Dr Kallam Anji Reddy, the Founder-Chairman of India’s Dr Reddy’s Laboratories (DRL) and an undisputed doyen of the Indian pharmaceutical industry passed away in Hyderabad on March 15, 2013. In his sad demise, the country lost a brilliant and creative first generation entrepreneur who was driven by a passion for science and technology. He was truly a game changer for the Indian pharmaceutical industry who placed the company on the global pharmaceutical map with cost-effective bulk drugs (or, active pharmacutical ingredients) and affordable generic formulations (or, finished drug products), several of them with path-breaking patent challenges. He was the first to lay the path of basic research and drug discovery in the Indian pharma, and was the inspiration and motivation for several other firms to emulate him in terms of not only APIs and generics but more importantly, drug discovery research. Under his stewardship, DRL which was set up with a seed capital of just Rs 25 lakhs (USD 50,000) in 1984 grew to be a Rs 10,000 crore (USD 1.8 billion) globally diversified pharmaceutical corporation by 2012 with several core research and manufacturing facilities in India, and employing over 16,000 employees in India and abroad.
Dr Anji Reddy, a recipient of India’s third highest civilian honour Padma Bhushan in 2009, rose from humble agricultural roots. A son of a turmeric farmer in a village called Tadepalli, near Guntur of Andhra Pradesh was a combination of science and technology. He graduated from Bombay University in B. Sc. (Tech) with specialization in pharmaceutical science and fine chemicals, and went on to obtain his Ph. D. in chemical engineering from the famed National Chemical Laboratory in Pune. After his studies, he joined in 1969 the government owned Indian Drugs and Pharmaceuticals Ltd, which was set up to ensure self-sufficiency in drugs and medicines. His entrepreneurial spirit made him set up Uniloids in 1976 with his partners, which he later sold of, and Standard Organics Limited in 1980. He later on went on to set up Dr Reddy’s Laboratories in 1984 and built it into a global pharmaceutical corporation, listed in Indian stock exchanges and New York Stock Exchange (NYSE). The current market capitalization of DRL is Rs 30,000 crore (USD 5.4 billion).
In demeanor, Dr Anji Reddy was always unassuming and self-effacing, belying his stature and the great regard in which he was held. There would, in the coming days and weeks, be many tributes and eulogies to the life and achievements of Dr Anji Reddy from his family, peers and organizational followers, bringing out several known and unknown facets. His own biography, which he is reported to have completed despite his illness of the last several months, would probably sharpen his expressed thoughts and obvious achievements and unravel his embedded ideology and silent initiatives. When an accomplished leader passes away, the best way to pay a tribute to his memory is by synthesizing and distilling his leadership model so that budding entrepreneurs and aspiring professionals can have a template that they can follow or adapt. This blog post endeavors to delineate Dr K Anji Reddy’s scientific and business leadership model, reflecting the germination and growth of DRL as an institution of repute. The Kallam Anji Reddy-Dr Reddy’s Laboratories saga has six praiseworthy features of world-class entrepreneurship.
Science, engineering and economics
Business leaders in their use of science and engineering are of three kinds. The first class views science and engineering in terms of products and processes, and costs thereof as platforms for businesses. The second class views science and engineering as creators of value for customers and businesses. The third class, to which Dr Anji Reddy belongs, views science and engineering not only in terms of products and processes, costs and value, and markets and businesses but also in terms of sound and sustainable economics. Dr Anji Reddy transformed the economics of the Indian pharmaceutical industry both in a macroeconomic sense, laying the foundations of affordable generic medicines, and in a microeconomic sense, with scope and scale of production redefining industrial costs and global value arbitrage. His simple economic formula of what a drug costs in the US in terms of a Dollar should be made and sold in India for a Rupee was a simple but effective paradigm of considerable economic foresight. His unique combination of pharmaceutical science and chemical engineering became his, as well as DRL’s, core competence in developing high quality active pharmaceutical ingredients through reverse engineering and establishing operationally efficient global scale generic formulations. From Dr Reddy's accomplishments, it emerges that Science, Engineering and Economics is a knowledge triad of a higher elan business leader that transforms human development.
Quality as the Q.E.D.
Dr Anji Reddy was one of the early entrepreneurs who recognized that the higher quality of requirements of advanced markets such as the USA and Europe and complying with the regulatory standards of international regulatory agencies such as the US FDA was the sine qua non of sustainable pharmaceutical business. His first failures in meeting the quality requirements of Merck & Co for its bulk drug only prompted Dr Reddy to lay the foundations of quality focused US FDA compliant bulk drug plants, and later generic formulation plants. As early as in 1987, DRL secured approval from the US FDA for DRL’s Ibuprofen, opening up the US market for DRL. The series of bulk drugs such as Ibuprofen, Ranitidine, Ciprofloxacin, Methyldopa, Norfloxacin and Omeprazole as well as their follow-on products from DRL enjoyed huge world markets. Whenever standalone formulation companies desired complex products of high quality they preferred to rely on DRL despite the price premium. When new startups desired to establish US FDA compliant plants they sought talent from DRL. These establish that Quality is the paradigm of virtue that successful business leaders seek to prove and eventually establish beyond doubt. “Quality Enterprise Diffused” is literally and figuratively the Q.E.D. of sustainable business.
Talent in teams, teams with targets
The engine of growth for any organization is the intellectual power. DRL illustrates that when the founder’s intellectual power is reinforced by his team’s broader intellectual competencies, the organization moves into a targeted high trajectory of sustainable growth. Dr Anji Reddy has built DRL on three principles of talent, teams and targets. Whether it is bulk drugs, formulations or drug discovery world-class indigenous talent laid the foundations and built the superstructure of the DRL seen today. Some of the best names of Indian pharmaceutical science and technology are identified with DRL, even if they are no longer with the company. Dr Anji Reddy was also one of the earliest first generation entrepreneurs who saw merit in coalescing talent into business teams and eventually into strategic business units. The growth of bulk drugs, global generics, branded formulations, custom synthesis and basic drug discovery was based on custom-inducted and business-focused talent teams. The third component of a talent-focused organization is targets. The best targets that an entrepreneur develops are not metrics of turnover or profits but are mega visions of transformation. When as a student Anji Reddy who saw a Pfizer plant thought of building a Pfizer-like plant as his entrepreneurial venture or after he set up his business targeted his pharmaceutical corporation to be a "Pfizer" or "Merck" of India driven by innovation, he was articulating concisely and passionately a visionary target that inspired him and his talented teams.
Professional family, family of professionals
DRL as a first generation enterprise has been an entrepreneur driven business. With the induction of Dr Anji Reddy’s son-in-law G V Prasad and son Satish Reddy as the chief executive officer and chief operating officer in 1986 and 1993 respectively, DRL became a compact family run business. Yet, it was a highly professional second generation that came on board. Both the next generation leaders were very well qualified and have admirably learnt the ropes on the job, building businesses and operations. Dr Anji Reddy ensured that the leadership roles to them played to their strengths, with GV Prasad focusing on strategy and generics business and Satish focusing on operations and emerging markets, and Dr Anji Reddy himself focusing on drug discovery and overall mentorship. In addition, the troika of family leadership ensured that they were governed by a strong board of directors of eleven, in which all directors except the three were independent directors of high repute representing diverse domains. In fact, in a recent survey DRL board was judged to be a top ranking board in India acclaimed for its corporate governance. The uniqueness of the family team at the helm has been that it surrounded and reinforced itself with professionals of outstanding expertise in their domains. Classy chemistry expertise, outstanding generics leadership, creative medicinal chemistry and discovery biology and savvy commercial, business, financial and legal strengths, among other domains, together made DRL a professional powerhouse. Dr Anji Reddy established that entrepreneurial chemistry and creativity is highly synergistic with professional expertise and integrity, both needing to be perpetual partners in progress.
Risky challenges, global rewards
Most successful leaders are intelligent and empathetic using their traits for planning and executing but all are not adept at taking investment and business risks based on the organization’s intellectual competencies as well as networking and negotiating capabilities. Dr Anji Reddy took intellectual and investment risk-taking progressively up four levels, ahead of most Indian pharmaceutical companies. DRL was the pioneer, in the 1980s, in taking the first risk of reverse engineering patented molecules through innovative non-infringing processes, and manufacturing them, leveraging India’s prevailing patent regime. This risky initiative handsomely paid off with the bulk drugs becoming the foundational cash generating business for the next wave of generics risk-taking. The next was in the 1990s when the generics business unit began embarking on the Paragraph IV, First to File (P4 FTF) challenges under the Hatch-Waxman’s Act of the USA which provided options for innovative challenges based on patent litigation in the US legal system. DRL’s Fluoxetine P4 FTF patent challenge against the innovator of the molecule has been a game changer leading to the dominance of the Indian pharmaceutical industry in the US. DRL has since built up one of the largest portfolios of P4 FTF products in the generics world. This second level of risk-taking enormously benefitted DRL and positioned it as an awe-inspiring player in the generics space. The third level of risk pertains to aggressive internationalization of its branded formulations business. Russia has been a beacon of success in this dimension while a few others have been less than successful. DRL's success in creating the dossier framework for global markets has prompted GSK to ally with the company for emerging markets. The fourth level of risk pertains to Dr Anji Reddy’s passion for basic drug discovery research with the aspiration of globally commercializing a DRL discovered new chemical entity. Despite the high investments and overwhelming uncertainty of payback in drug discovery, he founded as early as in 1993 Dr Reddy’s Research Foundation with chemistry and biology infrastructure in India and also established overseas discovery infrastructure progressively. Though the early discoveries failed to make it past all the human clinical phases, Dr Anji Reddy still remains the icon of drug discovery in India. Calculated risk taking initiatives based on indigenous intellectual capability have been part of Dr Anji Reddy’s leadership profile.
Enabling and sustaining good life
Pharmaceuticals support life, and the pharmaceuticals industry is a noble industry by any yardstick. If pharmaceutical corporations and the leaders of the pharmaceutical industry deploy their corporate and personal wealth to enable and sustain good life, they would be even more significant corporate citizens. DRL’s focus has primarily been on three life-altering areas: Patient Care, Education and Livelihood. The company channels its wide network of social activities through Dr. Reddy’s Foundation (DRF) and Dr. Reddy’s Foundation for Heath Education (DRFHE) which address health education needs and patient care activities. DRL also creates positive impact on communities through Corporate Social Responsibility (CSR) teams in each location. Two of the social responsibility initiatives undertaken by Dr Anji Reddy illustrate a silent social facet of his entrepreneurial profile. He spearheaded the Neo-natal Intensive Care and Emergencies Foundation called NICE Foundation, the only institute for new-born babies in India. He also set up Naandi Foundation (Naandi meaning start of a new initiative) for providing safe drinking water in rural areas. The foundation provides midday meals to 1.3 million government school-going children and farmers. Anand Mahindra, the Head of the automobile conglomerate Mahindra & Mahindra tweeted “R.I.P. Dr Anji Reddy. Your business achievements were well known, but you were an unsung hero for your transformational philanthropy.”
Game changing techno-entrepreneur
The author of this blog post has had no direct professional contact with Dr Anji Reddy except meeting him in a few pharmacutical forums. However, as an observer of Dr Anji Reddy's leadership model and DRL's continuous growth, the author believes that Dr Reddy’s contributions of entrepreneurial and business leadership have been truly exceptional as synthesized in this blog post. Successful entrepreneurs typically create sustainable institutions that create products and services for markets and generate returns for investors. A few entrepreneurs, however, craft and execute game changing strategies for their enterprises that fundamentally redefine the very structure and strategy of entire industries. Dr Anji Reddy clearly belongs to this illustrious genre of “super-entrepreneurs” in so far as the Indian pharmaceutical industry is concerned. His transformational contributions to the Indian pharmaceutical industry will remain unsurpassed for a long time to come. The epithets “doyen”, “icon” and “pioneer” describe his game-changing techno-entrepreneurial leadership perfectly. Dr Kallam Anji Reddy, the super-entrepreneur who wanted to create a "Merck" in India has certainly created, in Dr Reddy’s Laboratories, a robust and growth oriented pharmaceutical corporation that has earned global respect, and has in the process left an indelible mark on the Indian pharmaceutical canvas.
Posted by Dr CB Rao on March 17, 2013