RIL's Mukesh Ambani: He's getting his biotech baby to focus on innovation in chosen areas and come up with winning drugs

The idea took shape in 2001. a group of senior executives guided by Mukesh Ambani were making a presentation to the group's Founder-Chairman Dhirubhai Ambani. The patriarch listened attentively as the team explained the nuances and extolled the potential of biotechnology. Mukesh Ambani, who was also present, told his father that the project could change the way healthcare was administered in the country and, possibly, the world. Dhirubhai, who had not spoken a word through the two-hour presentation, turned to his son once it was over and said: "Mukesh, yeh karne ka hai (Mukesh, we have to be in this business)."

Five years later, the grand vision that spawned Reliance Life Sciences (RLS) is still work-in-progress, albeit at a much more advanced state of progress. Says Mukesh Ambani, CMD of RIL and RLS: "Life sciences is a business we are building for the future and we envisage it coming into full bloom towards the end of this decade."

Biotechnology has few apparent synergies with Reliance's existing lines of business; so looking for similarities is likely to be a futile exercise; but it fits snugly into the Reliance way of doing things: it is a global business from Stage I itself, is hugely scaleable and requires humungous investments upfront. And the way RLS has structured itself allows for high levels of synergy between its various components (see The Initiatives). Says RLS President K.V. Subramaniam: "This is an evolving business that is driven by knowledge and people relatively more than capital and manufacturing." And RLS is now at the most interesting phase of its life.

"So far, we had concentrated on building basic competencies, programmes and infrastructure in life sciences; now we are engaged in looking at scaling up the initiative," says Ambani. The objective is clear: look for areas where RLS has an advantage and scale up operations to global standards (see Global Pharmaceutical Market). It is, after all, one of 10 institutions named by the National Institutes of Health, us, in 2001 as having established embryonic stem cell lines (undifferentiated cells that can be manipulated to grow into, say, a liver or a kidney or a patch of skin, which can then be used to replace a damaged organ or burnt patch of skin). But this line of research, the Holy Grail of the bio-tech sector, is still years from yielding marketable products.

RLS' K.V. Subramaniam: Global gambit	RLS' biotech wing: Scaling up

RLS' current product portfolio (see The Starters) is used in areas such as neurosurgeries, plastic surgeries and primary immunodeficiencies. "We have a rich pipeline of products and services which will encompass areas such as cell-based therapies, plasma proteins, recombinant proteins-both generic and novel-bio-polymers and bio-fuels," says Subramaniam. The Reliance USP: Its products are 30-40 per cent cheaper than their imported substitutes. But these are just the starters. The main course that is scheduled to follow is currently being cooked by its team of 140 researchers (total staff strength is more than 500, which is expected to rise to 2,000 by 2008)-Ph.Ds, MDs and post-graduate scientists, including some expatriates-is more exciting. That's because this phase is all about translating the research findings into marketable products. "This is a critical phase-we are answerable to the management and also to ourselves. The last four years have been about planning for what the industry and the world at large wants and developing technologies. Now is the time to scale up," says Dr Chandra Viswanathan, Vice-President (Biologics), RLS. Adds Carlyle India's Managing Director and Head of its India Buyout Team, Rajeev Gupta, who has been involved in several deals in this sector: "Research is not about scale; this phase is about managing R&D programmes; success critically depends on knowledge sharing and managing R&D programmes."

The Numbers Game

No business is worthwhile till it generates healthy cash flows and profits. "This is a capital-intensive business with long incubation periods; and the market for life science products is still evolving," points out Megha Dhargalkar, Vice-President (Business Development), RLS. It is also a highly regulated industry with stringent guidelines in areas like Good Lab Practices (GLP), Good Clinical Practices (GCP) and Good Manufacturing Practices (GMP). So clearly, innovative business models are the need of the hour. Says Utkarsh Palnitkar, Industry Leader, Health Sciences, Ernst & Young: "A hybrid model using India's expertise in the area of development with overseas expertise in research could be an option. But eventually, players must have a long-term perspective and high levels of perseverance."

There is no official figure on how much RLS has invested so far, but the broad sense is that it is "several hundred crores" and still counting. Revenues have also started flowing in over the last year-and-a-half-again the company did not share figures; it is privately held and so, doesn't have to declare numbers-and the objective now is to break even over the next few years. "That will be an achievement for a greenfield research-driven biotech company like ours," says Subramaniam. In this context, Gupta adds that the capital-intensive nature of the business is why Indian companies do not have a large presence in the bio-tech sector.

There are, of course, a couple of areas of concern. The most important of these is people; getting the right people is a major issue here, as in many other industries. The issue is trickier here since biotech has space mostly for those only at the top end of the education scale. But Reliance is looking in the right places. "There is a lot of talent in government laboratories," says Palnitkar.

Then, there is the competition from global biggies with much deeper pockets and more experience than Reliance. Little wonder then that RLS is alive to the need to constantly innovate and reinvent itself. "Most of what we have done so far has not been tried before by anybody. In that sense, there are no precedents," explains Dhargalkar. RLS' approach is completely driven by innovation in key areas like research, competency development and people-related best practices. The goal? "What will make us happy is when a patient comes to us with leukemia or any other disease and we tell him that we have an answer for it," says Viswanathan. "Over the next 2-3 years, we will have more products in the market, scale up our initiatives and globalise these initiatives," says Subramaniam. And given Ambani's penchant for global scales, acquisitions remain a distinct possibility.

The way forward looks exciting. Everyone in the company points out that it will have to keep the engine of innovation going, develop competencies in its areas of specialisation, achieve sustained profitability quickly and, finally, adopt the path of globalisation. When Ambani addressed his shareholders last year, he had spoken of Reliance Industries' plans to incubate, through life sciences, an innovation-driven bio-technology business and said: "RIL will strive to help India make a global mark in life sciences." Life sciences, according to him, will bring to the table advantages like stable cash flows, build strong services-based revenues and fashion a knowledge-driven business. Ambani has never been known to think small and every project he has been involved with has been driven by the larger vision of making it a huge business over time. RLS is still in its early phase and it is highly likely that Ambani's vision for the company could just see it entering a different growth trajectory. The world is watching this phase closely.