Perspective # 25 – Legal Innovations

Legal Innovations: It is worthwhile to review recent Pharma takeovers with an Innovation lens. Malvinder Singh and family cashed out India’s #1 Pharma player Ranbaxy to Daiichi Sankyo for $4.6 billion. Though Malvinder Singh brands this as a 'transformational strategic redefinition' and not a sell-off ,he is running laughing to the nearest bank ☺ .

There are also patriotic concerns like the Death of Dreams - "someday Ratan Tata may also be pushed to sell Tata Motors to a Toyota; or that the Infosys management may one day reach the conclusion that it is in shareholder interest to sell out to IBM? " Let us keep the patriotic concerns aside and look at this deal from the innovation perspective.Though this is loads of cash , this pales in comparison to possibilities if they persevered and had hit a blockbuster drug. ChrysCapital MD Sanjiv Kaul, summarizes this nicely “Commercially, it is an awesome deal. However, Ranbaxy was the all-conquering Indian hero and should have been the last man standing instead of being the first to capitulate. A huge positive for Ranbaxy but a negative for Indian pharma.”

Pharma giants worldwide are celebrating as they feared the ‘legal innovation’ (innovators working in tandem with legal eagles) weapon of Ranbaxy. Interestingly legal and professional fees of Ranbaxy was Rs 154 crore in 2007, which ate into their net profits of Rs 617 crore. Why global pharma is celebrating? They are hopeful that the Japs will control their ‘legal innovation’ tool ........ Let us rewind few years back on the Ranbaxy and Pfizer Lipitor dispute and read the article Investors biting nails over Lipitor which said “Lipitor, which is designed to lower cholesterol, totaled $10.8 billion in 2004 sales, the first drug ever to surpass $10 billion. Deutsche Bank projects Lipitor sales will grow to $14.2 billion in 2007 if Pfizer successfully holds its patents. But if Pfizer loses, it could face a $8.6 billion plunge in annual sales by 2007" Pfizer CEO saved his job by cutting an out-of-court settlement with Ranbaxy

............Now let us now look at another Pharma innovator Genentech which is in news, as Roche wants to increase its stake and has offered $43.7 billion USD. Genentech stock moved to $95 and some analysts are talking well over $100 !! What is the big deal about Genentech and why the hell is this company so valuable?What has Genentech got which Ranbaxy does not? As we all know India has the best brains and the world is flat! The answer is thought provoking .Checkout how Genentech save lives and their true Innovation history . This company also got sheer guts! Their famous Scientist CEO, Levinson persuaded the board to plow 50 percent of revenues back into research (yes 50% - not a typo) End of the day it pays... as we are seeing now!'Legal innovation’ is not worth it! It makes only small change compared to true innovation.