Matrix Unloaded

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

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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 God



There 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.




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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.


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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.
 
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