Biocon India Case Study

1. DEPARTMENT OF MANAGEMENT SUDIES, IISC
BIOCON INDIA GROUP
Marketing Case Study
Under the Guidance of
Prof. R. Srinivasan
Submitted by:
Appoorvaa Singh
Anurag
Dhiraj Gangaraju
Manoj Reddy
Submitted on:
3/1/2017

2. 1) What are the advantages and disadvantages of starting and operating a pharmaceutical firm in India?
Answer 1)
Advantages:
Advantages of starting and operating a pharmaceutical firm in India are manifold, especially for domestic
players. These advantages can be clubbed under the following broad heads :
• High quality work force : India has several well-renounced research institutions, that produce quality
PhD graduates in the field of biology and chemistry every year. Examples include IISc, NCBS, CCMB,
CDRI, etc. The relative expensive of hiring these Indian graduates is much lower that the cost of hiring
PhD graduates from universities and research institutions outside India. Apart from this, India also
produces a substantial number of pharma- science graduates. Indians also score in terms of being able
to speak English.
• Indian patent laws : In the 1970s, the Indian government implemented the acts Drug Price Control
Order (DPCO) and India Patent Act (IPA). These provided a huge boost to the manufacturing of generic
drugs in India, to the extent that India holds 20% of the global market share in generic drugs.
• Diverse population for clinical trials : Clinical trials are a necessary step in the drug discovery and
development chain. Due to its vast population, non-stringent laws regarding clinical trials, low cost of
conducting such experiments and a genetically diverse population, Indian CROs for clinical trials have
become popular with many MNC pharmas.
• Policy support for manufacturing firms : In recent years, the Indian government’s new initiatives like
Make in India, older schemes like SEZs, subsidies on raw material procurement and exports, have
made pharma an extremely lucrative industry to set foot in. The Department of Science and
Technology provides support to research in the fundamental sciences, which has led to the creation of
a nurturing academic environment supporting the industry.
• Well established pharmaceutical industry : The Indian pharma industry dates back to 1947, when it
was dominated by foreign players, followed by PSUs in 1960s, private players since 1970s. With
liberalization and changes in the patent policy, there are now more than 20,000 pharma companies in
India. The Indian pharma industry ranks 3rd in the world terms of volume and 14th in terms of value.
• Huge domestic market : Domestic market in India is valued at $13.8 billion. Besides, India is a major
exporter of low cost generic drugs.
• Low cost operations : Pharma operations, especially R&D, are much cheaper in India and China
compared to USA, Germany, Canada.

3. • Foreign investments : New policy allows 100% FDI under automatic route in greenfield pharma, and
up to 100% (75% automatic & 25% govt. approval)FDI in brownfield pharma.
Disadvantages :
• Weak patent laws : The product patent laws apply for a limited period of time, after which the
products come in the generic domain.
• Ethical issues in clinical trials : significant proportion of the population is uneducated, holding clinical
trials on such people entails many ethical questions. It can lead to tarnishing of the company image. In
the highly competitive Indian pharmaceutical industry and the effects of social media vigilantes, image
tarnishing can lead the company to incur significant losses.
• Highly competitive market : there are already more than 20,000 domestic players in the domestic
market.
• Entry of international players : Since the 2005 product patent act, more MNCs are looking at India as a
viable investment location due to the low cost of manufacturing, high quality work force and
substantial domestic market.
• Price cap on drugs : The DPCO act puts a price cap on the drugs sold in Indian markets.
• Capital intensive industry : As a company tries moving up the value addition chain of the drug
discovery, development and marketing chain, the capital investment involved becomes substantial.
2) Is the Indian CRO market attractive?
Answer 2)
Contract Research Organizations are firms that perform research and development related tasks on the behalf
of other organizations.
The Indian CRO market was and is extremely attractive. The 2002 prediction of Indian CROs’ share in the
global market was predicted at 20%.
The reason for the lucrativeness of CROs in India was that the outsourcing of critical R&D tasks to CROs based
here was low cost, work produced was of high quality, the workers spoke fluent English – making
communication much easier compared to other countries like China, thus freeing the parent company to
concentrate on its core competencies, at a more optimum level of utilization of resources.
Indian CROs are focused primarily on serving the need for bio-equivalence and bio-availability studies in
market, which constituted the low-to-medium segment of the value chain. In the 2000s, few companies

4. offered services in clinical trials. A large, well established pharma company like Biocon could very well leverage
its name and reputation to lure pharmaceutical MNCs into outsourcing critical and sensitive, higher valued
clinical trial work to Clinigene.
In India, very few pharma companies had their own CROs at the time, compared to foreign countries. Some
examples include Lotus Labs, Insta’s “LAMBDA”, Zydus Cadila’s “B.A Research Centre”. This thus represented
significant “first-mover advantages” in a high potential, rapidly growing market.
3) What is the best way for Biocon India group to expand?
Answer 3)
In the context of the case study timeline (2000), Biocon India lacked presence only in the animal studies and
clinical trials segments of the typical drug development and discovery value chain.
The senior board was on the look for more opportunities to expand, preferably in line with their philosophy of
“earn as you learn”, with the ultimate goal of making Biocon a fully integrated drug discovery and
development company.
Short-term :
The first most logical direction to expand in, thus, was the field of clinical trials, with the setup and expansion
of Clinigene. Biocon was still a long way from developing its own original drug formulations, but developing
expertise in clinical trials through contracts from other organizations would only serve Biocon well in the long
term, when the time was ripe for the development of their own formulations.
Biocon had three alternatives regarding the working of Clinigene:
• As a subsidiary that took low value work from other organizations, thus making it less capital and
effort intensive to setup and maintain. As and when the need arose, and relevant capabilities were
developed, Clinigene could pick up higher value work. But the pharma industry was growing at a rapid
pace, especially in the services outsourcing sector. Not capturing the opportunity fully would not
provide a substantial return on the investment and pain involved in setting up Clinigene, which was
already 2 years old in 2000.
• As a subsidiary that provided the whole gamut of clinical trials services, which would entail
considerable capital investment and attention from the senior executives. The counter to this passive-
aggressive expansion was that it would divert attention from Biocon’s core competencies of drug
manufacturing and marketing. The strain could possibly also have a detrimental effect on Biocon’s
carefully nurtured work culture – which it counted on as an essential building block that helped Biocon
grow from strength to strength. But setting up such a subsidiary would help Biocon capture profits

5. from the rapidly growing pharmaceutical services outsourcing sector. In the highly competitive
pharmaceutical industry, it would also help Biocon rapidly develop the capabilities to launch their own
product. Overall, the possible benefits of this alternative seemed to outweight the risks. The
expansion to clinical trails from BE/BA could be spanned out over a period of 2 years.
Just 5 years down the line, in 2005, the Indian Government would bring in the product patent law –
which would make the launch of self developed drugs an extremely attractive option for well
established Indian pharma companies like Biocon, and bring in more MNCs willing to outsource the
entire drug discovery and development process to India.
• Acquire a company that was already working in the field of clinical trials. This seemed like a viable
option, but the time and resources to be consumed in finding and negotiating with a suitable
company, and then moulding it according to Biocon’s work culture reduced the attractiveness of this
option.
The second direction was to develop an animal testing facility.
Long-term :
• Biocon should look beyond Syngene and Clinigene in the long term for expansion, and focus on
innovation and build upon its core competencies
• Look out for Strategic Partners in developed countries to boost the revenues, by breaching untapped
international markets
• Partnering with incubators and research centers
• Consciously try to build a brand
• Start work on the development and release of its own drugs and formulations. This was not a viable
option for the short term because of the resource intensiveness of the process, and the DPCA and IPA
acts.
• Setting up operations in other states of India to benefit from the attractive sops provided by different
states for the pharma industry.
Overall though, in the short-term, passive-aggressive expansion of Clinigene, with carefully crafted plans to
take care of all contingencies, seemed to be the way forward for Biocon.
4) What is the best way for Biocon India group to expand, and what factors should it consider?
Answer 4)

6. In the context of strategic growth, the best way to begin expansion was for Biocon to broaden the sphere of
operations of Clinigene, thus establishing its foothold in the entire value-added chain of the drug development
and discovery process. The ultimate goal was to come out with its own innovative drug formulations. For this,
developing capability in clinical trials, apart from BE/BA testing, was a must. Regarding the particular case of
Clinigene, the best strategy for expansion seemed to be :
• Draft out a policy framework in the next one year for clinical trials, taking care of all legal and ethical
issues, while Clinigene works in the low-medium segment of the value chain to maintain market
presence and to sustain itself.
• Start recruitment of people who fit in the work culture, with a goal of 2 years to allow the new recruits
to acclimatize. Clinigene was already 2 years old in 2000 – by 2002, it could have a substantial work
force in place.
• For the next 2 years, develop expertize in low-medium segments of the value chain (BE/BA testing,
animal testing, legal expertise in approval and launch) by taking on as many projects as possible
without compromising on quality.
• Start recruiting qualified staff for clinical trials, and scoping for clinical trial projects from existing
clients.
• Lobby for complementary drug development and clinical trials laws
Factors Biocon should consider :
• Public image and ethical issues : Biocon holds a legendary status of sorts in the perception of Indian
public. Pharma by its inherent nature raises quite a few moral and ethical questions in its operations.
Through careful positioning in the public eye by targeted image enhancing campaigns, highlighting the
Indian-ness of the company and its focus on sustainable value, and corporate social responsibility
initiatives, Biocon should strength its public perception and hence provide a cushion in case Clinigene
bombed. Biocon should also take care of its positioning as a drug producer, and not a service provider,
through strategic public marketing.
• Organizational culture : Expansion of Clinigene posed questions on whether Biocon’s carefully
nurtured work culture faced any threats. Clinigene was already 2 years old at the time. Biocon should
thus focus on hiring more people for the next two year period, while Clinigene established its market
footing.
• Expertise divergence to Clinigene : To avoid other operations of Biocon from suffering due to
increased focus on Clinigene, the expansion should be begun gently. In the beginning, a small team of

7. executives sould be assigned exclusively to Clinigene. Clinigene would continue working in the low-
medium segments of the value chain, while an expansion plan was drafted and required manpower
and projects were scouted. This would take 1-2 years. Within 2 years, Clinigene operations would be
sustainable enough and organically growing to run on their own without significant attention of the
senior executives being diverted from other major operations.