Mumbai: K.G. Ananthakrishnan managing director of the Indian unit of the world’s second largest drug maker Merck and Co. Inc., oversaw one of the most complicated corporate mergers the local drug industry has seen in the recent past. After integrating the operations of two long-established, publicly traded firms—Fulford (India) Ltd and Organon (India) Ltd—with Merck’s fully-owned unit MSD Pharmaceuticals Pvt. Ltd (or Merck Sharp and Dohme), he is now transforming the combined entity to become one of the top five drug companies in India in the next four years.
Ananthakrishnan, or KG—as he is widely known in the industry, started his career with Novartis India Ltd as a medical representative in 1976 and worked his way up to become head (sales and marketing) of one of the business units in 1997-98. He then moved to Pharmacia India in 1999 as vice-president (sales and marketing). In 2003, he joined the Indian unit of the world’s largest drug maker Pfizer Inc. as senior director for India, Bangladesh and Sri Lanka. He came to Merck in 2009 after the company acquired Schering-Plough, which operated in India through its unit Fulford. Ananthakrishnan says he wants to tap the resources of the parent company to meet the challenges in his new assignment. Edited excerpts:
Merck’s re-entry into India’s growing pharma market, comparatively later than its global rivals, with an ambitious growth plan that is to be achieved in a short timespan, had triggered speculation that it may make a big-ticket takeover in India. Is that the actual strategy of the company, as many of its global rivals did it in the recent past, to quickly grab a considerable market share here?
I think it’s not a necessary option for MSD in India as the global parent, with a huge portfolio of products and an extensive research pipeline, itself provides greater scope to grow organically in this market at a faster pace. The parent’s annual research spend ($8 billion in 2010, or Rs36,000 crore today) that aggregates to at least 15% of its global sales ($46 billion), can feed its product portfolio to meet even specific medical needs of its various markets in future.
The rumour that our company was looking at big acquisition targets locally was totally unfounded. With the integration of the three entities post the global merger of Merck and Co. and Schering-Plough in 2009, MSD India has at least 2,000 people and 75 key products, most of them in the top-selling position in the respective therapeutic segments. We have enough scope to grow organically much faster than other companies in the Indian market. But, of course, we are looking at key partnerships with the local industry in all the facets such as manufacturing, research and even marketing to make this growth possible.
Even after integrating the businesses of Fulford and Organon, MSD India ranked 29th in the Rs55,000 crore Indian drug market, with about 1% of it. So, how realistic is the target to be in the Top 5 by 2015 without acquisitions?
The operational integration has just got completed. Now it’s one business. Reaching the top slot may not be an easy task. But looking at the vast majority of our globally sold high-value products, which have not yet been introduced in this market, we are hopeful that a phase-by-phase release of this portfolio in this market will help us grow faster.
India is one of the fastest growing markets with at least 15-17% growth a year. This (the target) is quite a realistic plan. For example, at an average of 40-plus percentage rate, we have grown much above the industry growth in most of the product segments that we are present (in) now in the last couple of years. In the vaccine segment, MSD has about 3.7% share already in the Rs815 crore domestic market. All the three vaccines—Pneumovax,?Gardasil and RotaTeq—that we have introduced in the market are currently the first ones, or market leaders. And the company as a vaccine seller is currently ranked ninth in the local market, and we grew 49% last year in this space.
In the drugs space, MSD, after the operational merger of the three companies, currently operates in at least 11 high-growth therapeutic areas, including diabetes, oncology, cardiovascular, women’s health and respiratory. Thirteen of the 75 brands that we sell now are the top prescription products in the respective segments. I hope another 25 new brands will be introduced in this market from Merck’s global portfolio in the next two-three years.
Could you elaborate on the partnership that you are exploring in the local industry?
We have 13 manufacturing partners already in the country. This number will keep increasing as we bring more and more products to this market.
We have also tied up with companies such as Piramal (Life Sciences Ltd) and Orchid (Chemicals and Pharmaceuticals Ltd) for research projects. These corporate research partnerships are apart from the various other projects that we have with the government institutions and laboratories for India-specific product developments.
The company is also currently exploring sales and marketing alliances and partnerships with big local firms to expand market reach. In fact, the parent and the Indian entity have a long-term commitment to India in terms of bringing (the) latest drugs, and also making necessary investments to serve the market through responsible pricing and a team-oriented disease management programmes. In addition, we may in future utilize our manufacturing partnerships in India to serve the international markets for the parent, taking the cost advantage of India.
Your marketing network in India largely covers urban locations. Many of your rivals have already expanded their reach to the vast rural markets for further growth. Don’t you think you may miss the bus to explore wider opportunities in this growing economy?
We are aware of this limitation, especially for the vaccines and primary-care business, which should ideally reach the semi-urban and rural population also.
Logistics is one of the key elements that block the rural reach mainly for the vaccines. For RotaTeq, the diarrhoea vaccine that was launched early this week, we have initiated a key research initiative with the newly started India-specific medical research foundation jointly supported by Merck and Welcome Trust to develop a heat-resistant vaccine, which will help (in) tackling the logistics issues.
Apart from this, we are also working with various stakeholders such as doctors, hospitals and health NGOs (non-governmental organizations) to ensure an extended reach to the country’s rural and semi-urban patients for several of our specialty products.