It may not be widely known but the TATAs always had an interest in pharmaceuticals. Besides Tata Pharma, they had invested in the multinational firm Merind, both of which were sold to Wockhardt. The group also invested in Avesthagen, a heavily-funded Bengaluru biotech which floundered. But the grand strategy behind Advinus surpassed earlier forays. In the mid-2000s, with their high EBITDA numbers, pharma companies were investors’ darling. A few key TATA executives, like Pradhan and Prasad Menon, had worked in the chemicals giant ICI in the UK and had seen how lucrative the pharma division was.
“Rashmi came with a proposal and some credentials. He showed cutting edge technology in his presentations. It was 80:20 partnership between the TATAs and Rashmi-Kasim team,” says the consultant quoted above.
What was the conclusion?
It did not yield anything tangible. But there were two kinds of learnings for the group. We learned a lot in deal-making and business approaches to such ventures, including how to cleverly structure companies and financing. We learned some R&D processes which were deployed elsewhere
SATISH PRADHAN, FORMER BOARD MEMBER, ADVINUS
Ratan Tata’s personal interest was in leading-edge technology and development. He wouldn’t get excited about soap-oil business but if you had a technology which had a new approach and promised a disproportionate reward, he would really give his time and energy, says Pradhan, who was also the group HR head until 2013. “He wouldn’t throw billions of dollars at it but he’d put a fair amount of money on the table with a fair amount of patience.”
Then who ran out of patience—the TATAs or Barbhaiya?
“The way Rashmi was leading Advinus, the kind of contracts he was getting, and the kind of commitments he was making to pharma companies, the outcomes were disappointing and were not showing green lights. And that became the raw material for what you are calling ‘loss of patience’,” says Pradhan.
In 2013, when Ratan Tata was pulling back and the new group chairman Cyrus Mistry was taking stock of the unwieldy spread of the group, Advinus jutted out as an island. And the severance moment came soon enough. A batch of beagles—dogs that are essential for animal studies in drug development—was being imported from China, allegedly under deception, and caught the attention of animal activists. (Former TATA officials today call it “errors in the import documentation”.) Politician Maneka Gandhi, a crusader for animal rights, called Ratan Tata and is learned to have told him “being a dog lover how could you allow this”. “RNT stopped overnight,” says the consultant quoted above.
That came as a mortal blow to the already sputtering Advinus.
“The beagles’ episode hurt Advinus and Indian research in a big way,” insists Barbhaiya. Whatever the animal lovers anywhere in the world may say, he argues, the worldwide drug regulations say that unless you test in small and large animals, you cannot put a molecule for clinical trials. “We had several molecules with which we could do IND filings.”
But it all came to, well, near naught.
If you put aside the capital and operational expenditures, including the real estate in Bengaluru, and the “personal commitments that the TATAs made to Rashmi and Kasim”, it’d be a good approximation to say the Tatas took a hit of about Rs 500 crore. That was the cash they put on the table.
While the sale to Eurofins may end an era for the TATAs, discovering new drugs remains a high-need and high-aspiration venture for India.
A handful, literally countable on fingers, companies are doing this (table above). And it’s tough as hell because beyond some bit of early funding, from angels and government grants and soft loans, there is really no Series B money available in India. And if the molecule is not in the lucrative or perceived-to-be-lifesaving field of cancer, it’s even tougher.
“We thought we’d be able to build support in India, but it has been very difficult to sell drug discovery to Indian investors. And it’s even more difficult because it’s anti-bacterial and not anti-cancer,” says Radha Rangarajan, founder and chief executive of Vitas Pharma in Hyderabad. In six years of work, Vitas has two novel antibiotics (or anti-bacterial), which are designed, synthesized and developed in India.