Case Study Analysis: Biocon India Group - Expansion and Growth

This case study examines the Biocon India Group's operations and strategic decisions within the Indian pharmaceutical industry. It analyzes the advantages and disadvantages of starting and operating a pharmaceutical firm in India, including patent laws, industry growth, skilled workforce, and government incentives, while also addressing challenges such as weak patent protection and ethical issues in clinical trials. The study assesses the attractiveness of the Indian CRO market, highlighting the low-cost outsourcing opportunities and the potential for Biocon's Clinigene subsidiary. Furthermore, the analysis explores Biocon's expansion strategies, recommending the development of Clinigene to establish a stronger foothold in the drug development value chain, with considerations for long-term goals such as research and innovation and international market expansion. The case study emphasizes the importance of a policy framework for clinical trials, recruitment of qualified staff, and securing clinical trial projects to ensure sustainable growth and market presence.

Case Study on
Biocon India Group
Submitted to:
Muhammad Maruf Ibne Wali
North South University
Submitted by:
Section: 5
Name ID
Samman Rahman 1721906630
Sabbir Hosen Riaz 1712752630
Akibul Islam 1513191030
Jarin Tasnim Preyata 1620445030
Barirah Alam Samira 1330076630
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1. What are the advantages and disadvantages of starting and operating a
pharmaceutical firm in India?
Advantages: There is quite a number of advantages and disadvantages for starting and operating
a pharmaceutical firm in India. The advantages are laid down below:
 Patent laws of India: In the mid-1970s, Indian government implemented an act called
Drug Price Control Order (DPCO). DPCO law had led a huge change in the generic drug
manufacturing industry in India. Many new players had increased their size of operation
and made a good profit out of it. Currently, The pharmaceutical industry in India ranks in
the 3rd position in the world in terms of volume of production and value.
 Well established industry: According to the Department of Pharmaceutical in India, the
total turnover of this industry between the year 2008 and 2009 was worth $21 billion and
the number is only increasing making solely the domestic market worth $16 billion at this
moment. At the beginning of its journey in 1947, The Indian market was dominated by
foreign companies. But starting from 1970s with the liberalization of patent laws, a lot of
domestic companies had started their operation which has led the industry to see more than
20,000 domestic companies in operation. India is also considered to be a pioneer of low
cost generic drug exporter.
 High quality scientists: There are several well recognized research institutes within the
border of India. A large number of PhD graduates are seen to be joining the field of biology
and chemistry. Despite being the 4th country with most doctoral graduates, the cost of hiring
these scientists are surprisingly low comparing to the western world. These well-educated
and English speaking graduates play a huge role in the overall success of pharmaceutical
industry in India.
 Diverse population: Clinical trials are one of the most crucial part of a medical science. It
is the most important step in the drug development chain. Having a vast and diverse
population has incentivized the clinical trial process greatly to develop new medicines.
Indian CRO for clinical trials have also become very popular among multinational
pharmaceutical companies like GlaxoSmithKiline and Sanofi.
 Political incentives for manufacturing firms: Indian government has continuously
promoted local manufacturing for all products that sell within their border. In recent years,
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the government had subsidized on raw material procurement and exports which has made
the pharma an attractive industry to set foot in. Dedicated governmental organizations like
DST also provides support for research and development for this industry.
 Low cost operation: The cost of operation, especially in the Research and Development
sector is much cheaper in India compared to countries like USA, Germany or Canada. This
cheaper operation cost is one of the key factors that had let Indian pharmaceutical industry
to flourish over time.
Disadvantages: Despite having numerous advantages to join this, industry there are also some
disadvantages which has let many domestic companies to suffer as well. Some of the disadvantages
are:
 Weak product patent laws: The laws related to patents of specific products or genomes
have a limited time span with a threat of getting stolen and replicated. Due to not having
enough technical knowledge of a delicate product like medicine, Law enforcement
agencies are not always very helpful to tackle such situations.
 Ethical issues with clinical trials: Clinical trials requires trying out different medicines in
the development stage on actual people. However, most of the people in India are
uneducated which raises questions on how ethical clinical trials are on these people. With
the easy access of internet and popularity of social media, tarnishing a company’s image
over unethical clinical trials can cause a lot of problems for companies of all sizes.
 Market competitiveness: As described earlier, Pharma is one of the most lucrative
industry in India. So, it is natural for companies to expect a competitive market. A recent
study has shown that there are more than 23000 domestic players in the Indian
pharmaceutical industry. Such competition requires companies to invest heavily on
innovation of new drugs that gives them a competitive edge.
 International companies: From the very beginning of the pharma industry’s inauguration,
Multinational companies have started operating in India. However, when the market was
saturated with domestic players, foreign companies were not making as much profit as
before. But after the 2005 product patent act, more foreign companies look at India as
viable investment location considering the low cost manufacturing process and skilled
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labor force. International Companies of large scale are one of the major threats for the local
companies.
 Price ceiling: The governmental initiative called DPCO act has put price tags on many
essential drugs sold in the Indian market.
 Capital intensive industry: Pharmaceutical industry is heavily dependent on research and
development. As companies try moving up the value addition chain, there is substantial
need of capital investment,
2. Is the Indian CRO market attractive?
CRO is an abbreviated term for Contract Research Organizations. It is referred to specialized firms
that perform research and development related tasks for other organizations. From the year 2002,
The Indian CRO market has been extremely attractive having a global market share of more than
25%. The main reason for the attractiveness of CROs in India is the low cost outsourcing of critical
R&D tasks. Despite being cheap, the work produced in India are of high quality because of highly
qualified scientists who can speak fluent English. Communication is much easier in India
comparing to other competitive countries like China. Indian CRO’s are focused primarily to
biotech studies. In the mid-2000s. very few companies in India offered services such as Clinical
Trials. However, the situation has changed. If Biocon does inaugurates its Clinical Trial company
Clinigene, they can most certainly lure a lot of well-established pharma companies and to use their
services and earn more brand reputation. Since there are not a lot of pharma companies having
dedicated CRO’, Biocon surely has its own competitive advantage in the industry to get more
exposure.
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3. What is the best way for Biocon India Group to expand?
In the context of the case study, Biocon only lacked presence in the Clinical Trials and Animal
Studies segments in the drug development and discover value chain. The executive board was on
the look for opportunities to expand their business with the alignment of the company’s philosophy
“Earn as you learn”. The goal is to make Biocon a fully integrated drug discovery any development
company.
Short Term: The most logical approach to expand the business for Biocon is to start setup and
expand their Clinical Trial subsidiary Clinigene. It was still a long way for Biocon to develop its
own drug formulations. However, developing expertise in Clinigene through contracts from
different organizations would only serve Biocon well in the long run. There are 3 short term factors
Biocon needs to consider regarding Clinigene:
 Clinigene will have to struggle in the first few years to gather recognition in the field of
Clinical trials. However, when the need will arise and relevant capabilities are developed,
Clinigene can pick up higher value work. But pharma industry is growing at a very fast
pace. Not utilizing the all opportunities fully would not provide substantial return on
investment that will be involved in setting up Clinigene.
 As a subsidiary that provided multiple types of Clinical trials services which entails
considerable capital investment and effort by senior executives, investing such time and
effort may divert attention from Biocon’s core competencies of drug manufacturing and
marketing. Its will be no surprise if the strain has a detrimental effect on Biocon’s unique
working culture which they consider the most important building block that helped Biocon
grow till this date. However, setting up Clinigene has become quite a necessary step in
order for Biocon to grow in the fast paced pharmaceutical industry. The highly competitive
market is always striving for innovative ways to do business. In such an environment, not
expanding their operation to different relevant fields will only put them behind the race.
 In short time they can also acquire other companies that have expertise working in Clinical
Trials. However, the time and resources that will be used to find and negotiating with a
suitable company and molding it according to Biocon’s work culture can be a long and
expensive process. Thus it is the least attractive approach of expansion for them.
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The second approach to expansion for Biocon are developing long term goals. Some of the
suggestions are laid down below.
Long Term:
 In a highly competitive market such as the Pharmaceutical industry, Biocon should look
beyond Syngene and Clinigene in the long run expansion plan. Focusing more on research
and innovation to come up with revolutionary formulas will get them a lot ahead of its
competitions.
 They can expand their operation in international markets by forming alliance with many
developed countries. It can surely boost up their revenue streams if they can identify the
right market which is untapped.
 Rather than expanding their business in terms forming more subsidiary, if they focused on
keeping their existing brand value intact, it can take them a long way ahead in the future.
 They can also start developing and releasing their own drugs and formulations. This cannot
be considered a viable option in the short term considering the amount of resources it takes
is immense. However, in the long run, it will surely be fruitful for them.
 They can also start expanding their operation in other states of India.
4. What is the best way for Biocon India Group to expand, and what factors
should it consider?
The best way to begin expansion was for Biocon to broaden the sphere of operation of Clinigene
to set its foothold in the value added chain of drug development and discovery process. The
ultimate goal is to release its own innovative drug formulations. For this, developing capability in
clinical trials was a must. In the context of the case, the best strategy for the expansion are:
 Make a policy framework in the next one year for clinical trials, taking care of all legal and
ethical issues while Clinigene works in the lower segment of the value chain to maintain
market presence and to sustain itself.
 Biocon should start recruiting qualified staff for clinical trials and scope for clinical trial
projects from existing clients.
 They should also lobby for drug development and clinical trials laws.
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Factors they should consider:
 Public image: Biocon holds a very prestigious status and a good public image among
the Indian population. Pharma by its inherent nature raises quite a number of moral and
ethical questions in the process of operation. In order to preserve their good public
image, Biocon should consider doing a lot of social campaigns and corporate social
responsibility initiatives to earn peoples trust. It is mandatory for Biocon to strengthen
its public perception as it will provide a cushion in case Clinigene backfires. By keeping
their long term goal in mind, Biocon should also take care of its positioning as a drug
producer rather than just a service provider.
 Preserving organizational culture: Expansion of Clinigene brought questions on
whether Biocon’s carefully nurtured working culture faced any threats since Clinigene
was already 2 years old at the time. Biocon should thus focus on hiring people who
goes along with the company values before they officially set foot in the Clinical Trials
market.
 Expertise deviation to Clinigene: Increasing focus on Clinigene may hinder the
regular operation of Biocon. Thus the expansion should begin gently. In the beginning,
a small team of executive should be assigned solely for Clinigene. In the first 2 years
Clinigene should only focus on low-medium segments of the value chain. After 2 years,
its operation would be sustainable enough to run on its own without much attention of
the senior executives.
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