Kiran Mazumder-Shaw: A journey marked by grit

Seema Singh's new book tells the story of how Kiran Mazumdar-Shaw scripted the success story of Biocon through sheer grit

MYTH BREAKER
KIRAN MAZUMDAR-SHAW AND THE STORY OF INDIAN BIOTECH
Author: Seema Singh
Publisher: HarperCollins
Pages: 336
Price: Rs 599

When Unilever bought the Biocon Group [in 1989], it perhaps did not do enough 'due diligence' on the Indian operation. Initially, Bengaluru's activities seemed minor and the minority holding was a lame asset for a company where many saw the Biocon Group acquisition itself as an unwelcome and unnecessary complication. Apart from Ireland, India, Peru and to some extent the Philippines were important locations for the Biocon Group. It took little time for Unilever's seasoned executives to map the opportunity and the company began to manoeuvre and take control of the Indian business.

Every few weeks, some senior executive would descend on Bengaluru. 'It would start off well but would often end with - "What would you want from Unilever?"' says Ajay Bharadwaj [former president-marketing at Biocon]. Unilever was beginning to understand that Kiran [Mazumdar-Shaw] had scant intention of ceding control. On her part, she knew that as long as they were a minority partner, she could call the shots.

After almost eighteen months of trying to convince Kiran to dilute her stakes, a large delegation, which included the global head of R&D at Unilever and his team, came to Bengaluru. In the opening meeting, Kiran gave a presentation, and her first slide, memorable to many, declared that there were three types of companies:

• Companies which make things happen
• Companies which watch things happen
• Companies which wonder what happened

Biocon India, she said, was the first type of company and Unilever was the third type.

That in-your-face presentation left everyone stunned. 'We didn't know where to look. There were board members, some senior managers and the head of Hindustan Unilever. Those days we did not have [smart] phones to fiddle with, we just went red in the face,' recalls Bharadwaj.

If egos were bruised, nobody showed it. Back in Europe, Biocon as a group was having a hard time assimilating itself within the Quest and Unilever family. It was seen as a 'mafia' or a 'Band of Brothers and Sisters' by many. When Kiran visited Naarden, she would often go first, informally, to Mike Powell's office [Powell was a vice-president of finance at Unilever who retired in 2000] in order to 'check the temperature' at senior Food and Corporate levels. 'Mutual trust is a very strong force in business, as in all walks of life,' notes Powell.

With each passing year, the relationship soured some more. In the meetings, in early years, Unilever members would extend 'warm, loving attention' which increasingly became antagonistic. As a former Biocon Group manager recalls, it would often be like, '"We've had enough of this. We know what's best. You little company, you start obeying our rules." It would get rather nasty.'

Mazumdar-Shaw at the Biocon Campus construction site in 1982

To say that Biocon managers got a culture shock when they came to Unilever would be an understatement. Getting into a structured, disciplined, slow-moving and slow-decision-making organization was just the opposite of what they had practised in Ireland and elsewhere. At Unilever, they learnt that managers hardly made decisions. That slowed things down; people did not show the courage to experiment. If the Biocon way of designing a new manufacturing process meant looking at the theory, figuring out a sense of how it would work and then getting the old, run-down equipment to implement the design, the Unilever way was going out and buying everything that was most expensive and hygienic. 'Money was slow [to come] but when you got the money, you got to do the best possible plant, not the cheapest possible plant,' says Mike Woulfe, vice-president (enzymes) at Kerry Group in Ireland.

Process hygiene was a big deal in Unilever. Hygienic design principles were also critical for people's safety because enzymes can cause allergies and had been a recurring problem earlier at Biocon Ireland. After Unilever improved the processes, allergic reactions stopped. Roland Cocker, who had earlier worked in global companies like Glaxo, said the scientific design principles of Unilever were very special worldwide; even Glaxo was no match for it.

Unilever designed manufacturing and other processes in a way that they did not get dirty easily - the type of material and design used had the least number of crevices and couplings - and if they got dirty they would get cleaned, drained and sterilized quickly, using minimum water, energy and chemicals, at minimum environmental cost. It's an almost Zen-like approach to design, based on experimental results from science and it was new to the Biocon Group.

'If you take a lot of biotech plants from big pharma companies, you'll find they use couplings and valves which are very common; they wouldn't pass the process cleanability test,' says Cocker, who now runs Cocker Consulting, which specializes in hygiene design principles and does food safety and quality audits for the National Sanitary Foundation in the US.

Mazumdar-Shaw (second from right) at work during Biocon’s early days

In Biocon India, people quickly absorbed the supply chain quality culture. The company spruced up its financial reporting as well. Internal financial reporting in Unilever is rigorous, frequent, detailed and very structured. 'It must have taken a major effort for Bengaluru to get that organized because when I arrived in the first quarter in 1991, it was running absolutely perfectly,' says Powell.

Around that time, Unilever had asked its businesses to qualify for the International Organization for Standardization (ISO) certification. For all her fiercely guarded independence, Kiran was ready to 'toe the line' when it came to conforming to their processes to benchmark her company against global standards. Biocon India grabbed the opportunity and became the first business within the Unilever Group, and only the third company in India (the two others being Bosch-Mico and Widia, both mechanical engineering companies), to get ISO 9001 certification from the German authority RWTUV.

'I was passionate about building credibility for an Indian company. I wanted the Made-in-India label to be of high quality,' she remembers, even though it meant writing their own quality manuals and fumbling along the way.

In 1994, when Biocon India wanted to expand its export-oriented BioChemizyme capacity fourfold, Unilever wanted a 50 per cent share. So they decided to set up a new plant called Biocon-Quest. By then, the Indian market was opening up, following the economic reforms of 1991. There was an attractive Export Promotion Capital Goods (EPCG) scheme which let companies pay a reduced import duty of a mere 5 per cent and sell their products wherever they wanted on the condition that they would have to export seven times the worth of goods they imported.

The investment in Biocon-Quest amounted to Rs 12 crore, of which the two partners would pay Rs 2 crore each and the rest would come from Deutsche Bank, an old lender for Unilever. Since the amount was over the authorized limit of Quest management, the proposal had to go to a special committee for approval within the Unilever Group. It could take six months or more, Bengaluru was told.

'I was ready to start, like, tomorrow. I couldn't wait. I was short on capacity because pectinases were doing very well. I wanted to complete the plant in one year, so I didn't wait for their approval. I put in my money and the borrowing, and I started,' says Kiran. On the day of the plant inauguration in 1995, Victor Rensing, chief executive of Quest, gave her the cheque and complimented her for 'fast execution', but it came packaged with some flak 'for violating the norms of a multinational'. (For a while, there was an internal joke at Biocon about who Con-Quested whom.)

After Biocon-Quest started, Unilever began to put pressure on Kiran. Biocon was supplying a lot of food enzymes to Unilever's global food business; it had become strategically important. Keki Dadiseth, chief executive of HUL, would convey 'messages' from Unilever and say, 'It would augur well if you gave control of Biocon India to Unilever by some way, we wouldn't mind if it came even through HUL. Why don't you give 1 per cent to Hindustan Unilever? That way we'll be able to do a lot more for you -invest more, get more business.'

When Kiran, avoiding getting caught in bureaucracy and certainly with no intention of forfeiting her freedom, kept ignoring those messages, Keki Dadiseth [former HUL chief executive] said she was sending the 'wrong signals'. At one point, Kiran told him, 'You keep telling me I'm sending wrong signals, but what assurance are you giving that you will stay invested in biotechnology? Can you ensure 1 per cent will translate into a guarantee that you will not sell the biotech [division]?' 'If anything,' she added in half jest, 'I'd like to buy back your share.'

Dadiseth hushed it: 'Don't even say such things.'

Mazumdar-Shaw with Nobel laureate James Watson during his visit to Biocon in 1999

In 1996, thought leader and author Stephen Covey was giving a talk at Oberoi Hotel in Bengaluru, where many business leaders had descended to listen to the celebrated speaker. During lunch, Kiran Mazumdar-Shaw met Dr Parvinder Singh, who had taken the reins at Ranbaxy from his father three years earlier. A chemistry doctorate from the University of Michigan, Singh was overhauling Ranbaxy radically; so naturally he seemed interested in the goings-on at Biocon. The two were meeting for the first time but 'they chatted most of the afternoon', and Singh, who had a late-evening flight, drove down to the city outskirts to visit the Biocon campus.

After that visit, he proposed to Kiran that they forge a research partnership. She suggested fungal pharmaceuticals; he recommended statins, a class of small molecules that lower the cholesterol level in blood by reducing cholesterol production in the liver. Lovastatin was a rage those days. Even though the drug was approved by the US Food and Drug Administration in 1987, a landmark study had been published in 1994. It dismissed the ambiguities surrounding lovastatin's beneficial effects in reducing LDL (low-density lipoprotein) cholesterol which significantly reduced recurrence of heart attacks. Pharmaceutical company Merck had commercialized the product, but its patent was expiring in 2001.

Biocon's willingness to develop lovastatin was instinctive. It was a fermentation product, one which was first discovered by enzyme researcher Akira Endo at Sankyo Corporation in Japan, a country where the earliest record of the Koji enzyme technology can be traced back to the third century ad. In the late 1970s, Endo had identified compounds, later named compactin or mevastatin, from the mould that infected the Japanese orange. But Sankyo dropped the project after some initial toxicity results. A few years later, Merck took it up and did larger studies to understand the mechanism of reported toxicity, and finally brought it to the clinics.

Kiran promised Singh that Biocon would develop high-yielding micro-organism strains, and the two companies' R&D teams got on to it with their respective strengths - Biocon using solid state fermentation, Ranbaxy using submerged fermentation. 'We saw it as an opportunity to get into manufacturing - we would have created two technologies; in any case, they were into marketing,' Kiran recalls.

By the mid-1990s, under its own strategic shift, Biocon sniffed the opportunities in pharmaceuticals and started research for lovastatin under the new company Helix, away from Unilever's scrutiny and interference.

'I had said if Ranbaxy gave us the strains, we could adapt and improve the strain for solid state fermentation,' Shri says. 'Sure enough, we did it. But it surprised the hell out of everybody when Ranbaxy, which was struggling to scale up its own laboratory work, changed its mind and decided to do it alone.'

Before the statin collaboration, Ranbaxy and Biocon had contemplated a business association when the former needed enzymes for its flagship product, penicillin, for which the starting raw material was a fermented product, 6-amino penicillin acid. Biocon was one of the leading enzyme producers those days, but, for a lack of capacity, most of which was already committed to the brewing industry, it could not produce enzymes for Ranbaxy.

On its part, Ranbaxy never intended to get directly into fermentation, primarily because it was a chemistry-driven company and wished to remain so. No less importantly, Singh was married into the Radhaswamy Satsang family whose guru was his father-in-law. 'So the question of Singh getting involved in manufacturing something that had anything to do with alcohol or intoxication was not possible,' said Bimal Raizada, a long-term Ranbaxy executive who handled different responsibilities at different times, at one point even running the non-pharmaceutical businesses of the family.

Singh was basically proposing that Biocon set up the production unit and Ranbaxy would consume the enzymes. The deal did not work out and Ranbaxy ended up making an investment in a small unit near Kangra in Himachal Pradesh. Gist-Brocadis helped transfer the technology to Max India to make the enzyme. The Singh family had a clear understanding that Ranbaxy and Max were separate companies and that the latter would do biotechnology. However, a director on Ranbaxy's board, D.D. Chopra, was a good friend of Kiran and he, to an extent, 'influenced Ranbaxy in building a bond with Biocon'.

By the early 1990s, it was clear to Singh, who had until then focused largely on anti-infectives, that major diseases in India would be related to hypertension and heart attack. 'We did take on a few blood-pressure-related products but we were unsuccessful. For cardiac cases, we had identified a range of statins and that's how Dr Singh wanted to collaborate with Kiran,' said Raizada, who passed away in March 2015.

To avoid getting into fermentation, which was becoming integral to many drugs it was producing, Ranbaxy signed a collaborative agreement with Hoechst - before it merged with the French company Rhône-Poulenc to become Aventis - to buy the state-owned Hindustan Antibiotics Limited (HAL) in Pune. There was going to be a three-member partnership which would form the biologics arm of Ranbaxy. But the government could not make up its mind on spinning off HAL, which had good manufacturing facilities for certain fermented products, including penicillin. A major producer of penicillin in Europe, Hoechst was meant to provide new strains to HAL.

While all this planning was going on in Singh's mind, in early 1999, he invited Kiran and John Shaw [her husband] to Delhi. At Ranbaxy House in Nehru Place, after a lavish lunch, Singh asked the others to leave and had a private conversation with Kiran and Shaw. 'Kiran, I want to make a proposal to you. I'm very keen to see if Biocon can become part of the Ranbaxy family. You are doing a tremendous job,' Kiran recalls him saying. He offered Ranbaxy shares, a board position in his company and the right to run Biocon.

'I told him,' says Kiran, 'it's a great honour to be asked by you but I am not ready to even consider such a proposal. He understood and said, "If you ever reconsider, let me know."'

Singh was thinking of biotechnology, but the rest of the company wasn't. 'If you ask me what the reaction was at that lunch meeting, people were saying: "You are doing well in biotech, I wish you luck; but I am good and doing well in chemistry",' said Raizada. That inherent aloofness, if not outright aversion, to biotech would come back to haunt Ranbaxy a few years later.

All plans fell apart later in 1999 - Hoechst merged with Rhône-Poulenc; the Indian government could not come to a decision on hiving off Hindustan Antibiotics; and Singh, fifty-six years old, tragically succumbed to cancer in July.

Excerpted with permission from HarperCollins from Mythbreaker: Kiran Mazumdar-Shaw and the Story of Indian Biotech by Seema Singh