When Dilip Shanghvi, chairman and managing director of Sun Pharmaceuticals Industries (Sun Pharma), brought in high-profile S Kalyanasundaram as chief executive officer (CEO) in April, many industry watchers were surprised.
Sun Pharma, India’s largest drugmaker by market capitalisation and perceived by many as a conservative company, did not have a CEO for the past 27 years.
Sun — focused more on profits than revenues — was growing thanks to the management skills of founder Shanghvi and his brother-in-law and second in command, Sudhir Valia, a full-time director on the company’s board.
More surprising was the decision to get a thoroughbred multinational executive, known in the industry as Kal, for a generics company, which makes reverse engineered versions of patented drugs.
Kal was head of commercial excellence for the Asia-Pacific in the world’s second largest drug maker, GlaxoSmithKline, and a former GSK India managing director.
Adapting to get ahead
For most of India’s leading traditional drug firms, the strategy, challenges and demands are changing for them to stay in their business. These have transformed from a turnover of few hundred crore a decade earlier, with operations confined to the domestic market, to many thousands of crore of annual revenue, with direct operations in a majority of the continents.
Also Read
Glenmark, owned by Glenn Saldanha, is going through a similar transformation. Earlier, the top and the middle management reported directly to Saldanha. Now, only two executives report directly to him — the recently appointed chief operating officer, Arvind Vasudeva, who oversees the entire branded generics business, and Terrance Coughlin, chief executive of Glenmark Generics.
“We have always believed in creating an atmosphere where professionals have been employed at every level in the organisation. It is important for us to separate management from ownership, because only then will we be able to create a global world class organisation,” says Saldanha.
Most companies realise that the skills of traditional board rooms, consisting of a promoter father-son-daughter management, supported by some trusted friends and technical experts, are inadequate to handle complex and large global operations. As a result, Indian pharma companies are on a professional trail and ready to hand out fancy pay cheques to professionals for steering their companies. The pharmacist or scientist turned promoters are taking a back seat, offering the steering to experienced professionals or next generation management experts.
“If we look at most of these firms, Generation Next is highly qualified, with overseas education and with a professional management background, which helps in professionalising the company,” says Sujay Shetty, Head of Life Sciences at consulting firm PricewaterhouseCoopers.
Handing on
Take the case of Lupin, where scientist turned promoter, D B Gupta, built his 40-year-old business with active support of Kamal K Sharma, managing director since 2003, and former managing director of Lupin Chemicals. Gupta has handed over the day-to-day operations to a professional team, headed by Kamal Sharma, his son, Nilesh, and daughter, Vinita, who head the US and Europe business.
“Hiring and nurturing talent, more importantly leadership talent, and managing the same, assumes a strategic and critical role in today’s business,” says Nilesh Gupta, Lupin Group President and Executive Director.
Lupin recruited Paul McGarty, former CEO of Nycomed US as president for Lupin Pharmaceuticals Inc a few weeks earlier. The management team includes some high-profile executives such as Ninad Deshpanday and Rajender Kamboj, who head the drug research activities; former Henkel CFO Ramesh Swaminathan; the domestic formulations business’ head, Shakti Chakraborty; and Satish Khanna, who heads the API business.
At Dr Reddy’s Laboratories, India’s second-largest drug company in terms of turnover, scientist turned promoter K Anji Reddy had handed over the entire running of the business a few years earlier to two professionals — son Satish Reddy, the managing director and COO, and son-in-law G V Prasad, vice chairman and CEO. Dr Reddy’s also has a large team of high-profile professionals at various levels in India, US and Europe.
Apart from the talent hunt, the high-profile executives also bring with them huge experience and contacts.
Piramal Healthcare, which a few months earlier sold its domestic formulation business for Rs 17,000 crore to Abbott at nine times the turnover, had appointed Murari Rajan as executive director of Piramal Enterprises in October 2008, with responsibility for mergers and acquisitions (M&As). He brought with him an experience of leading M&A transactions exceeding $70 billion across a variety of industries and this was a key factor in cracking the big deal with Abbott, said the executive.
The corporate governance practices, systems and professionalism of Ranbaxy and Piramal were two major factors that attracted Big Pharma, said Sujay Shetty.
It is necessary to create an organisation culture that encourages entrepreneurial thinking among professionals, as this is imperative for success, says Saldanha. Glenmark says it recruits employees who have the ability to think out-of-the-box and give them the freedom to execute their own ideas and initiatives, he said.
According to Nilesh, Lupin has personnel programs to help institute processes and maximise performance at every level.