Active Ingredient. New Chemical Entities (NCE) refer to the drug substances that are the first to enter the drug regulatory arena under the banner of New Drug Application (NDA). Comparison with innovator API: The challenge that the API supplier manufacturer faces in entering the market place is to assure the user of the material that the API will be comparable to the innovator or pioneer drug substance, which is employed in an approved NDA drug product. Current FDA requirements regarding the filing of an ANDA for a single component listed drug product is that the API must be the same chemical entity, which is contained, in the listed drug. The critical aspects of sameness or comparability for the generic API vs. the innovator API include three critical realms: Chemical Structure :The API must have the same chemical structure as the innovator drug. Impurity Profile

Analytical Profile: The PDT is responsible for the analysis of the brand name drug. The PDT makes an extensive study on the API and carries out the pre-formulation studies. The study on API includes: 54

Stress testing of API for first API specification Impact of Impurities on API Specifications to understand the allowable level of impurities. Pre-formulation Investigations Stability assessment Shelf life study Selection of API and Drug Product Processing Methods Degradation Issues for Combination Products Role of API Processing in Product Instability Role of Excipients in API Instability

There are two types of clinical trials for a generic product. 1. The Bio- Root: If a molecule is already present in the domestic market for at least 4 years, such molecules have already been approved by the DCGI. If another company wants to manufacture and market the molecule, the company need not conduct a clinical trial. Only an analysis proving the bioequivalency of the drug to the innovator drug is needed. 2. The B&CT- Root: If a company is the first one to launch a generic molecule in India , he has to follow all the procedure and is obliged to show efficacy as well as the bioequivalence. Once the pre-formulation studies are done and the API is studied in detail the IPDO creates a drug master file which is to be submitted along with the application for license from Drug Controller General of India (DCGI).

STEP 5 - MAKING OF THE DRUG MASTER FILE A Drug Master File (DMF) is a submission to the FDA of information, usually concerning the Chemistry, Manufacturing and Controls (CMC) of a component of a drug product, to permit the FDA to review this information in support of a third partys submission. Drug product information or other non-CMC information may be filed in a DMF.

55

One can search the DMF database and obtain information such as the name of the article included in the DMF, the name and address of the sponsor or holder of the DMF and date of original submission. The filed DMF is typically used in the generic drug environment to support the filing of an ANDA.

The DMF sponsor is required to update the filed DMF annually with information concerning any changes that were made in the manufacturing or controls employed for the production of the API, including specifications and test methods. As part of the procedure and practice of making any changes to a filed DMF for an API, the DMF holder is requested to notify all customers who purchase that API, and who have referenced the particular DMF in their ANDA, of such changes.

There are five types of DMFs 1) Manufacturing plant information 2) Drug substance, drug product, intermediates and material used in their manufacture 3) Packaging 4) Excipients 5) Other Usually clinical, tox

Current Types of DMFs: 1) Now Four Types (Numbering retained to avoid confusion) 2) Drug substance, drug product, intermediates and material used in their manufacture 3) Packaging 4) Excipients 5) Other Sterile manufacturing plants, biotech contract facilities, clinical, tox

STEP 6 - LEGAL APPROVAL FROM THE DCGI For each and every step of the original API analysis in the laboratory to obtain knowledge about its characteristics require legal permission from the Drug Controller General of India. The

56

Regulatory Affairs(RA) department is responsible for the proper filing of legal documents at CDSCO.

Functions of Regulatory Affairs:

Participate in the regulatory activities of full spectrum of Product development, from clinical trials to marketing to post approval activities.

Ensure the appropriate licensing, marketing and legal compliance of API products. Combining knowledge of scientific, legal and business issues, enable the products to meet the required legislation.

Some of the important Acts and Rules are: Prior to clinical studies: Prior to manufacturing and marketing the molecule the RA has to file for further licenses. Along with the application for these licenses the Drug Master File should also be submitted. Form-29 (Test License) It is a license to manufacture drugs for the purposes of examination, test or analysis. It is obtained from State Licensing Authority [SLA]. The test-license is valid for the period one year from date of grant of license. NOC for Form-29 (Test License) For new drugs Obtained from DCGI prior to applying for test license to SLA for a new drugs B-NOC and CT-NOC: These are licenses for carrying out Bio-root and B&CT-root clinical trials. These are obtained from State Licensing Authority [SLA] Form-11 (Import License/T-License for Innovator Samples or API) [For small quantities of drug] Form-11 is a license to import drugs for the purpose of examination test or analysis. It also permits the import of drugs for the purpose of BA/BE Studies and for Clinical Trials. It is valid for the period one year from date of grant of license. Once the DCGI grants these licenses a company can carry out all the clinical trials and analytical studies.When applying for a license from the DCGI, the API is introduced in the generic name and not the brand name. Along with the application the Drug Master File is also given. The 57

DCGI brands that the drug is bioequivalent to the innovator drug and can be taken up for manufacturing. Prior to manufacturing: The actual license for manufacturing and marketing is received from the local Dug Control Authority (DCA). The process involves the following steps: The company has to provide all the relevant details regarding the site of manufacture. A dossier containing the details of an internal audit of the site of manufacture has to be submitted. The DCA will conduct an audit themselves to ensure that all GMP norms are followed. For the approval of the drug the Company has to provide the brand name, i.e. the name in which the drug will be marketed. Once the DCA approves the company can take up the manufacture. The forms that need to be submitted include: Form- 41 (Import Registration) Form-41 is the registration certificate to be issued for import of drugs into India under drugs and cosmetics Rules, 1945. It is valid for the period three year from date of grant of license. Form-10 (Import License) It is a license to import drugs to the drugs & Cosmetics Rules 1945 for commercial activities/Product development purposes. Form-10 provides validity up to the validity period of Registration Certificate. Form 45 (Import Permission) It grants permission to import finished formulation of new drug. Form 45-A (Import Permission) It grants the permission to import new bulk drug substances. STEP 7 - SELECTING THE SITE FOR MANUFACTURE Once the final molecules are selected, the most important decision lies whether to make the molecule in-house or to outsource the manufacture.

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There are two ways of manufacturing the products: Outsourced - The Company looks if the product exists in another companys product pipeline and outsources the production to that company. The product marketing alone is done here. In-house - The team looks if the products can be developed in the company. This is usually a tedious process. It may take 1-2 yrs Pharmaceutical companies seldom have all the expertise in-house to cover the required areas, and look for the external partners by outsourcing of the service to complement their own skill set in particular areas or to cut costs. To this aim a clear communication structure supporting open dialogue and qualified program oversight by an experienced Project manager are essential when outsourcing stages of development. The involvement of any external contract partners Contract Manufacturing Organizations (CMOs) and non-clinical or clinical research partners (CROs) implicates auditing to ensure that Good Manufacturing Practice (GMP), Good Laboratory Practice (GLP) and Good Clinical Practices (GCP) are established and heeded. The decision is taken by the Capacity Planning Team (CPT) along with IPDO. Capacity Planning: Capacity planning is the process of determining the production capacity present in an organization to meet changing demands for its products. In the context of capacity planning, "capacity" is the maximum amount of work that an organization is capable of completing in a given period of time. Certain formulations can only be manufactured In-house at Dr Reddys. For others, that need high expertise it is usually outsourced to other manufacturing units. Contract manufacturing In case of outsourcing, the contract manufacturing department is contacted. Contract

manufacturing is a form of outsourcing. The hiring firm approaches the contract manufacturer with a formula for a new molecule. The contract manufacturer will provide details about the 59

various factors including the processes, labor and material cost. Industries including aerospace, defense, energy, medical, food manufacturing, automotive etc... utilize this business model. The pharmaceutical industry utilizes this process with CMs called Contract Manufacturing Organizations (CMOs). A CMO also known as Contract Development and Manufacturing Organization (CDMO) is an organization that serves pharmaceutical industry and provides clients with comprehensive services from drug development through manufacture. Services offered include: Pre-formulation Formulation development Stability studies Method development Pre-clinical and phase-1 clinical trial materials Late stage clinical trial materials Registration batches Commercial production etc

The pharmaceutical market uses outsourcing services from providers in the form of Contract Research Organizations (CROs) and Contract Manufacturing Organizations (CMOs). In recent years the concept of comprehensive, single source providers from drug development to commercial manufacture has emerged. This concept has been implemented today by providers known as Development and Manufacturing Organization (CDMO). Contract manufacturing at Dr Reddys: The details of the approved drug to be manufactured are forwarded to the Contract Manufacturing Department. The Contract Manufacturing Department has a list of approved CMOs. Contacting the CMO The department contacts a suitable CMO and gives details about the new molecule that is to be manufactured.

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The CMO sends back a report to the Contract Manufacturing Department which gives details about the cost involved, procedures, labor cost, time line, the technology it has etc From this information the average cost that the firm may incur is derived. The same is communicated to the Marketing Department which checks the Maximum Retail Price that it has decided for the molecules against the cost the CMO has provided. If acceptable the marketing department informs the Integrated Product Development Organization (IPDO). Location approval: The IPDO is responsible for the location approval. The IPDO has a check list against which it checks the merits of the CMO. The CMO should contain all the facilities and safety measures as needed for the manufacture of that particular molecule. The check list is send to the CMO. Based on the parameters of the checklist the CMO conducts a pre- audit. The report is then sending back to the Contract Manufacturing Department. If the report proves satisfactory, it is referred to the Quality Assurance (QA) department. The QA conducts a final audit and forwards the report to the IPDO. Once satisfied the IPDO gives the approval to the Contract Manufacturing Department which then communicates it to the CMO. The Contract Manufacturing Department then issues a purchase order. A purchase order is a commercial document issued by a buyer to a seller. It includes details regarding the quantities to be manufactured and the agreed prices. In case of outsourcing all the legal formalities are taken care by the CMO itself.

In-house manufacturing
In in-house manufacturing an outside CMO is not involved. The organization marketing the molecule also takes care of its production. There are two main concepts in this model of manufacture: Loan License Manufacturing In-house manufacturing

Loan License Manufacturing:

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A license issued by a licensing authority to a applicant who does not have his own arrangements for manufacture but who intends to avail himself to the manufacturing facilities owned by another licensee is called loan license manufacturing. Dr Reddys does not have an in- house production facilities for formulations such as injectibles etc Such formulations are given for loan license manufacturing. In- House Manufacturing: The new molecule is manufactured inside the premises of the organization itself. The Process: Once the new molecule to be launched is confirmed, a team is formed under a Project Manager. The Project Manager (PM) is responsible for co-coordinating the various procedures for in-house manufacturing. The PM has to prepare a chart which shoes all the processes that are involved in the drug manufacture and the estimated time that will be taken by them. Thus he can calculate an approximate launch date. He also decides the launch stock needed for initiating the drug into the market. Every 2 weeks the PM has a meeting with the other personnel involved in the new product launch and he discusses his progress. They also take decision of how to resolve a bottleneck when it arises. In this case the Regulatory Affairs body takes care of all the legal formalities. This includes getting a license from DCGI and local FDA, the approval of brand names etc The IPDO also checks the feasibility of commercial production. It decides whether the product should be manufactured through loan licensing or in-house in the company premises. If the company decides on loan licensing, the Contract Manufacturing Department comes into play. The location for manufacture is decided and it is approved by IPDO. The technology for the manufacture is then transferred to the location. The Supply Chain Management (SCM) Department is responsible for the procurement of the necessary materials required for the manufacture. The manufacturing begins and the finished goods are supplied to the organization.

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In the case where the molecule is manufactured inside the company premises, the Formulations Technical Operations Departments take up the manufacturing process. In Dr Reddys there are many units which undertake manufacture. The legal affairs are again taken up by the Regulatory Affairs body. In this case, the Contract Manufacturing Department plays no role. Supply chain management for In house manufacturing : The marketing department along with the IPDO communicates the New Product Launch Requirement (NPLR) to the SCM department. The process can be explained as follows: They issue a Material Requisition Sheet which carries details of all the raw materials needed for the manufacture of the drug The SCM department has a list of approved vendors A purchase order is issued to the vendor. The vendor gives a purchase requisition number and the Expected Date of Delivery(EDD) The raw materials are delivered to the Global Distribution Centre (GDC).

Selection of a new vendor: In case it is a new vendor, the Company has to make sure that the vendor has the necessary qualifications and licenses to provide the raw materials. The Central Quality Assurance is responsible for the examination of a new vendor. The new vendor is given a Vendor

questionnaire which he has to fill. The questionnaire will help get the necessary details about the licenses he holds, the logistics facilities etc The CQA has also to ensure that the vendor has to provide a BSE/TSE free material. The vendor is also asked to send three different lot samples which can be tested against specifications. The CQA also conducts an audit at the vendor organization to ensure that the vendor follows all GMP norms. Once a vendor qualifies all the procedures he will be added to the Approved Vendor List.

STEP 8 - SELECTION AND APPROVAL OF BRAND NAME AND PACKAGES A well-chosen pharmaceutical branding strategy promotes Pharma brand name awareness and is easily recalled by prescribers, pharmacists, and consumers. Aside from the obvious marketing implications of choosing a pharmaceutical brand name with high recognition and memorability, 63

there are significant regulatory benefits in choosing a pharmaceutical brand name that is not easily confused with other healthcare brand name products. Much of today's pharmaceutical naming regulatory and legal scrutiny revolves around the problem of confusingly similar pharmaceutical proprietary names and their effect on medication errors. When managing a pharmaceutical business, the emphasis is on owning your market. The first step towards this goal is to establish pharmaceutical brand equity and support a powerful brand image through effective brand management and name brand positioning. Each of the following must be carefully considered before creating a pharmaceutical brand name: Nomenclature Strategy/Brand Architecture Positioning Brand Development Trademark Screening Linguistic Screening Market Research

It is the successful combination of these elements that creates a companys most valuable asset, its brand name. Develop Brand Names: While developing a brand name, a creative approach should be taken. The methodology includes brainstorming techniques designed for evaluation of pharmaceutical names and concepts for creative refinement. The name selected for a brand may be: Linked to the molecule Linked to the indication Any catchy name.

Approval of brand names: The marketing department creates a list of brand names that is to be submitted to the local DCA for approval. The local DCA has a Brand Name Registration Authority.

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The list if forwarded to the RA department. The RA takes care of making the dossier which contains the application for Brand name registration, the necessary fee needed and any other documents as specified. This is then submitted to the Authority. The Authority has certain norms as to the approval of the name. The brand name must not resemble the names of any other drug The brand name must not resemble the names of any other product in any other industry. Not more than three consecutive letters of the name should match the names of any other drug. The phonetics of the name should not match any other drug or any other product in any industry. It should not be similar in indications of other drugs. In the present scenario, as there are many drugs in the market, the brand name should not be derived from the chemical entity present in it. If any names are approved the DCA issues a letter, which acts as a legal document showing the approval of the drug name. Trademarks: A trademark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or services from those of other entities.In the Pharma industry two kinds of trademarks are used:

- For an unregistered trade mark, that is, a mark used to promote or brand goods - For a registered trademark. The time taken for an unregistered trademark to become a registered trademark id approximately 15- 20 years.

Development of packages: The marketing department has a separate team of personnel who work in the development of packages. In case of cosmetic products the packages should be developed in such a way that they are catchy and should be appealing to the eyes. However in case of drugs the packaging should be such that it conveys safety, hygiene and quality. The packaging ideas are then conveyed to an 65

approved printer who prints a sample of the package. The team then gets the package approved by the marketing department and it is forwarded to the RA department for approval from the DCA.

Approval of packages: The packaging for a pharmaceutical product is approved from the local DCA. In order to get the approval the company has to undertake certain tests on the package. The most prominent amongst them is the stability test. Stability test: A stability test can be conducted for 3 months or for six months. In the stability test the drug is kept in the proposed package for duration of 3 months or 6 months. The drug is then examined to see if there are any changes in the chemical as well as physical properties. If not, then the package is proven to be stable. The package of the drug should also carry certain details like: The organization marketing the drug.

The organization manufacturing the drug The date of manufacture and expiry The dosage form Drug inserts: Label showing the official description of a drug product which includes indication (what the drug is used for); who should take it; adverse events (side effects); instructions for uses in pregnancy, children, and other populations; and safety information for the patient . The design of the package is also important. It should be in such a way that the drug does not interact with the outside atmosphere which will affect the stability of the drug. If approved, the DCA issues a letter, which acts as a legal document showing the approval of the drug packaging. STEP 9 - MARKETING OF THE DRUG Pharmaceutical marketing, sometimes called medico-marketing, is the business of advertising or otherwise promoting the sale of pharmaceuticals or drugs. 66

The pharmaceutical marketing strategies of the company include :

Medical representatives Giving drugs as free samples to doctors; Providing details of their products through journal articles or opinion leaders; Gifts that hold the company logo or details of one or multiple drugs; and Sponsoring continuing medical education.

The most important amongst these are the medical representatives who form the backbone of the marketing success. Medical representatives: Use of medical representatives for marketing products to physicians and to exert some influence over others in the hierarchy of decision makers has been a time-tested tradition. Typically, sales force expense comprises an estimated 15 percent to 20 percent of annual product revenues, the largest line item on the balance sheet. Despite this other expense, the industry is still plagued with some very serious strategic and operational level issues. Prior to sales the medical representatives are given a training regarding the new product and the scientific facts related to it. Medical rep has to sell products of Pharma companies or drug manufacturers. He has to go to doctors and medical shops to sell drugs and promote drugs. He will ask physicians to refer his drugs for the patient. At Dr Reddys there are 17 marketing divisions. Each division has a number of medical representatives. The marketing divisions are: ZENURA 2 ZENURA 3 ZENURA-1 RECURA FUTURA ASPIRA AQURA-HG DERMA-A AQURA-SG 67

WINTURA RHEUMATOLOGY DERMA-B AESTHETIX INDURA SPLTY, AESTHETICS OTHERS

Each of these divisions has a number of medical representatives and the managers they report to. The hierarchy of the sales force can be illustrated as:

Medical Representatives

Area Sales Manager

Regional Sales Manager

Zone In Charge

National Sales Manager

STEP 10 - DISTRIBUTION OF THE DRUG Once the manufacture has started a date is set to provide a Launch Stock. The Launch Stock is transferred to the Global Distribution Centre (GDC) from where it is given to the marketing department. After the manufacture the stocks arrive at the GDC where separate warehouses for

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export drugs and domestic market is present. From the warehouse the stocks are given to different customers as per the requirement. Global Distribution Centre (GDC) The manufactured stock comes from the manufacturer to the Global Distribution Centre (GDC) from where it is transported to the Carrying and Forwarding Agents (C&FAs). Its job is to store the material on behalf of the company and forward it to further stockists as per the delivery order of the company. The Pharmaceutical stockists in India have an association called the All India Organization of Chemists and Drugs Association (AIOCDA). Every state and sometimes a district have their own association. When the Company dispatches the finished goods to the C&FA and from there to the regional stockist a NOC is needed. For this, the Company has to pay a fee for the application form (FORM FIVE). Once the application is filled and the NOC is received the details of the new drug will be published in their publication Product Information Service. For the NOC the AIODCA has to be convinced that the MRP charged is not unreasonable. The collection of a fee for the NOC was made illegal, hence the association collect it under the pretence of Product Information Service. The AIODCA does not have a set rule of action hence their requirement in every state is different. In certain places like Maharashtra a manufacturing license should also be submitted along with Form- Five. For existing products the Company has different credit days for the local stockist as well as the stockist present around the country. The local stockist is given a credit period of 15 days and the up-country stockist a period of 21-90 days, depending on the requirements of the AIODCA in the particular state. In the case of new products the stock may not immediately move and the credit period is decided by the regional manager and the stockist.

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Logistics There are two types of cold chain products: Products to be stored at 2-80 C: These products have to be dispatched immediately after the manufacture within a time period of 48 hrs. The means of transportation is by air. The products mainly include onco drugs and neurological drug like the Cresp. Products to be stored at 15-250C: These products are transported by road in special containers that can maintain the temperature. The company also monitors the storage at the C&FA every week to analyze the temperature. 28 products are transported by road.

Trends of DRL in the Domestic Market: The revenues from the new products and existing products of DRL for the past three financial years are shown below:

2006-07 Existing Products Revenue (Crores) New Products Revenue (Crores) Total Revenue Rs 718

2007-08 Rs732

2008-09 Rs 737

2009-10 Rs 761

2010-11 Rs 719

Rs97

Rs 31

Rs 153

Rs 326

Rs 815

Rs 732

Rs 768

Rs 914

Rs 1044

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Analysis of the data collected: Table shows the revenue from existing products and new products in the past 5 years. The data was received from the marketing department. STEP 1 : Percentage analysis: The study was conducted to determine if new products are the key success factors for a pharmaceutical company. The revenue a company makes in a year is the major indicator of its success. Hence in this step, the contribution of new products in percentage to the total revenue the company made in the domestic market is determined. PERCENTAGE ANALYSIS = SALES DERIVED FROM NEW PRODUCTS x 100 TOTAL REVENUE IN THE DOMESTIC MARKET Year 2006-07 2007-08 2008-09 2009-10 2010-11 Contribution (%) 11.9% 0 4% 16.7% 31.2%

Interpretation In the financial year 2006-07 the revenue from new products formed 11.9% of the total domestic revenue. 2007-08 was a difficult year for the company as the recession greatly affected the company. the company recovered quickly bringing a 4% contribution from the new products. In the subsequent years, as the table clearly shows the contribution from new products has increased thus increasing the returns to the company.

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STEP 2: Scatter diagram This step consists of creation of Scatter Diagram using the table being created in step 1. The representations for the scatter diagram are as follows: X axis: Revenue from new products (crores) Y axis: Total revenue ( Crores)

Step 3: Creation of trend line: The next step is the creation of a Trend Line in the scatter diagram which is a straight line representing the relationship between x and y fitted through it. Trend Lines are an important tool in technical analysis for both trend identification and confirmation. Also, occurrence of Trend Lines confirms the existence of Linear Relationship between the variables under consideration. Equations: Trend Line equation: y = a + bx Here, b = [n ( xy) ] [ ( x ) ( y ) ] [ n ( x2 ) ] [ ( x )2 ] a = y` - bx` x` represents mean of all values of x y` represents mean of all values of y Calculation Results: As per the calculations we get, y = 0.969x + 736.9 a represents the y-intercept. b represents the slope of the line.

Step 4: Correlation Coefficient r: The last step is to check for the extent of linear relation between the variables namely new products and total revenue in the domestic market, which is done by ascertaining the 72

Correlation Coefficient r. Here, correlation coefficient r defines the magnitude and direction of the relationship.

Equations: Correlation Coefficient r = [n ( xy) ] [ ( x ) ( y ) ] [(( n (x2 )) - ( x )2]1/2 . [(( n (y2 )) - ( y )2]1/2 Calculation Results: As per the calculations we get, r = 0.9904

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Scatter Diagram With Trend Line:

1200

1000 914

1044

Total Revenue (in crores)

800 732

815 768

y = 0.969x + 736.9
R = 0.9904

600

400

200

0 0 50 100 150 200 250 300 350

Revenue From New Products (in crores)

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Findings
Analyzing the product launch process, some of the key problems identified were: 1. During the selection process, the marketing department faces difficulties in selecting a new molecule for launch. In the present state a large number of players exist in the market and a new molecule should be selected in such a way that it can create a niche for itself. 2. Identifying a brand name is another key difficulty faced as a brand name should be selected such that it does not resemble any product in any industry. Hence identifying such brand names and getting them approved from the Brand Name Registration Authority is a time consuming process. 3. Acquiring a license and approval from the DCGI after B-route and B&CT- root development for manufacture is a difficult procedure. If not satisfied with the bioequivalence result the company will be asked to repeat the process which is expensive and time consuming. 4. When going for in-house manufacturing, the Project Manager (in-charge of the product launch) may find the manufacturing schedule at the FTO to be filled and may have to wait till a slot opens. This results in a time lag and may result in delay of the launch date. 5. While selecting a new vendor for raw materials there can be a time delay as the vendor may not give the three sample lots together with the Certificate of Analysis. Without the three sample lots the CQA will not approve the vendor. 6. The quantity of the finished goods needs to be forecasted accurately. It is based on this forecast that the raw materials are bought. If the forecast is not properly done, it may lead to wastage of raw materials and capital resources. 7. A business case should be carefully built because any error in the forecast can increase the payback period. While the actual launch process starts investments in equipments, the capital needed for the product development, the time lag coming up in the process etc.. can reduce the quantity produced in a batch, thus the payback period increases and the cash flow gets disrupted. 8. Getting an approval from the AIODCA is a tedious process as they do not have any set rules. The decision is mainly dependant on the person responsible and his personal views. Also the AIODCA has different requirements in different state which makes the acquiring of the NOC difficult. The company has to cater to the needs of each state 75

AIODCA where it is preparing the launch and further complications occur when each district has their own association.

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CONCLUSION
Dr Reddys Laboratories Ltd. ranks number one in the Indian Pharmaceutical Industry. It produces and sells Active Pharmaceutical Ingredients (API), Finished Dosages and Biologics. It manufactures ulcer medicines, antibiotics, pain relievers, antidepressants and cardiovascular drugs. The company carries out research and development (R&D) in diabetes, cancer, cardiovascular diseases, and inflammation and bacterial infections. It also has a significant presence in the biotech sector. In 2011 the company generated revenue of Rs. 1044 crores. Implementation of Efficient New Product Development Processes coupled with effective marketing strategies was found to be the key success factors. However on analyzing the process various challenges were identified which need to be given attention. Overcoming these challenges would ensure that the product launches bring even more success to the Company. Dr. Reddys adherence to high standards of corporate governance and ethical business practices has been a key factor to its success.

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ANNEXURE

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Interviewee : Dr Prashanth Varma, Senior Manager, Marketing Department 1. How is the information about a new molecule in the market known to a Pharma company? 2. Other than patent expiry and journals what are the other sources for the information? 3. Once the information about the molecules are known how do you select the list of molecules for consideration? 4. What is a business case? Who helps preparing it? 5. Like any other FMCG goods, are brand names important for a pharma product as well? 6. How are the brand names selected and registered? 7. How important is the packaging for a pharma product? Does the package need to be approved by the FDA too? 8. How does sales and marketing work in a pharma company? 9. How important are medical representatives to a pharma company? How does the team work? 10. Very few advertisements of Dr Reddys are visible in the mass media. In such a case how does the company ensure constant advertisement of its products? 11. People generally tend to think that generic drugs are lower in quality and action when compared to innovator drugs? How is this situation dealt? Does this affect the sales of generic drug?

Interviewee : T P Vijayaraghavan, Manager, Research & Developement: 1. What is the role of the IPDO in the launch of a new drug? 2. What are the elements considered while making a strategic plan? 3. How is this plan formulated? How is the team for carrying out this plan selected? 4. Could you give more insight into what an API is? How is it compared with the Innovator drug? 5. Every innovator products goes through 4 to 5 steps of clinical trials? Does the same apply for a generic drug too? 6. Is a generic drug any different from the innovator drug? Interviewee : Mr. Balaji, Deputy Manager, Regulatory Affairs

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1. How does the company approach the FDA and DCGI for approval of its products? 2. Do the regulatory Affairs have different teams for product, brand name, package, and location for manufacture approval? If so, how do they function? 3. What is a DMF? How is it prepared and submitted? 4. As the development and manufacture proceed, does the company need an approval for every stage of its action? 5. What are the procedures for submitting a DMF? Could you provide details about the different forms of submission involved? 6. Could you give more insight into the forms needed prior to clinical trials and manufacture?

Interviewee : R Adhi Kesavan, Deputy Manager, Contract Manufacturing 1. Does Dr Reddys have the capability for manufacturing all their products? 2. What are the roles of CMOs and CROs? How does the company approach them? 3. Could you explain the process of contract manufacturing? 4. What are the guidelines for the approval of a CMO? How does the company approach them? 5. What are the criteria for selecting a new vendor for raw materials? 6. How profitable is contract manufacturing? 7. What are the difficulties faced during in house manufacturing? 8. Who is responsible for carrying out the in house manufacture? 9. How does the company monitor the manufacturing process- both in house and out sourced? Interviewee: A Ramakrishnan, Associate Director, Logistics 1. What is the role of GDC in the company? 2. How are the stocks received and maintained? 3. What are the precautions for carrying the drugs to various parts of the world? 4. What are the major difficulties you face in logistics? 5. How are the conflicts between stockists and the company resolved?

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