Wockhardt Ltd.: Will the strategic change work?

Abstract

Purpose

Wockhardt Ltd. is a global, research-based pharmaceuticals and biotechnology company headquartered in India. The company went through an ambitious period of growth, mainly using acquisitions as its primary inorganic growth strategy until the 2008 financial crisis. This period saw Wockhardt struggling to meet its financial obligations while at the same time confronting legal and regulatory challenges. Post this period, the company executed several strategic changes to its businesses to facilitate a recovery. The case asks students to assess Wockhardt’s strategic response to the crisis and its future success as a pharmaceutical company in an industry marked by intense competition.

Design/methodology/approach

The case is based on secondary data sources and publicly available information. The company’s data and its history over the past six decades have been examined. Newspaper articles, journal articles, company annual reports and analyst firm reports have been used to gather information and have been cited accordingly. Financial data have been obtained from the Centre for Monitoring Indian Economy (CMIE) Prowess database.

Findings

The case highlights some interesting findings from Wockhardt’s handling of its financial problems and subsequent recovery process. Key insights come from its multi-pronged strategy to first stabilize and then continue to expand its core pharmaceuticals business by identifying new markets for its products and alternate channels for growth.

Originality/value

Previous cases on Wockhardt have focused on the financial aspects of the crises, particularly the corporate debt restructuring (CDR) process that was undertaken, the challenges of hedging foreign currency risk and the drawbacks of using foreign currency convertible bonds (FCCBs). In this case, we emphasize the unique aspects of Wockhardt’s business strategy, from its initial acquisition-based inorganic growth, its crisis response and management and finally the strategic execution of its recovery and continued expansion.

Citation

Upadhyay, E. and Kumar, R. (2024), "Wockhardt Ltd.: Will the strategic change work?", IIM Ranchi Journal of Management Studies, Vol. 3 No. 2, pp. 163-176. https://doi.org/10.1108/IRJMS-11-2023-0080

1. Introduction

Wockhardt Ltd. is a global research-based pharmaceuticals and biotechnology organization. The company since its inception in 1967 had been a pioneer in its field, winning awards and recognitions for its breakthrough clinical developments and outreach activities. The company has been on a roller-coaster ride over the last six decades with Dr Habil F Khorakiwala in the driver’s seat. For almost four decades, the company embarked on its strategy of inorganic growth via cross-border acquisitions, which brought scale but also put a severe strain on its financials. Under the leadership of Khorakiwala, the cash-strapped company engaged in the practice of foreign currency risk hedging, took a considerable hit during the 2008 global financial crisis and rolled out the process of corporate debt restructuring (CDR) that ended in 2012. After this period, the company became involved in litigation and regulatory hassles regarding its manufacturing operations.

When the company finally emerged from its prolonged period of setbacks, industry watchers were skeptical about its recovery. The highly diversified company had been forced to sell off key assets and divisions to its rivals, and it had lost top positions in several of its markets. With this precarious position in a highly competitive and regulated industry, Khorakiwala had to act and chalk out the path for strategic change and realignment. He had to decide upon a course of action to set the company back on its course of growth and profitability. To this effect, he focused on strengthening the company’s position in businesses where it faced lesser competition and enjoyed certain strategic advantages. Consequently, Wockhardt’s noncore businesses in healthcare, animal health and medical nutrition were gradually sold off, and the proceeds were used to repay its debts. Khorakiwala sold part of his company’s stake in the domestic branded drugs business but continued to retain the chronic and specialty drug portfolios. These strategic changes allowed Wockhardt Ltd. to, firstly, concentrate wholly on utilizing their strong research and development (R&D) capabilities and manufacturing facilities in niche areas such as diabetes and antibiotics and, secondly, diversify and expand its global presence beyond developed markets of the European Union (EU) and the United States of America (USA). However, it is unclear how 2024 and beyond will unfold for Khorakiwala and Wockhardt Ltd. Some of the key strategic questions that need immediate attention include: Are Wockhardt’s chosen strategies, viable in the long run? Will the key strategic decisions taken by Khorakiwala be enough to ensure the company’s recovery and future growth? Are Wockhardt’s R&D strengths truly competitive? Will the company succeed in diversifying into new markets, especially the UK? And, more importantly, will the long-drawn strategic change work?

2. Background: The pharmaceuticals industry

The pharmaceutical industry is involved in the discovery, development and manufacturing of drugs and medications by public and private organizations (Dailey, 2023). In 2022, revenues for the global pharma sector stood at USD 1,482bn (Mikulic, 2023a). Global spending on pharma R&D was at USD 244bn in 2022 and is projected to increase to USD 262bn in 2023 (Mikulic, 2023b). The total number of drugs in the R&D pipeline globally was 20,109 in 2022 and 21,292 in 2023 (Mikulic, 2023c). However, the number of novel drugs approved by the US Food and Drug Administration (FDA) in 2022 was 37 (Mikulic, 2023d).

Known as the “pharmacy to the world,” India is the largest provider of generic drugs and is known globally as a low-cost vaccine and generic medicine provider. The Indian pharmaceutical sector is worth USD 42bn with a compound annual growth rate (CAGR) of 9.43% (IBEF, 2023).

In India, the leading pharma and drug manufacturer by net profit was Cipla, followed by Divis Laboratories, Glenmark and Dr Reddy’s Laboratories (Minhas, 2023a). R&D investments as a percentage of sales of the leading Indian pharma companies stood at 7.2% in 2021 (Minhas, 2023b). A closer analysis of the pharmaceutical industry reveals that it is difficult for any new player to enter the industry due to the substantial R&D costs involved in bringing a drug to market (Radder & Smiers, 2024). However, several smaller firms with a novel technology or patent (e.g. biotechnology startups) exist but do not pose a major threat to incumbents, as one of the exit strategies employed by these firms is to sell out to a large pharma company once the new products are past the initial development phase (Fattoum & Sadok, 2024). There is availability of the raw materials and equipment from multiple manufacturers and the medical patient, healthcare providers and health insurers have no say in the prices of medicines. There is an absence of substitutes when it comes to prescription drugs and also due to the attitude and behavior of medical practitioners toward generic medicines (Madan & Juyal, 2024). Pharmacies and medical institutions have limited negotiating power as they can decide which drugs to store or make available, although they have little incentive to provide patients with the lowest possible pricing. Lastly, government and regulatory bodies exert some power and influence by exercising control over which drugs can be sold in the market. A pharmaceutical firm has a limited period and number of products by which to capture rents associated with its innovation. Essentially, the time period spans the date of regulatory approval to the date of patent expiration. Once a patent expires, generic drug manufacturers step in to make similar products at substantially lower rates.

The competitive rivalry between firms in the pharmaceutical industry can be intense. For example, the pharmaceuticals industry is highly segmented from generics producers to R&D specialists focused on novel drug research with multiple players (small to large-sized firms, domestic and multinational companies) offering a similar combination of products and services (PwC, 2009) (see Figure 1 and 2). Due to the expensive and uncertain R&D process involved, leaking of competitive information can occur, underscoring the importance of intellectual property rights in this sector. Firms try to respond by differentiating their products as much as possible and taking steps (legal and otherwise) to block and delay generic companies.

Recent trends in this sector indicate a shift towards prevention rather than cure the concept of “patient empowerment” to support patients in their preventive efforts and condition management; addressing downward pricing pressures through a value-based approach; use of technology for precision diagnostics (Tinazli, 2022); enabling patient access to their health records, and lastly, newer therapies such as gene therapy, stem cell therapies and immunotherapy to name a few (KPMG, 2017) are making their mark.

3. Wockhardt’s growth story: Until 2006

Wockhardt was founded by Dr Habil F Khorakiwala in 1967. This was the offshoot of the originally acquired Worli Chemicals Works by Habil’s father in 1959. In 1973, Wockhardt Pvt. Ltd. was established, and in 1994, it merged with two other companies involved in bulk drug manufacture and dietetic foods. The company’s first factory was set up in Aurangabad, India, and was named “Wockhardt” – a name derived from Worli Chemical Works with a twist on the German word for “hard work.” Presently, the company has a total of three R&D centers in India, the USA and the UK and a total of twelve manufacturing plants – eight in India and one each in Ireland, Wales, the USA and Dubai. It has an established market presence in India, the USA, the UK, Russia, Ireland, Switzerland and several other countries. It currently operates with six subsidiaries and 27 step-down subsidiaries.

Some of the major segments of the Indian pharmaceutical industry include generic drugs, over-the-counter (OTC) medicines, bulk drugs, vaccines, contract research and manufacturing, biosimilars and biologics, and Wockhardt operates in several of these segments. The company’s drug discovery program focuses in the area of novel antibiotics for treating antibiotic-resistant infections. In the year 2022–2023, the company filed seven patents, out of which five were for new chemical entities (NCEs). Wockhardt’s biotechnology research in biosimilars and biobetters has also had successes with a robust pipeline of recombinant therapeutic proteins for major healthcare needs, particularly diabetes. Lastly, Wockhardt has also successfully obtained the necessary regulatory approvals for manufacturing and export of the COVID-19 vaccine (Wockhardt Annual Report, 2022–2023).

Wockhardt has many “firsts” to its credit. This value innovation approach of being first in the industry resembles a company that follows a blue ocean strategy. Blue Ocean strategy is about value innovation and creating and capturing uncontested market space, thereby making the competition irrelevant. This is done partly by opening up a new market space and creating new demand and partly by reducing costs and eliminating processes that add to the company’s cost, eventually leading to the simultaneous pursuit of differentiation and low-cost strategy (Kim & Mauborgne, 2005). For example, Wockhardt was Asia’s first to manufacture and launch a recombinant long-acting human insulin analog. It introduced the first-ever once-a-day combination antibiotic that overcomes an array of problematic bacterial resistance mechanisms. It was the first company to opt for an Initial Public Offering (IPO) post the economic reforms, the first pharmaceutical company in India to obtain the USA FDA approval for its manufacturing plant and the first Indian company to acquire in the UK (Wockhardt Annual Report, 2004–2005).

Until the year 2006, Wockhardt underwent a period of intensive and ambitious acquisition activity as part of its strategy of inorganic growth, which led to a steep debt buildup for the company. Similar to many firms from emerging markets, Wockhardt mainly sought to acquire technological competencies from established firms in developed economies. Unfortunately, accumulating debt coupled with the global economic meltdown in 2007 triggered a financial crisis for the firm.

Wockhardt’s initial response, was to sell off ten of its hospitals to rival Fortis (Business Standard, 2013a) and undertake a massive debt restructuring exercise that concluded in the year 2012 (Ghosh, 2012). Following this period, Wockhardt divested several of its businesses and concentrated on its pharmaceuticals division. The next few sections will describe the reasons for the crisis and Wockhardt’s strategic response in detail.

4. Wockhardt in crisis: 2007–2017

4.1 Financial troubles

Wockhardt had embarked on a policy of inorganic growth achieved primarily through acquisitions. Notable among them were CP, UK (2003); Esparma, Germany (2004); Dumex, India (2006); Pinewood, Ireland (2006); Negma Laboratories, France (2007) and Morton Grove, USA (2007). Before the 2008 financial crisis, Wockhardt, like many other companies, was riding the wave of globalization and consolidation to gather strength and prepare a springboard for future growth. Alongside its inorganic growth strategy, Wockhardt was also making significant investments in infrastructure and R&D efforts. The years 2006–2007 were a period of incredible growth for Wockhardt – its European business grew at 97%, Indian business at 15% and USA business at 64% (Wockhardt Annual Report, 2006–2007). But by December 31, 2007, Wockhardt’s secured loans amounted to USD 595m, unsecured loans USD 141m and net profit after tax USD 98m (Wockhardt Annual Report, 2007–2008). By December 31, 2008, the financial statements reported mark-to-market (MTM) and derivative losses of USD 71m, resulting in a net loss of USD 17m for the company involved in hedging foreign exchange risk (Wockhardt Annual Report, 2008–2009). These losses due to a volatile currency derivatives market, compounded by the global financial meltdown in 2008, saw several Indian companies including Wockhardt plagued by financial difficulties (Nimkar, 2008).

By April 2009, events reached a breaking point. Wockhardt defaulted on its interest payments and was subsequently downgraded by both Crisil and Fitch Ratings agencies (Jayakumar, 2013). With a mounting debt burden, the founder-chairman, Dr Habil Khorakiwala, announced that the company would be approaching the CDR cell through ICICI Bank Ltd. In March 2010, Wockhardt reported a net loss of USD 223m, chiefly due to MTM losses (Wockhardt Annual Report, 2009–2010).

By 2012, Wockhardt was ready to announce that it had completed the restructuring exercise and would be exiting the CDR cell by the year end, but its troubles were not yet over.

4.2 Operational lapses

In May 2013, Wockhardt’s ratings were downgraded by the rating agency Macquarie in response to an import ban on products manufactured at the company’s Waluj plant at Aurangabad, citing quality issues. The company was charged with violating the Code of Federal Regulations and breach of manufacturing standards (Unnikrishnan & Pilla, 2013). In November 2013, a second import ban was imposed on the drug Metoprolol XR, which is used for treating blood pressure, manufactured by Wockhardt at the second Aurangabad plant at Chikalthana (Economic Times, 2015a), sending its shares down by almost 13.5% (Chatterjee & Aravindan, 2013). In October, the UK’s Medicines and Healthcare Products Regulatory Agency followed suit and withdrew its Good Manufacturing Practices (GMP) certificate for the plant and issued a restricted certificate in its place (The Hindu businessline, 2018). The UK regulator asked Wockhardt to recall 16 medicines from pharmacies and wholesalers in the UK (Times of India, 2013).

In December 2015, FDA inspections at the company’s manufacturing facility at Ankleshwar, Gujarat, revealed multiple manufacturing lapses, including quality control and data integrity issues. An import ban was put into effect from August, 2016 (Economic Times, 2017). Between 2015 and 2016, Wockhardt initiated a series of Class II recalls of several of its manufactured products from the USA market including two antibiotics and various drugs for the treatment of high blood pressure, stomach ulcers and seizures (Economic Times, 2015b).

In the same year, litigation proceedings were started against Wockhardt UK Holdings and its subsidiary CP Pharmaceuticals by Cephalon, a subsidiary of Teva Pharmaceuticals, over a dispute regarding the price charged for chemotherapeutic drug Trisenox. The litigation was settled by June 2017, after CP agreed to drop its trade receivables claim of GBP 20m and paid a further GBP 23m to Teva by way of full and final settlement (Business Standard, 2017).

5. Response to the crises

5.1 Sale of noncore assets

As part of its structured CDR arrangement to reduce its debt burden and repay its loans in the form of foreign currency convertible bonds (FCCBs), Wockhardt agreed to raise funds through the sale of several of its noncore assets. Three businesses were eventually sold off to various buyers: 10 out of 17 hospitals under Wockhardt Hospitals Ltd. were sold to Fortis Hospitals in August 2009 (Business Standard, 2013b); the German subsidiary, Esparma, was sold to Mova GmnH, a subsidiary of Lindopharm GmbH, Germany, in June 2009 (Financial Express, 2009); its animal health division was sold to a French company, Vétoquinol, in August 2009 (Business Standard, 2013c).

In August 2011, Danone completed its acquisition of Wockhardt’s baby food and medical nutrition business, specifically its brands Dexolac, Farex, Nusobee and Protinex, as a step toward entering the Indian market in a deal worth USD 356m (Business Standard, 2013d; Vijayraghavan, 2012). Wockhardt expected to use the funds from the sale for repayment of all outstanding dues.

In February 2020, the company sold part of its domestic branded businesses in India, Nepal, the Maldives, Sri Lanka and Bhutan comprising 62 products as well as a manufacturing facility at Baddi, Himachal Pradesh, to Dr Reddy’s Laboratories. Post the divestments, Wockhardt continued to own all of its international operations through its subsidiaries located in the UK, the USA, Ireland and other locations; formulation plants at Waluj, Shendra and Chikalthana in Aurangabad, Bhimpore, and Kadaiya in Daman; bulk drugs plant at Ankleshwar, India, and manufacturing facilities at all existing international locations; its R&D centers located at Chikalthana, Aurangabad, India, and existing facilities in the international locations and retained part of its domestic branded business consisting of chronic and specialty portfolios (Sharma, 2020).

It also owned a US FDA and European Medicines Evaluation Agency (EMEA) GMP-compliant Biotech Park set up in 2004 to take advantage of its manufacturing excellence and cost efficiencies to cater to the global demand for pharmaceutical exports.

By the year 2021–2022, Wockhardt had been able to overcome its financial problems and even achieved remarkable success in its R&D efforts, winning several important clients and supply contracts. However, the sale of several of its assets and divisions, had left Wockhardt with a few low-margin domestic businesses, and it seemed that altogether exiting its India operations seemed the most practical way forward (Das, 2022). Industry watchers were wary of this step as it indicated an overdependence on the USA and UK markets, the gradual exclusion of low-risk generic portfolios and entry into high-risk R&D research (Datta, 2018).

5.2 Strengthening the core

While divesting almost all of its non-core assets, Wockhardt renewed its focus and concentrated its efforts on its pharmaceuticals business. While Wockhardt had, since its inception, achieved significant milestones in clinical research, the marked shift in its strategy was evident in all of the company’s communications post 2011. R&D expenditure as a percentage of sales was declared in every chairman’s message beginning from the year 2012; clinical research breakthroughs were frequently announced through press releases; detailed R&D progress till date and future plans featured prominently in annual reports (see Figure 3). The strategy paid off, and the years between 2014 and 2022 saw the company achieve important clinical breakthroughs, win several large contracts and receive recognition for its contributions.

In 2015, the company stated its continued focus on R&D into complex generic, biotechnology and NCE programs. Its R&D investments reached 11.5% of total sales compared to 9.3% in the previous year. Its New Drug Discovery program was granted the coveted Qualified Infectious Disease Product (QIDP) status for three of its drugs under development by the US FDA – the first instance of an India pharmaceutical company to do so (Economic Times, 2015c).

In 2017, Wockhardt announced a collaborative model for its drug discovery program – one that would reduce both time and cost in identifying potential drug candidates. According to this model, initial lead identification, preclinical and internal clinical studies would be conducted internally, whereas external clinical studies would be outsourced to contract research organizations (CROs), key opinion leaders (KOL) or university laboratories (Wockhardt Annual Report, 2018–2019). Over two decades worth of dedicated novel drug research into anti-infective therapy, specifically antibiotics targeting ‘superbugs or drug-resistant microbes that cause life-threatening infections, culminated in a series of successes. A total of six antibiotics (WCK 5222, WCK 4282, WCK 4873, WCK 771 & WCK 2349 and WCK 6777) received QIDP status. WCK 6777 was declared the first-ever once-a-day combination antibiotic. WCK 771 & WCK 2349, under the brand names EMROK and EMROK O, were launched in 2020 with the approval of the Indian drug regulator (DCGI) (Wockhardt Annual Report, 2020–2021).

6. Recovery and growth: Post-2017

In 2021, Wockhardt’s annual report contained a statement from the chairman, Dr Habil Khorakiwala:

Research and Development has always been the mainstay of our vision for sustainability and value creation as a research-based global pharmaceutical and biotech company. Our focus on new drug discovery in the antibiotics space has put us in a unique position globally.

In 2022, the company reiterated its continued strategic emphasis on research in pharma, biosimilars, vaccines and NCEs as well as its gradual shift from chronic to acute diseases (particularly diabetes). Wockhardt provided an optimistic view of its long-term prospects, which depended on the growth of the global pharmaceutical sector, expanding reach into emerging markets, increasing the pipeline of generic and niche products and expanding revenue streams through partnerships and tie-ups to manufacture vaccines (Wockhardt Annual Report, 2021–2022).

6.1 Developing key resources and capabilities

The key to sustained competitive advantage in any industry is the possession of resources that are valuable, rare, inimitable and nonsubstitutable (da Costa et al., 2024). In the pharmaceutical industry, sustained competitive advantage is tied to knowledge or technology development. In particular, Yeoh and Roth (1999) identify two components of sustained advantage in the pharmaceutical industry: therapeutic differentiation and global NCEs. High-quality products (therapeutic differentiation) that have a world market application (global NCEs) result in the highest source of rent generation. These advantages vary among firms in the context of their individual resources and capabilities.

A key resource for Wockhardt is its commitment to R&D spending. Wockhardt’s R&D expenditures are chiefly directed toward acquiring technology to become technologically competitive. Another resource for the company is its expertise in the development of therapeutically differentiated drugs. Such knowledge and skills that are embedded within the firm and its routines are difficult to replicate by competitors. Wockhardt has developed considerable expertise in a niche area: anti-infectives, specifically antibiotics targeting ‘superbugs or drug-resistant microbes. The company’s research activities in this area have been tremendously successful, with several of its drugs receiving the QIDP status by the US FDA. Thus overall, Wockhardt’s focused attention in specific therapeutic areas (anti-infectives, diabetes and biologicals) and its position in a few therapeutic markets (EU, UK, USA and India), where it has an established presence, are the sources of its competitive advantage.

6.2 Expanding horizons

In 2005, India, initially Wockhardt’s largest market, took second place after Europe, which accounted for 41% of sales. Wockhardt, through its acquisition of Pinewood laboratories, strengthened its position as one of the top ten generic companies in the UK, while the USA became the fastest-growing market and a key growth driver for Wockhardt. The company began to explore ways of expanding its presence in emerging markets, particularly the Middle East, Southeast Asia and Pacific, Africa and South America. In 2006, two new divisions were added to Wockhardt’s India operations: NutriUno (nutrition) and SkinUno (dermatology). While the UK and EU remained the main strategic markets for Wockhardt, its USA business gained in momentum. In 2007, with the acquisition of Morton Grove Pharmaceuticals in the USA, Wockhardt took a significant step toward growing its operations in the USA. In 2010, Wockhardt outlined its international expansion strategy with a focus on the USA and EU, through partnerships with established players with existing marketing and sales capabilities. Wockhardt partnered with Sheffield Bio-Science (USA) to exclusively distribute Wockhardt’s recombinant insulin (Wockhardt Annual Report, 2010–2011). In 2011, sales from the USA contributed 52% of revenue compared to Europe at 24%, making the USA Wockhardt’s top market. In the EU, Wockhardt’s position was mainly due to the UK and Ireland, where Wockhardt was the third largest generic pharma company and largest branded generic pharma company, respectively. 2013–2014 was an important period in Wockhardt’s history. Its USA business continued to grow despite import restrictions and the remedial costs towards FDA issues. The company’s sustained and increasing focus on the USA market rested on several key developments: the Affordable Care Act, 2010 that positively impacted sales; the Generating Antibiotic Incentives Now (GAIN) Act of 2012, under which the QIDP status was constituted by the FDA as an urgent response to the growing threat of antibiotic-resistance by incentivizing new antibiotic development programs and stagnant growth and economic conditions post the recession in major EU economies such as UK, Italy, France and Spain (Wockhardt Annual Report, 2014–2015). By 2015, Wockhardt was on the lookout for opportunities in the second largest pharmaceuticals market, China. In 2018, the company opened its first manufacturing facility in Dubai. In 2019, Wockhardt ranked among the top three Indian generics companies in the UK and the top five generic companies in Ireland. The company also stepped up its efforts to enter newer geographies such as the Gulf Cooperation Council (GCC) countries, Latin America, Australia and New Zealand as well as building partnerships in China, Japan and Korea.

In 2019, the COVID-19 pandemic caused widespread suffering and loss of both lives and livelihood. It also triggered a global demand for vaccine development and supply on an unprecedented scale. In August 2020, Wockhardt announced a partnership with the UK government to fill and finish COVID-19 vaccines licensed by AstraZeneca at its manufacturing facility under CP Pharmaceuticals (Jagannath, 2020). In February 2021, the company was awarded a six-month extension of the manufacturing contract until August 2022. The Russian Direct Investment Fund (RDIF) and Wockhardt, in August 2021, entered into a partnership to produce Sputnik V and Sputnik Light vaccines (Dutta, 2021). In a further boost for the company, Wockhardt UK and Serum Life Sciences UK announced a 51:49 joint venture to set up a vaccine manufacturing facility in Wales as part of the efforts to build long-term capacity for global vaccination roll-outs against infectious diseases (Economic Times, 2022; Datta, 2023).

In its annual report for 2021–2022, Wockhardt declared that 7% of the company’s revenue came from its EU businesses, UK operations contributed 43% and India and the rest of the world (ROW) contributed 39%. India had remained a generally consistent profit center for Wockhardt primarily due to the high-margin vaccines business and higher sales from the domestic branded generics portfolio (see Figure 4).

6.3 The way forward: building a sustainable business

In the financial year ended March 31^st, 2022, Wockhardt reported consolidated total revenue of USD 426m compared to the previous year’s consolidated total revenue of USD 371m, an increase of about 15%. For comparison, the company’s long-term borrowings amounted to just USD 46m. The financial woes of the company had forced it to make difficult decisions and alter its strategies along the way. But it seemed that the worst was finally over, and Wockhardt had weathered the storm and emerged victorious. Wockhardt has positioned itself as “a research-based global pharmaceutical and biotech company,” dependent on overseas markets such as the USA and the UK for a significant portion of its revenue. Wockhardt’s Managing Director, Dr Murtaza Khorakiwala (son of the founder, Habil F Khorakiwala), highlighted the company’s four main strategic pillars: first its pharmaceuticals business and its portfolio of well-differentiated, affordable products to address unmet medical needs; second, the NCE program in antibiotics, which had already delivered superior results; third, the shifting focus from acute to chronic lifestyle diseases such as diabetes and lastly springboarding on its UK success, Wockhardt’s vaccines program.

In an interview with “The CEO Magazine” in 2021, Wockhardt’s Managing Director, Dr Murtaza Khorakiwala, explained (Mikulic, 2022a):

Wockhardt’s product pipeline is made up of less competitive and difficult-to-replicate products. The key areas we have identified where we want to play are not hyper-competitive areas. For example, with our insulin portfolio, there are not too many players in the world, maybe four or five. And with the drug discovery antibiotics, we’re unique in terms of depth and breadth of portfolio addressing unmet medical needs.

But this strategy is not without its risks. Developed markets such as the US and the UK are heavily regulated, as Wockhardt had learned from past experience. Its sales after 2013 had taken a hit due to import bans imposed by the USA and the UK regulators and the subsequent remedial costs. Moreover, entry into these markets using a high-risk R&D strategy places the company in direct conflict with leading pharmaceutical companies with significantly high R&D budgets, such as AstraZeneca and GSK in the UK (by market capitalization) (Mikulic, 2022b) and Pfizer and Johnson & Johnson in the USA (by total revenue) (Majumdar, 2021). The series of divestitures, particularly of its hospitals and branded generics portfolio, have hurt revenue streams and drastically scaled down the scope of the business. While divesting part of their generics division, Wockhardt had cited competitive pressures in generics, price erosion and fewer avenues for growth for doing so. However, this segment may prove to be lucrative in the upcoming years as several molecules go off-patent and Indian companies ramp up their manufacturing standards in anticipation. Further, its vaccine business grew out of a temporary opportunity during the pandemic period. Wockhardt quickly took advantage of its partnership with Serum Life Sciences, UK, to establish a manufacturing unit in the UK. Lastly, the company has begun to expand into underserved international markets to diversify its revenue streams and reduce its reliance on the highly competitive and regulated developed markets.

Now it remains to be seen if these strategies provide long-term, viable solutions that enable Wockhardt to build a sustainable business and retain its position in the pharmaceutical sector. While the company has had success with its NCE program, will it be able to build a robust R&D pipeline? Will its vaccine manufacturing arm become a permanent UK business? Will the long-drawn strategic change work? Will it be able to successfully create and execute a blue ocean strategy and make competition irrelevant? These are important questions as Wockhardt embarks on its ambitious journey into the future.

6.4 Exhibits

6.4.1 Competitor analysis of the Indian pharmaceutical sector

The exhibit illustrates the competitive positioning of major Indian pharmaceutical companies dominating the domestic market from 2022–2023 based on profitability (measured as sales by total income) and R&D spending (measured as R&D expenses by sales). The size of the circles represents market share (measured as sales by total industry revenue). All values are in Rs million. Data are downloaded from the Prowess database by the Centre for Monitoring Indian Economy (CMIE). The exchange rate is taken as of October 10, 2023.

The exhibit highlights the large number of companies operating in the domestic market, leading to intense competition (not all companies are included to enhance readability). Wockhardt enjoys a smaller share of the domestic market but moderate levels of profitability in comparison to its market share and R&D spending, even overtaking some of its larger rivals.

6.4.2 Share price movement from 2000–2023

The exhibit analyzes the movement in Wockhardt’s share price during 2000–2023. Data were taken from the Prowess database. A dip in share prices can be seen during the crisis period beginning in 2006 and lasting till 2012 when Wockhardt exited the CDR process. A second dip in the stock prices occurred post-2013 when the company was plagued by legal and regulatory hassles. The COVID-19 period also sees a fall in stock prices.

6.4.3 Wockhardt’s R&D output based on patents filed and granted

The exhibit illustrates Wockhardt’s increasing success in its R&D efforts and attempts to position itself as a research-based pharmaceutical company. The exhibits show the total number of patents filed and granted each year starting in 2010, which marked a shift in the company’s strategy. Data were taken from company annual reports.

6.4.4 Wockhardt’s major markets

The exhibit illustrates Wockhardt’s changing market focus and growing interest in emerging economies. The shift in strategy may have been catalyzed by the difficulties the company faced in heavily regulated markets such as the USA and the UK. Data were taken from company annual reports.

Figures

Figure 1

Competitor analysis FY 2022–2023

Figure 2

Wockhardt share price movement (FY, 2000–2023)

Figure 3

Cumulative number of patents filed and granted by year

Figure 4

Wockhardt’s major markets