CIPLA

Group - 1
Kudi Shrinidhi

M028-15

Niraj Jhunjhunwalla

M034-15

Saswata Banerjee

M048-15

Shruti Vinyas

M051-15

Abhisek Sur

F002-15

Cipla, Ltd.

1/2

Cipla was formed in 1935 by Khwaja Abdul Hamied (German-educated chemist and
entrepreneur)
At the advent of World War II, Cipla devoted its resources to produce drugs that would
support the British in their war effort

By 1944 Cipla was producing basic chemicals required for pharmaceuticals

By 1970 Cipla established itself as a respectable small pharma company
producing high quality and affordable medications

In 1972 Cipla reign passed on to Dr. Yusuf Hamied

who shifted focus on developing life saving drugs to treat chronic conditions

Cipla, Ltd.

2/2

By 2003 Cipla was growing at a rate of 30.3% YOY basis, with pre-tax profits of 22%
Cipla had a line of more than 400 drugs

Cipla used reverse engineering for drug discovery, and alternate synthesizing method
for production
Though a public company, Hamieds family and friends held 40% of its shares

Though analysts recommended Cipla stock as top pick, their long-term future was in
question
This is because they have not invested/researched in any knowledge based assets
i.e. drug molecules
They were classified majorly in generics segment

The Road Ahead

AIDS was declared pandemic by WHO 41 million infected, 3 million deaths in
2002
Antiretroviral drugs from the big pharma players were available at $10,000 per
head per year
In 2001, Dr. Hamied offered his triple-therapy cocktail at:

$1,200 to wholesalers,
$600 to Governments, and
$350 to Medicins Sans Frontiers

This saw a drop in the prices of antiretroviral drugs by over 50%

Indias agreement on TRIPS (Trade Related Aspects of Intellectual Property
Rights) in 1995 meant many of their reverse-engineered products will be
withdrawn from market by 2005
Current issue faced by Cipla is What I should do as a strategy to combat with
multinational players and Indias acceptance of TRIPS by 2005?

Q1.
What is your assessment of how well the various
parties are handling the global AIDS problems?

Party

Pros

Cons

Funds/shares R&D expenses of Encourages patents of pharma

pharma companies, thereby
companies, thereby giving them
encouraging them to research
a free run when a drug is
and develop drug molecules
approved

Governments of
developed nations
Stringent policies to check
(US/ Europe)
introduction of accurate
medications

No mechanism to set/ oversee

the pricing of drugs being
introduced

Develop policies to make lessexpensive generic drugs

available to the citizens
Governments of
developing
nations (India/
South Africa)

Raise awareness of AIDS

preventive measures, effect of
infection
Seek collaboration with
agencies and pharma companies
to provide affordable drugs to the

Does not have enough leveraged

networks with big pharma
companies, to get assistance

Party

Pros

Cons
Secure patents for their
developed drugs

Big Pharma
companies
(Glaxo,
Boenhringer)

Invested in R&D to come up

with a drug to slow/ negate the
effect of AIDS
Quality knowledge pool of
researchers and chemists

Replicate drugs through

reverse-engineering to provide
less-expensive and generic
medications
Small Pharma
companies (Cipla)

Reduce the dosage of

medication
Pulls back the market from
monopoly through price

Aimed at recovering R&D costs

and profits - $12-15,000 per
person per year
No co-operation with other
institutions to share knowledge multiple dosages, expensive
medications

Violation of intellectual property

rights and patents
Discourages investment in
R&D

Party

Pros

Cons

Raise awareness among

citizens effect and prevention of
AIDS
NGOs, Charities,
Global Agencies
(UNAIDS, WHO,
UNICEF)

Stand up against big pharma

companies to make the drugs
affordable and available to
average citizens
Collaborate with small pharma
companies to provide lessexpensive drugs

Limited implementation power

as they are controlled by
developed economies

Q2.
How does Ciplas business model differ from
those of the traditional pharmaceutical
companies? What are the key drivers and
challenges to Ciplas success?

Business Model Big Pharma

Source Active Ingredients externally
Higher spends on Research and
Development

Reverse engineer and synthesize

popular drugs in a manner different from
the original drug
Produce high quality affordable
medicines

Patent ever-greening
Pronounced profit motive

Low spends on R&D

Extensive lobby with governments

Cipla Sales Revenue by Region, 2001-02

Export of Active Pharmaceutical

Ingredients (APIs) to big Pharma
Export of off patent drugs

Africa; 4%
Europe; 8%

Business Model Cipla

Australia; 2% Asia; 2%

Target market was India

Middle East; 4%

The Americas; 14%

India; 65%

Challenges
Cipla
Strong relations
with the government
TRIPS agreement?
Research Capabilities?

India

The Americas

Europe

Middle East

Australia

Asia

Africa

Long-term growth?

Views of CEOs
They are pirates. Thats about what they are..they have
never done a day of research in their lives.

JP Garnier, CEO,
GSK
If we are pirates ,(let them Litigate)against us where is
the question of piracy when we abide by the laws of the
land? I dont believe in companies holding monopoly.
Dr. Hamied, CEO
Cipla

Q3.
In your view, do Ciplas practices constitute
unfair competition?

 No, Ciplas practices does not constitute unfair competition

Instead Cipla plays an important role to pull the drug and medicine market from
monopoly towards a more competitive market
Healthcare is a basic need and is supposed to be affordable and available to the
average people

Big Pharma companies tries to rake in superior profits through sales of their
approved drugs
This leaves a gap of better administration and efficient use of resources and
knowledge bases

Replication has two strategic value flows:

Expand the product line and support geographies and cater to customer needs
Lays the foundation for learning and improvement

Small pharma companies like Cipla encourages co-operation amongst agencies and
companies to:
Develop a more effective drug in terms of dosages, composition, and affordability
Have an efficient distribution system in place to make it available across geographies

Q4.
What should Dr. Hamied and his company do in
response to challenges they face?

 At present approximately 20% of its revenues come from replicated drugs;

remaining from producing drugs with expired patents
Continue production of drugs whose patents are about to expire, as well as replicate
patented drugs to produce affordable and efficient varieties
Dr. Hamied should leverage his relationship in the ministry and have them in
confidence to exempt Cipla from the TRIPS agreement and formulate policies for the
Indian Drug Industry
Invest in R&D to build intangible assets and competitive advantage, and have a longterm focus
Acquire bio-tech companies active in research work, enter into JV with pharma
companies to share their respective knowledge, while learning about the process and
products
Collaborate with Non-Government Organizations, Agencies, and Institutions across
geographies to:
Spread awareness on diseases amongst people
Make affordable medicines and drugs available to the masses
Open diagnostic centres to treat people

Q5.
What is anything the following parties can do to
combat the global AIDS crisis?
(1) Big Pharma, (2) Rich Country Governments,
(3) Non-Governmental Organizations (NGOs) and
non-profits such as the Clinton Foundation?

Party

Deliverables
Invest in R&D to come up with efficient drugs and develop their
knowledge assets

Big Pharma
Companies

Collaborate with pharma companies to share each others assets

and reduce costs
License out their product to other producers in return of royalty
Support the pharma companies by funding/sharing their R&D
expenses

Rich Country
Governments

Have liberal policies in place to ensure affordability and

availability of medications
Help NGOs and agencies to implement their plans through policies and
funds

NGOs and nonprofit

Organizations

Increase awareness of diseases amongst people

Leverage their network to ensure availability of drugs across
geographies

Thank You