Glenn Saldanha tells MoneyLIFE how he created an innovative pharma company
September 16, 2008
I think most of the outside world thought we were crazy when we said we are going to do drug discovery
Five years ago, Glenmark was a small formulations company, the bulk of its revenues coming from India. Today, it is a radically transformed company focused on daring new drug discovery with two molecules in clinical trials and two landmark deals with leading foreign companies. The man behind this path-breaking success is managing director Glenn Saldanha, 38, a serious, highly focused and confident young man, who seems extremely certain about the company’s growth path to a place in the global pharma scene. After a stint in consulting with Pricewaterhouse, Glenn returned to Mumbai to join the company, started by his father Gracias in 1977 and named after him and his brother Mark. His experience of consulting with global pharma majors and the opportunities opened by India’s economic liberalisation programme together allowed him to quickly put the company on a high growth path by creating its own proprietary products rather than doing contract research. His game plan includes organic growth through expansion and acquisitions in India and abroad. Glenmark has a successful drug discovery programme and has been forging marketing partnerships around the world. The result: a compounded annual growth rate of over 27% in the past six years.
ML: Would you please start by telling us a little about your background?
Saldanha:I am a pharmacy graduate from the BombayUniversity. I worked in India for about three and a half years as a medical representative and a product manager. Then I went to the US to do my MBA from New YorkUniversity and then went to work for Eli Lily in Indianapolis. I worked there for a short while and then moved to California to Pricewaterhouse (now Pricewaterhouse Coopers, PWC), consulting for the pharma industry. In that capacity, I worked with most big pharma companies, such as Astra Zeneca, Merck, Rhone Poulenc, Bristol Myers Squibb, SmithKline Beecham, Johnson & Johnson, etc. I was with Lily for over a year, with PWC for two and a half years and moved back to India towards the end of 1998.
At PWC, I worked on consulting projects for pharma companies; typically, three or four-month projects where you’re brought in to do fire-fighting and advise clients about how they should re-formulate their strategies. Most of my consulting was in sales and marketing. I did some post-patent strategic work for one client, planned the life cycle of a product for another, did a lot of work in fire-fighting issues such as some brands getting hit by competitors and helping to get through that or how a client should revamp operations. It was mostly very high-end consulting. PWC in the US had a boutique pharmaceutical practice which exclusively focused on this area. Most of the work there was with CEOs and senior executives in big pharma companies. So I got a very good overall experience and insight into the global industry. I actually got promoted at PWC a week before I put in my papers and decided to move back to India.
ML: How old were you then?
Saldanha: I was around 30 or 31 at that time and I saw tremendous opportunity in India. My stint in the US was five-six years, of which three and a half years were in consulting. If you get two years of consulting experience, it is probably equal to eight to 10 years of a regular job because it is a very high-pressure environment, especially in the US. People expect you to add a lot of value from the first day you walk in because the billing rates are high. It is a different ball game altogether.
ML: When you came back to India did you plan to start something of your own?
Saldanha: No, Glenmark was promoted by my father. It is named after me and my brother Mark. It was a 29-year old company and was relatively small when I moved back -- just about Rs70 crore to Rs80 crore in sales. Last year, we closed sales at about Rs750 crore and, this year, we have crossed the Rs1,000 crore mark. I had worked initially with a sister company of Glenmark that we subsequently moved out of, just to get experience without direct association with the promoter group. At that time, almost 99% of our business came out of India. I saw tremendous potential, primarily because of the talent pool that we had to offer, especially in research. Providing the right environment, a lot could be done within India to propel growth. That’s what we did -- we went public in 1999, raised capital and built a facility in New Bombay. I think most of the outside world thought we were crazy when we said we are going to do drug discovery and look at new chemical entities and so on.
ML: What about Dr Reddy’s, wasn’t it already doing this?
Saldanha: At that time, there was Dr Reddy’s and Ranbaxy -- they were the two majors. Dr Reddy’s had done two deals in 1998 and that excited us. We thought intellectual capital is very high in India and, if we could attract people of Indian origin back from the US into leadership positions and provide them the right kind of environment, we could do research here at a much lower cost than the West. Those days, our pitch used to be that the cost of doing research in India is a tenth of the West; obviously things have changed. Now it is probably more like one-fourth or one-fifth; but we are still very competitive. So we did all that. We raised money; attracted key scientists back from the US and built the whole research effort and capability.
ML: But you looked straight away at original research and not contract research?
Saldanha: We never saw ourselves doing contract research. Culturally, we thought doing work as a CRO (contract research organisation) was not our cup of tea for whatever reasons and have always stayed out of it as a company. If you look at Glenmark today, all our work is our own products and proprietary stuff. We stuck to it. The thought process was - yes, research is risky, but we took on those risks. The idea was that if we had to break out of where we were and move up the value chain very quickly, the only way we could do it was through innovation and discovery. Today, Glenmark has emerged as what it is because we put in that effort over the last five-six years and pride ourselves on having one of the best product pipelines in the Indian pharma industry. We then acquired companies in Brazil, set up fully-owned subsidiaries in the US and Brazil and announced the discovery of a lead molecule which clearly put India, not just Glenmark, on the global map. I think India is increasingly getting recognised and, as we go along the curve with more and more deals and value being added, we will be able to re-position India’s capabilities in the drug discovery area -- that’s where we see the future going.
ML: Would you take us through the leadership challenges you faced.
Saldanha: The first thing we did after I moved back was to put in place a corporate strategy looking at where we saw the firm going over the next five to seven years. At that time, GATT had just been signed and that made it even more exciting, as there would be many challenges that Indian companies would face. One could look at it either way -- as doomsday scenario or an opportunity. We decided to focus on four areas: the first was our domestic business. Then, almost 99% of revenue was domestic; last year, we closed with 50% of the revenues coming out of India and, this year, it would probably go down to 35%. So we completely de-risked that, but we are still among the top 10 or 15 Indian pharmaceutical companies. We are leaders in dermatology, women’s healthcare, paediatrics, diabetes, respiratory diseases, etc. These are some of the franchises that we dominate within India. So we built a reasonably good domestic business, but we have done better in other areas.
The second piece of the strategy was our discovery effort, which I will talk about as we go along. The third area was generics and API (active pharmaceutical ingredients). The interim strategy would always be generics and whatever cash you are able to generate from the generics side of the business would be reinvested in innovation -- that was the whole game plan. So we said we needed API capabilities. We bought GSK’s facility at Ankleshwar and got it USFDA (US Food and Drug Administration) approved. We have filed 15 applications and, this year, we have another 15 or 16 going out. In generics, we supply to a huge number of companies across the world.
Today, we have about $30million to $40 million coming out of API. This year, it is going to be about $55million or Rs250-odd crore. So we have created a certain amount of scale there. The fourth focus area is international formulations. We had some presence in scattered markets like Africa and Russia when I moved back, but today Glenmark is completely global. Over the past six years, we have developed operations in over 80 countries through direct sales, tie-ups and partnerships.
The tie-up part is to accelerate bringing products to market. We have six products now. Whether we sell six products or whether we sell 30 products, the infrastructure required is the same. Effectively, our thought process is to increase the number of products going through our pipeline in the US. If we were going to try to build it on our own, it would take a decade or two; so we went out and did deals. We got Forest Laboratories as one partner to do a joint development deal and we got Teijin Pharma as a second partner. We also did a whole bunch of in-licensing deals to increase the throughput from our own front-end.
ML: Did you acquire a marketing company?
Saldanha: No, we built it completely. Last year was our first year in the US market. We have been there for a little over three years. In the first quarter, we had virtually zero sales; in the second quarter, we were $1 million; third quarter was $4 million and last quarter, we had $7.5 million -- so it is a huge ramp up in scale. This year, we put out numbers of $35 million. With the 17 filings with the FDA, we are looking at eight to 10 approvals this year. Plus we have this controlled substances pipeline where we have about five products, which we have started launching this month. These are already approved. So the US clearly is a large opportunity for us. Our strategy is that whatever comes out of our NCE (new chemical entity) pipeline, we will partner for US, Europe and Japan. We will keep the rights for the rest of the world with us.
ML: Is that decision purely based on market size?
Saldanha: Yes, because it is all related to funding. Europe, the US and Japan require huge amount of capital, if you want to go branded, which clearly we will never have for the next decade. I don’t think any Indian company will have it. To launch a proprietary molecule in the US, you need millions of dollars. You need large marketing budgets and investments in clinical testing -- so that is a dream for Indian companies. We decided to give out the US, Europe and Japan and use that capital to build up scale in the rest of the world. That is the strategy and it works well because most companies, who are in-licensed, want to keep Europe, the US and Japan, which is 80%-85% of the market today. It is another matter that growth will actually come from markets other than these -- for instance, countries like India, China, Brazil and Russia.
ML: Is your strategy to build infrastructure or grow through acquisitions?
Saldanha: We are doing a combination of infrastructure building and acquisitions. If the US, Europe and Japan is one market, then Latin America is a second market. Here, we bought a company in Brazil and another in Argentina and have a fairly large presence of around 400 people. This is part of the game plan -- of building rest of the world (or ROW) markets. The third region is less regulated markets --Africa, Asia and CIS. In Africa, we cover 34 markets out of the 54-odd. We have bought companies in South Africa and Nigeria. The game plan is that, in 2009, when we launch Oglemilast, we must have infrastructure on the ground in these markets. In Asia, we cover most countries except China, Japan and South Korea. We have a presence in Malaysia, the Philippines, Vietnam, Sri Lanka, Myanmar, Singapore and other countries. In CIS, we have a presence in Russia with a reasonable size. We don’t have much of a presence elsewhere but we are building it up. We don’t have much of a presence in Europe but we are looking at getting a foot in the door -- nothing big ticket. So other than the US, Europe and Japan, we will do something on our own or through co-marketing -- that is our strategy.
ML: Many pharma companies have faced litigation overseas. How do you plan to avoid that?
Saldanha: If you look at the discovery side, we have simply avoided the Para IV (gunning for products that are going off-patent) side of the business. We have gone with Para III (NCE) as a strategy, primarily to avoid lawsuits, large investments and the challenges that you face in the Para IV business. We decided that the risk that we would take was on the discovery side and capped our risk there. Everything else is plain vanilla -- very stable. We may have some innovation and niche products; but we don’t have any risks or potential losses coming out of the rest of the business, unlike some companies who have a much broader risk profile, obviously because their capabilities are much larger.
ML: Does this planning on the risk mitigation come out of your consulting experience in the US?
Saldanha: Yes, maybe. I am not taking credit for what we have done; we still have a long way to go. As a firm, we are still in the building phase. So we don’t claim to be pioneers. We have done some good things and we know where our strength lies. As a firm, we capped our risk, and hedged our risk. For instance, we reduced our domestic market dependence to 50% -- we hedged that. We had to decide if we want to get into litigation, fight that game and put up big dollars or put our money in innovation. We clearly saw innovation as the way forward because the skill set that we would acquire in the discovery process would stand by us in the long run. Only time will tell who is right and who is wrong. You can have a big hit by litigation or sink money in discovery.
ML: Given the cost advantage in India, why haven’t big pharma companies, which already have a presence in India, ever used India as a base for research?
Saldanha: What we have done is still an exception to the rule. I still think India has some way to go in terms of its understanding of research. It has not yet established itself in the discovery stage, which will take some time. Whatever research has been done on the discovery side in India is less than a decade old; while in terms of discovery of molecules, the West has been doing research for over a hundred years. To replicate that learning requires time. Yes, we work hard and we are smart people, but we need time to completely understand the process. As for Glenmark, we have done some right things and that has given us some advantage and helped us move ahead. But for India to get recognised as a country for its research capability needs more time. A lot many deals have to happen before India gets on to the global map.
ML: Is it all about costs?
Saldanha: No, it is not about cost at all, cost is just one element. It is about being convinced about intellectual capital, understanding research and making an investment - that is now beginning to happen. Some MNCs, such as Astra Zeneca in Bangalore are doing discovery research. There are one or two others who are doing some components of discovery like some chemistry work and taking the compounds to their parents. India still does not have a single molecule in the market. When that happens, we as a country will get recognition. Typically, we would be viewed as a manufacturing base for contract research, because there is a clear cost advantage here.
ML: In your success story, there is a strong component of management. With all the right ideas, you could still take the wrong turn. Will you give us a sense of how you have managed things?
Saldanha: This is a question we have been repeatedly asked. How do we manage the momentum of growth and how we are able to deliver, what many of our peers are not able to execute. What we have done at Glenmark, I believe, is that we have recruited the best talent in the industry. We have some of the finest guys working for us. We recruit aggressively from the IIMs, we go to most of the leading management schools and have a lot of smart people within the organisation -that has been our key strength. Obviously the challenge is also in retaining that talent and managing the whole thing. We have done a reasonably good job at retaining talent. With the company doing well, a lot of people have been rewarded adequately across the board. On execution, we have phenomenal guys all around and we have depended on local talent to run individual pieces of the global business and it is working great. Local talent in different countries has a great inherent advantage and we find that works very well for us. Most people also enjoy being exposed to different cultures.
ML: What has been your biggest breakthrough so far?
Saldanha: Clearly, we always worked for that one hit which was Oglemilast, in discovery. All it takes is one product in the market. Once you have that, you have made it. Today we have a pipeline of six products, two of them are in Phase II trials. Oglemilast and 8200 are both in Phase II and we have four other molecules which are going into Phase I. As a firm, if one of these six goes into market, you are looking at millions of dollars coming into the firm every year for the rest of the patent life of around 15 years. We have always worked for that one strike.Oglemilast was that strike. Obviously Oglemilast has to go to the market, when that happens, expectations from Glenmark will be that from a big pharma, because that kind of money will come into the business. We will then have to look at our business and decide how to evolve. We cannot depend on discovery alone. It is a great engine, you have to be working for that one strike. At the same time, the rest of the business has to generate cash.
ML: What is your biggest challenge and did you make any mistakes?
Saldanha: Our biggest challenge clearly remains how to hedge out the risk in discovery and how to get more molecules in the clinics through more deals. The second challenge obviously is in retaining the team and making sure we continue to have that consistency. These are the two broad challenges we have. Obviously we have made mistakes. Every company has to make mistakes in order to be successful. We made some mistakes with people and some mistakes in terms of investments. I don’t want to elaborate on the specifics, but I think at the end of the day as long as your successes outweigh your mistakes, it is okay. There aren’t any big enough mistakes that have hurt the foundation of the company.
ML: Has nothing ever happened to ever make you change track?
Saldanha: So far nothing has made us change track. Our focus, our commitment and our belief are the three key things that drive us. We are very focused and we believe in what we do as an organisation, irrespective of what the outside world thinks of us. We have charted a particular course and we don’t leave it until we see success. What makes us unique is our execution skill. At the end of the day, if you make a mistake in strategy you will not go ahead as an individual or as a firm. But even if you have the strategy, right, you have to execute it right. Execution is what has differentiated us from the rest.
ML: How difficult has it been for our pharma companies to be accepted globally, given that India also has a reputation for piracy and counterfeiting medicine?
Saldanha: Well, it has always been like that isn’t it? India has always got bad publicity all over the world for various things. Yet, Indian pharma companies have done well and established a reputation for themselves. India has begun to be taken seriously as a potential global powerhouse. Our big breakthrough was in signing the GATT and accepting the patent regime, the second stage will be tightening of regulation which will put pressure on the bad eggs. We will evolve over the next 10 years or so, but we are clearly being taken very seriously already and this is evident from the number of global companies that are partnering with India.