Dr Rao is a man for all seasons. After having worked in diverse sectors such as banking and automotive, he is now busy enhancing shareholder value at Orchid Chemicals and Pharmaceuticals
"We have finally arrived. Orchid Chemicals & Pharmaceuticals is now an end-to-end connected pharma company," declares the soft spoken deputy managing director Dr. C Bhaktavatasala Rao.
He refers to the company's presence in the entire pharma value chain -new drug research, bulk drug, formulations and nutraceuticals- and not to forget the computer connectivity (enterprise resource planning -ERP programme) up to the sentry's post at Orchid Towers, the corporate office.
The 54 year old Dr. Rao has an interesting career background. Prior to joining the drug company in 1998 he had spent 24 years in production, planning, industrial engineering, corporate planning, tying up business collaborations and general management in corporates like Ashok Leyland, Scooters India, Telco (now Tata Motors) and State Bank of India.
One of the top rankers while at school and college, Dr. Rao finished his BE (Mechanical) from the Sri Venkateswara University, Tirupathi and wrote the State Bank of India's probationary officers recruitment exam before joining M.Tech at the Indian Institute of Technology, Madras (IIT-M).
A year later SBI informed him about his success in the written exam and the interview and sent him the appointment order. "I wrote back stating my inability to join the bank immediately - due to my M.Tech studies- and requested one year extension," Dr. Rao recalls.
Taking a considerate view, the public sector bank acceded to his request. "I was morally obliged to join the bank after my masters degree," adds Dr. Rao who served the bank for a year before switching track to automotive industries.
The first pit stop for him was at Tata Motors. From there he moved on to companies like Scooters India and Ashok Leyland before joining Orchid. Enroute, he quenched his thirst for academics by acquiring a doctorate degree in Industrial Management from IIT-M.
For Dr Rao, Orchid was not a strange forest when he quit Ashok Leyland as deputy general manager-corporate planning. As a matter of fact Dr. Rao has been sharpening his claws as an Orchid board member ever since his friend and the company's managing director K Raghavendra Rao promoted the company.
As long as Orchid was in the bulk drug area, the company's core team took care of the operations. However the need for a different management philosophy was felt when the company got into the formulations and Dr. Rao decided to take the plunge.
"In a way I am fulfilling my father's wish as I am now serving in the drug manufacturing sector," he muses. Dr.Rao's father, late C Satyanarayana Rao, a college principal in Kakinada thought the son would make a better medical doctor.
But Dr. Rao decided to mark his own territory in the engineering field. "I decided in favour of engineering as I can acquire two engineering degrees during the time spent to get the MBBS certificate."
Now his duty is to fulfill the wishes of Orchid's shareholders, that is increasing their wealth and maximising the returns as the company during the past few years has invested Rs.450 crore in various projects.
Not long ago some of Orchid's plans had failed and others were like disjointed chain links.
- The Aurangabad plant (acquired from Ajanta Pharma in 2000) manufacturing non cephalosporin bulk actives didn't attain its peak capacity and in turn didn't contribute to the bottomline.
- The formulations division didn't take off as expected.
- The company forayed into manufacture of nutraceuticals and also set up a subsidiary in UK to market the same through mail orders. The mail order business didn't take off as expected and the UK subsidiary is now dormant.
- In addition Orchid embarked upon setting up a new plant at Irungattukotai near Chennai at an outlay of Rs.60 crore and a pre clinical centre. A new cephalosporin sterile crystalline, non sterile and intermediate plants were built at its existing facility at Alathur, near Chennai.
- An equal joint venture with IBPP, Italy for applied research. Orchid's share of investment is $1.1 million.
- In 2002 Orchid floated a 50:50 US joint venture company-Bexel Pharmaceuticals Inc- partnering with Bexel Biotechnology Inc, US to do discover new drugs. Orchid's share of investment will be $20 million.
- A few days later Orchid announced its Chinese joint venture- NCPC Orchid Pharmaceuticals Company- part to manufacture sterile cephalosporin drug. Out of total $25 million investment planned, Orchid has already invested $5 million as its equity contribution and loan funds have been arranged towards the balance project cost.
- In 2003 as a measure to expand its formulations portfolio, Orchid acquired the Chennai based Mano Pharmaceuticals and its sister outfit Sali Healthcare.
Investments are paying back
According to Dr.Rao the investments made in the recent past have started yielding results. The Aurangabad plant has improved its capacity utilisation and makes nutraceuticals like Biotin and SAMe and non cephalosporin betalactums.
"The new formulations plant at Irungattukottai built as per USFDA specifications will shortly be inaugurated while the Chinese joint venture went on stream manufacturing sterile cephalosporin in September 2003. The China strategy will consolidate the sterile cephalosporin market first and later look at formulations production. Orchid already exports to China oral cephalosporin from Chennai.
Bexel Pharmaceuticals' novel anti diabetic molecule (BLX 1002) has entered the phase I of the human trials in Europe.
Similarly the recent acquisitions-Mano Pharma and Sali Healthcare- have started contributing to the formulation divisions top and bottomlines," declares Dr.Rao.
Orchid's ability to attract top talents from other drug companies is one proof of the faith that others have in the company. For instance Orchid's executive director & COO - Formulations, R S Prasad is an ex Dr.Reddy's Laboratories hand.
Outlining the company's strategies for different product segments Dr. Rao says the focus for the bulk drugs will be on increasing generic exports to regulated markets like the USA. To enable this the company has been seriously following steps to get its plants and drugs certified by regulatory agencies like USFDA.
"We have developed non infringing process for different cephalosporin bulk for the purpose. Moreover we have the widest breadth of cephalosporin drugs and have filed 120 process patents."
"July 2005 will see ceftriaxome going off the patent list and we will be ready to cash on that. From 2005-06 there will be a quantum jump in our turnover," he predicts. To take advantage of the emerging opportunities in America, Orchid has signed an exclusive agreement with Apotex Corporation, US to supply generic sterile cephalosporin.
On the formulations front the focus has now shifted to speciality drugs, anti infectives and pain management drugs. Thanks to Mano Pharma and Sali Healthcare acquisitions the product count went up to 300 from a paltry 25 and the total field force too saw a sudden jump to 800 thereby increasing the doctor coverage to 1.2 lakh.
"Prior to the acquisition we were realising Rs.2.25 crore per month from formulations. Now it is Rs.4.4 crore per month and it is growing," says Dr. Rao. According to him, Orchid is now looking at entering Brazil, Russia and other countries where regulatory norms are bit lenient. The company will also start filing drug master files (DMF) abbreviated new drug applications (ANDA) with USFDA from regulatory certified plants.
Orchid is betting on its new Irungattukottai plant in a big way. The USFDA compliant factory will manufacture sterile cephalosporin, tablets, dry syrup and compounds. "Over next twelve months around 12 ANDA's will be filed," he assures.
Dismissing fears of over capacity, Dr. Rao promises to achieve peak production capacity when the company starts shipping consignments to Europe.
As mentioned earlier some of the plans have started contributing to the company's top and bottomline. For the nine months ended December 31, 2003 turnover and operating income stands at Rs 505.66 crore as compared to Rs 346.45 crore in the corresponding period last fiscal. Net profit after deferred tax for the nine months was Rs 23.27 crore compared to Rs 9.52 crore registered during the same period of the last fiscal.
Apart from increased finished dosage sales, the bottomline got beefed up due to the improved production processes that resulted in better yields in solvent recovery and the fall in input-7ACA- prices.
The increase in the expenditure head is due to the 40 per cent hike in turnover. Inventory is maintained at the previous year levels, though inventory costs have gone up, he remarks.
The teaching executive
A prolific writer, with 35 research papers (two in book form) to his credit, Dr. Rao has also written more than 100 articles in business and economic journals. He is also a recipient of Times Research Foundation award for two years and five of his papers have won him awards.
One has to prod Dr. Rao to tell about his small family consisting of his mother, wife Jyothsna and daughter Bhavana. "My wife is an economics graduate and ours is an arranged marriage in 1977. Bhavana is now studying MS in management systems after completing BE computer science."
Despite his busy schedules, traveling overseas clinching business deals, Dr. Rao pursues his interests in academics. For several years he is an adjunct faculty at the Department of Humanities & Social Sciences, IIT-M. He is also on the Board of the Technical Teacher's Training Institute, a Government of India institution.
The teacher in him surfaces at office also. "My management philosophy is to guide and develop people. A manager should nurture the potential, provide value addition but allow others to do things."
Dr. Rao's post retirement plans are predictable. "Writing more articles and perhaps a management book," he concludes.