Man who made 3 crores into 6000crs in 6years

Matrix Unloaded

N. Prasad bought a company for Rs 3 crore in 2000. He sold it for a valuation of Rs 6,210 crore. His story

The Making Of Matrix LabsUnusual he is. Part of the reason is that Prasad comes from a modest middle class background — his father was an army officer and mother a housewife — and he does not carry the baggage of inheritance. That gave him the stomach to take risks from the beginning. “I have little to lose,” he says.
Mylan’s headquarters in the US
A Master’s degree holder in chemistry (he later did an MBA while at his first job), Prasad started his career as a small-time analytical chemist with Indian Molasses, a New Delhi-based company. In 1993, when his mentor, P.A. Kumaran, then general manager at Indian Molasses, advised him to join pharma manufacturing, he decided to work at Plant Organics, an API supplier in Hyderabad, despite the fact that it was running huge losses. As general manager, he turned Plant Organics around in a year by convincing its largest API buyer Alkem Labs to pay more for the API and assuring greater supplies.
Plant Organics had a loss-making subsidiary called Vorin Labs. In 1995, a group of NRI investors bought out Plant Organics, and asked Prasad to run the show as managing director of Vorin. Vorin began supplying APIs to Ranbaxy, then led by D.S. Brar. Impressed with Prasad’s work, Ranbaxy took 38 per cent stake (they woud later raise it to 51 per cent) in Vorin. It was at this time that Prasad met Malik, who was with Ranbaxy as head (R&D) and, subsequently, on the board of Vorin Labs. Till now, Prasad was still just an employee. In 2000, he took his first leap of faith.
The Andhra Pradesh government had recently disallowed setting up of new plants in Hyderabad. For Prasad, who was bit by the entrepreneurial bug, the only route was to buy an existing plant. He found the perfect company in Herren Drugs and Pharmaceuticals, a Hyderabad-based company that was running into losses. Prasad and a business associate, N. Ravinder, bought the company for a mere Rs 3 crore. That money, too, was not easy to come by. They cobbled it together by borrowing. Prasad got the money at a whopping 48 per cent interest. He continued being managing director, Vorin — Herren was bought in his personal capacity.

Meanwhile, Ranbaxy wanted out because it did not really want a plant in Hyderabad, since its manufacturing was concentrated in the north and at strategic global locations. Prasad bought out Ranbaxy’s stake in Vorin by raising money through bank loans and merged it with Herren. Thus, in March 2001, was born Matrix Laboratories.
Prasad, meanwhile, kept going the extra mile if an opportunity presented itself. Shortly after Matrix was formed, Deepak Chhataraj, regional head (US), Ranbaxy, wanted to launch loratadine, an API for antihistamine. He wanted 3-4 tonnes of the API, but Ranbaxy could produce maximum 1 tonne. Prasad offered to do 3-4 tonnes himself (through Matrix) and without signing a formal agreement, put up a manufacturing block that must have cost him Rs 15 crore-20 crore. It was a large sum for a company of Matrix’s size, the first big order after Vorin and Herren were merged. Ultimately Ranbaxy could not place this order — and Prasad put it down to the travails of entrepreneurship.

Between 2002 and 2004, Matrix acquired a host of smaller Indian companies . Says Prasad: “Each acquisition that we made either added to the capacities or was strategically significant to our growth. The organic route would take too long. We wanted to grow fast.”
In November 2003, Matrix set up joint ventures (in India and Ireland) with two German companies. Sensing an opportunity, by March 2004, private equity players Temasek and Newbridge moved in and picked up a stake of 38 per cent between them. In July 2005, Matrix upped its stake in Explora Laboratories, a Mendrisio, Switzerland-based technology platform company. This acquisition added niche products in the oncology segment to Matrix’s portfolio.
Later that month, Matrix did its biggest acquisition, and the biggest deal by any Indian pharma company at that point — it bought 22 per cent stake for $263 million in Docpharma, a pharmaceutical trading company with a robust marketing and distribution network in western Europe. Says Prasad: “Matrix needed to enter the front end and a European acquisition gave us that. Moving into formulations and finished dosage form was a natural growth path for us.”
In January 2006, Matrix bought a 58 per cent stake in Mchem, a China-based manufacturing company. Mchem makes anti-retroviral APIs and gives Matrix the advantage of lowering prices in the segment using China’s manufacturing advantage.

Then, Matrix entered into two strategic joint ventures with Aspen Pharmacare, South Africa’s largest generic pharma company. Matrix had a strong anti-retroviral portfolio and joining hands with Aspen strengthened it further since together, the two companies had 25 products. It also gave Matrix access to niche, controlled-release products through Aspen’s subsidiary FCC.
Finally, Matrix acquired Concord Biotech in February 2006. None of these were random moves. They were calculated to take the once single product (citalopram) focused API supplier into the league of broad-based generic companies.
Prasad’s aim has always been to take Matrix into the global league. That has been realised with the acquisitions and now the deal with Mylan. With that ends one chapter in a remarkable career. And another begins.

MATRIX MAN: Prasad with Rambo, his pet dog
On a December evening last year, Nimmagadda Prasad, the soft-spoken and gentle-to-a-fault executive chairman of Hyderabad-based Matrix Laboratories, walked into the room of Rajiv Malik, CEO of the company. Earlier, in July, Malik had quit as head of global development and registration at Sandoz to join Matrix. A through-and-through R&D man, he was grappling with three M&As that Matrix had done recently — Docpharma of Belgium, Explora of Switzerland and Mchem of China. After discussing a few innocuous matters, Prasad casually passed an envelope to Malik. “Read it when you have time,” he said and walked out of the room.
Later that evening, Malik opened the envelope. In it was the profile of Concord Biotech, an Ahmedabad-based biotechnology outfit. He was shocked. “We had not even digested the earlier acquisitions when another one was thrown at me. I argued with Prasad. But he wouldn’t relent. He said that we would not get this opportunity again. I was stressed over the earlier acquisitions, but knew he was right,” recalls Malik.
Concord produces biological-based active pharmaceutical ingredients (APIs) targeted at the US market. It was an opportunity that simply could not be missed. And with big players like GlaxoSmithKline and Sandoz also eyeing Concord, Matrix had to move fast. That was Prasad’s point. That December itself, it acquired 55 per cent of Concord.
The Man They Call GodThere are many Prasads. His employees call him God. Sudhir Vaid, the scientist-turned-entrepreneur and managing director of Concord, says Prasad is the most transparent and fair person he has met. That’s why he sold his company to Matrix, despite there being bigger, more illustrious rivals in play. “I run Concord independently although the majority stake is held by Matrix. It is an ideal situation,” says Vaid.
Now talk to Prasad — and you’ll come away thinking that he is a philanthropist. In an interview from New York, he told BW he plans to give 50 per cent of his wealth to charity. Matrix employees say that Prasad often sponsors the higher education of some of their children. To Malik, who has known him for over a decade, Prasad is as an opportunistic risk-taker.
But what perhaps describes Prasad best is that he is an astute businessman with an instinctive sense of timing. One who bought a company for Rs 3 crore barely six years ago, and sold it for an enterprise valuation of Rs 6,210 crore last week.

The Mylan deal is clearly Prasad at his best. When he entered the pharma business in the late 1990s, the global generics and API businesses were just about opening up, with billions of dollars of products slated to go off patent. But in the last year or so, innovator companies have begun fighting back through a series of measures — launching authorised generics (where the innovator allows a single generics company to launch the genericised version of the drug), stiff legal countermeasures of patent challenges, sweetheart deals with generic companies and so on.
Predictably, margins are under pressure. And big generic players around the globe have begun consolidating, their numbers having come down from 14 to six in the last three years.
Prasad argues that alliances such as Matrix-Mylan are the way forward. “A player has to decide how he can stay in the field for as long as possible. Matrix, as a significant API supplier, needed a bigger playing field. Partnering with Mylan gives us that.”
Malik puts this in context. In July 2005, with an eye on the European market, Matrix had bought Docpharma, a pharmaceutical trading company with a robust marketing and distribution network in western Europe for $263 million. Docpharma was a smart buy — but Matrix was still absent in the US, the world’s largest pharma market. However, Matrix’s balance sheet did not allow it to enter the US market through, say, a $50-million acquisition any longer. Especially not after Docpharma.
“We could not make an acquisition that was substantial on a global scale. But we had an open mind to be in the business. The chairman provided the answer. To stay in the game, to create more value for the shareholder, and to protect employees’ interests, Matrix would sell,” says Malik. Indeed, as the next article argues, Prasad’s deal will perhaps trigger a round of consolidation in Indian pharma.
STILL IN THE SADDLE: Rajiv Malik, CEO, Matrix Labs, will continue to head its operations in India
Mylan was, of course, a great fit. Puneet Bhatia, managing director, Newbridge India and private equity investor in Matrix since 2004, says that though Mylan is not so well known in India, the company is the gold standard in the generics business in the US. “It has a very strong balance sheet and the highest profit margins.”
Moreover, in the last four years, Mylan has been buying APIs from Matrix. The leaders of the two companies, Prasad and Robert Coury, vice-chairman and CEO, Mylan, have immense respect for each other, even though the two met for the first time only last December.
Coury’s respect for Prasad was evident from his precondi tion for the merger — that Prasad join Mylan’s board. With his experience in global markets to back him up, Prasad will take over as head of global strategies at Mylan. (In India, the rest of the management team of Matrix will take the show forward under Malik as CEO. The other significant acquisition of Matrix, Docpharma, will continue to be managed by Stijn Van Rompay, the co-founder of the company.)
For Prasad, who started his career as an employee and moved on to be an entrepreneur, life has come full circle. It is perhaps not easy for an entrepreneur who has built a company to become an employee, albeit an immensely wealthy one with a shareholding to boot.
But Prasad makes it seem easy. “I should have a job because of my competence and not because of my share in the company.”
A year ago when he was CEO of Matrix and in charge of operations, he figured to take Matrix ahead, he needed someone of Malik’s calibre. The two have known each other since 1998. “To get Malik into Matrix, I could not offer him a post lower than that of the CEO,” says Prasad.
And so, active entrepreneur-CEO Prasad made way for Malik and made himself chairman of the company. “Kicking oneself upstairs in favour of a professional is something that is rare. But Prasad is unusual,” says Newbridge’s Bhatia.