The Y K Hamied Interview : Part Three

On February 6, Cipla announced that its chairman and managing director Yusuf Hamied would step down as managing director, as of March 31, four decades after he assumed the role following the demise of his father and Cipla founder K A Hamied.  He will continue as non-executive chairman. In this conversation, Hamied makes known his rarely-expressed views on far-reaching management and strategy changes at the company.

For long run by Hamied, brother M K Hamied, and the late Amar Lulla, Cipla has professionalised top management aggressively with a raft of top-flight hires being made in the last 12 to 18 months. This includes Chief Executive Officer Subhanu Saxena who came on board this month from Swiss drug maker Novartis. These changes have occured even as Cipla overhauls its exports strategy. From being a product developer and back-end supplier to international generics companies such as Teva it wants to set up its own selling networks, own its product registrations in key markets, even set up manufacturing in some countries.

Hamied explains what has changed, and why, at the age of 75, far from feeling jaded, he’s embarking on his “second innings.”

On the management changes and their objective

We’ve really brought in a lot of structural changes. We’ve appointed McKinsey to advice us on organizational change. We have a new CEO, a new international head, a new head for human resources, for supply chain management, for legal, for local business, new heads for Europe and USA, both from Teva.

Last year were about Rs 7000 crore (in turnover). So this year we will just cross Rs 8000 crore. If I have to do Rs 9000 crore next year where is that additional Rs 1000 crore going to come from? When we were a small company three people (Hamied, brother and joint MD M K Hamied and former joint MD the late Amar Lulla) could manage. Now with turnover the way it is we can’t manage. We have a 25-people executive committee now and they are meeting once a month at least. That is where Nikhil Lalwani (ex-McKinsey, and Cipla’s head of operations–transformation) is very good. (He is like a) Chief Integration Officer. And two of my relatives are also in the company Kamil and Samina (children of M K Hamied). Kamil’s focus is human beings. Kamil has a very good rapport with the team.

On his own views on this change

It has given me a lot of satisfaction and two, enthusiasm. And something to look forward to, like in cricket you have a second innings, I have just started my second innings, which I am enjoying. With less responsibilities of course. But I give my opinion, I don’t force it down. Let the team decide, why should I decide? Maybe for example if (Cipla) had to invest $300mn to buy out a company, I have my reservations because until now I have never done it. But now that I have a team in place (I tell them) you decide. I might not have done it on my own. You decide.

On why the company chose Subhanu Saxena, a former Big Pharma man, as CEO of Cipla which has different beliefs and practices from innovator companies

I think you should ask him that question rather than ask us. We have not really questioned him on you know..  We all got on like a house on fire so let’s hope things will work out.

On Cipla’s overhaul of its exports strategy for the US and other key markets

I think we’ve earned enough in America without the hassles of litigation, staffing. Don’t forget that this was an easy life. So the topline was less, the bottomline was always there. But now, we have to increase the topline.. Let’s take escitalopram (a generic anti-depressant which Cipla developed and supplies to Teva for the US) as an example. We get a share of the profits. And that has come into our books so the topline is X and so is the bottomline.

But if the topline had not been X what would it have been. What was Teva’s topline? $600mn for six months (of generic exclusivity). You hit the jackpot for that period..  The strategy now is now that by and large we will have our own registrations. Some products you can go alone, bigger products you can go in partnership, some you licence out…We have a totally open mind…So, say even if my (asthma inhaler) Seroflo (generic of GSK’s Seretide) gets approved tomorrow I may still have to go to somebody like Sandoz (to market it)..

On whether Cipla’s changed exports strategy comes too late to make the most of the patent cliff (peaking of patent expiries in US and Europe) and whether it has missed the bus

If we had missed the bus we would’ve been Rs 5000 crore not Rs 7000 crore. It depends on which bus you’re catching. Are you catching the slow boat to China? And you are working within your own resources. Please understand that. Every company works within the resources that they have. You can’t build a skyscraper unless you have building blocks.

On January 29, Yusuf Khwaja Hamied, 75, chairman of India’s third-largest drug maker Cipla sat down with Gauri Kamath at Cipla’s Mumbai headquarters for a wide-rangeing interview. Apothecurry presents the Y K Hamied interview in three parts. Click here and here for parts one and two.

Pic courtesy Cipla Ltd.

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