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The man behind Dr Reddy's success
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December 11, 2007

The 47-year-old CEO whose marriage to the founder's daughter played a big role in his career is now delegating part of his day-to-day work to the boss's son.

By his own admission, the most important event in G V Prasad's life has been his marriage with Dr Reddy's Laboratories founder-chairman Anji Reddy's daughter.

After finishing his studies from the Illinois University in the mid-eighties, Prasad, now the vice-chairman and CEO of Dr Reddy's, wanted to do something different from his family business of construction and real estate, and ventured into the manufacturing of bulk drugs with a start-up unit called Bensex Laboratories. But the unit soon ran into losses, write Shyamal Majumdar and P B Jayakumar.

The loss-making Bensex needed a lifeline and that came in the form of his marriage into the Reddy family. Anji Reddy bought his son-in-law's company and inducted him, quite predictably, into Dr Reddy's Lab in 1986. But Prasad dismisses all notions of any favour done by a doting father-in-law and says Bensex was a perfect fit for Dr Reddy's which was then looking out for creating more capacities for bulk drug manufacturing.

We are at Souk, on the Rooftop at the Taj Mahal Hotel. Prasad chose Souk as he loves the fresh, pungent flavours of dishes from Iran, Turkey, Lebanon, Egypt, Greece and Morocco. There is another reason why we are glad that he chose Souk -- the glass-panelled windows give you a breathtaking view of the Mumbai harbour.

Actually, his first love is Japanese food at what he calls one of the most expensive restaurants on the ground floor of the hotel. But he changed the venue on learning from his PR staff that he is the guest. "I didn't want to force my choice on the hosts," Prasad says, politely declining our offer to shift the venue to his original choice.

The menu is all Greek as far as we are concerned but Prasad has no such problems as he scans the menu and orders soup and a fish preparation for the main course. The steward helps us choose what he thinks is the pick of Souk.

Formidable-sounding names such as Shesh Taouk, Spanakos Menemen and Samak Moroccaine stare us in the face, but the dishes look and taste like chicken soup and kebabs with salads and crispy rotis.

Just as we are finishing our soup, an eagle perches itself on the concrete shade behind the glass window and Prasad marvels at its majestic looks. His childhood passion of watching birds has not diminished even now and he has bought 100 acres of land near Hyderabad to set up one of the largest bird sanctuaries in India. "Birds teach you everything from patience to team spirit," he says. He should know -- he devotes at least four to five days a year to travel with ornithologists to study birds.

That's just about the only break he has allowed himself in what has been a very busy career since he joined Dr Reddy's in 1986. For, the transformation of the company from a predominantly bulk drug manufacturing unit to the big league of global generics business needed a lot of hard work and perseverance. The efforts have paid off. Today, Dr Reddy's drugs are available in more than 40 countries and the company has over 9,000 employees in different parts of the world.

After establishing itself strongly in the domestic market, Dr Reddy's geared up to go global. In March 1997, it achieved its first breakthrough by licensing out an anti-diabetes molecule to Denmark's Novo Nordisk, the world leader in diabetes drugs. In fact, this small step taken by the company proved to be a giant stride for the Indian pharmaceutical space. The industry went through an instant paradigm shift in its image from being known just as a copycat to being known as an innovator.

Dr Reddy's moved to Germany in early 2006 and acquired Betapharm, one of the largest generic drug companies in that country, for Rs 2,250 crore (Rs 22.50 billion). It was the biggest ever overseas acquisition by an Indian pharmaceutical company.

But what about the widespread criticism of the Betapharm acquisition? Prasad is quite candid about it and says Dr Reddy's went for it mainly because not many large generic companies were available in Europe at that point. But things became tough as the German government brought in new rules to reduce healthcare costs. The government's decision resulted in a reduction in medicine prices. As a result, Dr Reddy's could get only Rs 960.3 crore (Rs 9.60 billion) revenue from Betapharm in 2006-07, compared to the Rs 242.2 crore (Rs 2.42 billion) it got from just 28 days of business in the previous year.

But the master strategist is at work. "The situation will be different once we fully integtrate Betapharm. We have adopted a two-pronged strategy to optimise the synergy. The first is to move part of the production to Hyderabad and the second is to entrust the remaining products to more than one generic contract manufacturer. We are also in the process of re-aligning the team to optimise the benefits," Prasad explains. He admits though that the challenges are still enormous.

Dr Reddy's performance has shown signs of faltering this year after a glittering show last year. But Prasad says that's an unfair comparison as last year's superlative show was powered by the one-time opportunity of the authorised generic versions of Merck's cholesterol drugs Zocar and Proscar, which fetched Rs 1,581 crore (Rs 15.81 billion).

"What should not be forgotten is that we have secured our generic future in the US for at least the next decade," he says, adding Dr Reddy's has 22 first-to-file Para IVs in the US, and if it gets one or two every year, good revenues are assured. As per the US rules, when a generic company challenges an innovator patent with success and has first-to-file challenge status, it gets 180 days' exclusivity to sell the product in that country.

Dr Reddy's, Prasad says, is at a crucial stage of transformation in its pursuit to become a true drug discovery-led company. "While the current generics will power the business on the one hand, new drugs and biomilars (copycat drugs of off-patent biotech molecules) will contribute in the same way to our business in future," he says. The company has seven new molecules under development, including five in the clinical development stage. Balaglitazone is, in fact, in the Phase II stage.

Untapped geographies for the generics business is another area of focus for Prasad. "Countries such as Turkey, Mexico, Brazil and South Africa are still untapped in the field of generics. While the focus in the US will be on high-value specialty formulations, our Europe strategy will be powered by branded formulations," he says. All this has meant a huge pressure on Prasad's time (he is, for instance, flying back to Hyderabad in the evening only to take the next day's early morning flight back to Mumbai after attending an evening meeting there).

The son-in-law also seems to have a perfect sense of timing. With the son rising at Dr Reddy's (Satish Reddy, son of Anji Reddy, has taken over as the managing director), the 47-year-old Prasad has decided to "consciously delegate" about 90 per cent of the revenue-earning day-to-day businesses of Dr Reddy's to Satish, who is seven years younger to him.

Question him on this and the answer is predictable. "This is what every sensible CEO should be doing after a particular level of growth of the organisation," he says, adding his immediate focus is to concentrate on developing futuristic businesses and unlocking value from the investments made by Dr Reddy's in drug research.

The father-in-law would be happy with that answer.

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