The old order changeth in Indian pharma landscape

It’s the elephant in the room, says pharma industry veteran Ranjit Shahani, on the challenge of handing over the reins of a company to the next generation. Local drug companies need to take a reality check when it comes to succession, he says, as stalwarts who founded drug companies on a passion or with nationalistic ideals are “getting on in years.”

The rise of next-gen In recent years, the pharmaceutical landscape reflects a transition. And a glance at Sun Pharma, Cipla, Dr Reddy’s, Lupin, Wockhardt, Piramal Enterprises or Alembic reveals that the next-gen is rising.

But are the young turks ready? Have they gone through the middle management and through the ranks and earned their spurs or are they parachuting directly onto the board, wonders Shahani, Novartis India Vice Chairman and Managing Director. In international companies the “drop dead” policy ensures that a clear line of succession is outlined and groomed in case an untoward event affects top management heads, he says.

Late last month, Lupin Founder-Chairman Desh Bandhu Gupta or DBG, as industry colleagues fondly called him, passed away. The company he built is being run by brother-sister duo Nilesh and Vinita Gupa, Managing Director and Chief Executive, respectively. But DBG’s passing has in a sense put the spotlight back on the transitioning industry.

Over at Dr Reddy’s, Satish Reddy and GV Prasad have been at the helm for sometime now. Also playing key roles in their respective companies are Sun Pharma promoter Dilip Shanghvi’s son Aalok, Ajay and Swati Piramal’s next-gen with daughter Nandini becoming the face of strategic decisions, Wockhardt founder Habil Khorakiwala’s son Murtaza is Managing Director and Zydus Cadila’s Sharvil Patel is Joint MD. Uncertainity around Cipla has been nixed for a while, with Dr Hamied’s niece Samina Vaziralli’s elevation as Executive Vice Chairman.

Getting it right The old order is changing, bringing with it comparisons of how the founders ran their companies and fears of whether gen-next has the steam to steer the ship through a choppy market environment fraught with challenges of pricing, research uncertainties and patent monopolies.

Industry veteran DG Shah says there are companies where the transition has been smooth and focussed. Alembic, Torrent Pharma and Ipca have streamlined their businesses and are running it effectively, he adds.

Succession is critical and it’s important how it takes place, says Shah. “Will the value systems of the founders get transferred to the younger generation, only time will tell.” he says.

His concern is whether the domestic pharma industry will over time lose its “face”. Indian pharma had no dearth of them: late Dr Parvinder Singh (Ranbaxy), late Dr Anji Reddy, Dr Hamied, DBG, Dr Khorakiwala, Piramals and even Shah himself.

Though local drug companies are largely family-owned, Arijit Choudhury, Director (Global Key Accounts) with QuintilesIMS, observes that they are run by a mix of professionals and promoters. Promoters can be as professional as anyone else: they have a stake in the company, and decisions are thought-through. But there are also companies where professionals have the freedom to execute their decisions, he says.

But will gen-next have less of a connect with the core company and be more inclined to selling it? Choudhury reasons that the earlier generation set up an organisation with the right framework for gen-next to take it to the next level, often internationally. It is human tendency for every generation to chart its own course, which may be different from what the founders envisaged, he says.

Clearly the transition story is not over. As Cipla doyen Hamied once said, “Transitions in life are never complete.”

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