Murali Krishna Divi
Chairman and managing director, Divis Laboratories
Age: 63
Rank in the Rich List: 45
Net Worth: $2.03 billion
The Big Challenge Faced in the Last Year: Managing growth in an uncertain political climate, especially the bifurcation of Andhra Pradesh
The Way Forward: Strengthen ties with big pharma firms to continue getting high-margin custom synthesis contracts and play a non-conflict role to generics companies for API contracts
Murali Krishna Divi has a humorous disposition, the mildly amused air of a man who doesn’t have too much to worry about. The 63-year-old sits at the helm of a Rs 2,597 crore pharmaceutical contract manufacturing company, an investor favourite because of its industry-beating margins. In the last one year, the stock price of his company, Divis Laboratories, has risen by 75 percent. It ended its June quarter this year with a 38 percent operating margin in an industry that averages over 20 percent. And Murali Divi seems confident that he can sustain this pace. “There is a lot more opportunity in the field we are in,” he says, “in terms of manufacturing new products and also existing products.”
As a company that supplies the active ingredients of drugs to big pharmaceutical manufacturers, Divis Laboratories will only benefit from the expanding demand for medicines in developed and developing countries. “People are living longer. As they live longer, they need to use more lifestyle management medicines. If you have arthritis and, instead of 80, you are living till 90 or 100, you need to use anti-arthritis or anti-inflammatory drugs for another 10-20 years,” says Murali Divi. (Divis Labs is the world’s largest manufacturer of Naproxen, an anti-inflammatory that is a part of medicines used to treat osteoarthritis.)
One of the reasons why the company is on such solid ground today is because it deliberately chose a different business model at a time when most of the Indian pharmaceutical industry was seeking its fortune in challenging patents and selling generics in regulated markets. Murali Divi decided very early on in the game that his firm would stick to contract manufacturing of raw material for drugs. This involves making active pharmaceutical ingredients, or APIs (the compound in a drug that has the therapeutic effect), on a large scale for generics already being sold in the market, or doing the same on a smaller scale for the testing and development of experimental drugs.
To date, Divis Laboratories does not manufacture the final formulation (the tablets and tonics sold in the market) because this would change its role from a service provider to big pharma companies to their competitor. This canny decision was made soon after Murali Divi parted ways with Kallam Anji Reddy, founder of Dr Reddy’s Laboratories, a firm that deals in both generics and contract manufacturing.
Murali Divi’s life as an entrepreneur began in 1984 when he returned to India after working in senior research and development roles in American firms such as Fike Chemical. He had spent several years in the US after receiving his doctorate in pharmaceutical sciences from erstwhile Andhra’s (now Telangana’s) Kakatiya University. When the opportunity to partner with Reddy—a chemical engineer who was also striking out on his own after working at government-owned Indian Drugs and Pharmaceuticals Ltd (IDPL)—presented itself, Murali Divi decided to return to India.
He joined as a director on the board of the newly formed Dr Reddy’s Laboratories in 1984. Together, Reddy and Murali Divi took over Cheminor, an ailing contract manufacturing company, with the intention of turning it around. The idea was for Cheminor, a subsidiary of Dr Reddy’s Laboratories, to be the contract manufacturing arm of the company, while Dr Reddy’s would concentrate on generics and drug discovery.
But reviving Cheminor was a tall order. At the time, the company had only a few chemical reactors, the equipment used to produce APIs, which were churning out outdated products.
Murali Divi stepped in and changed all that. He took on the role of managing director, hired a crew of fresh graduates and trained them in the chemistry skills needed to revive the firm. His team included organic chemists Ramesh Babu Potluri, TVVSN Murthy, NV Ramana and G Hemanth Kumar. They worked on developing a cost-effective manufacturing process for the API, ibuprofen. A year down the line, the team had set up a production line for ibuprofen, which was soon scaled up to 1,200 metric tonnes a year, catering to about 25 percent of the global market demand for the compound.
From the very beginning, Murali Divi was adamant that he would not enter the formulations play even though most of the Indian pharmaceutical industry had taken that route through reverse engineering. Murali Divi’s former place of work, Dr Reddy’s, was leading the way with Paragraph IV filings for drug product applications in the US market. This filing allowed an Indian pharma company to launch a generic version of a patented drug by challenging the validity of the patent. If it won the challenge, the pharma company would receive six months of exclusive marketing rights and the large profits that went with it. But in doing so, Indian companies were also competing with pharma giants such as Pfizer and Merck, who were potential clients for their bread-and-butter contract manufacturing services.
“We get offers on a gold plate with new clothes and even some cash on it,” he says, referring to American and Japanese firms looking to sell off their contract manufacturing arms. But buying such companies would amount to “buying inefficiency”. Instead, Murali Divi prefers to expand his own facility and bring it up to speed—an expeditious and cost-effective exercise.
(This story appears in the 16 October, 2014 issue of Forbes India. To visit our Archives, click here.)
One of things you gotta love about Mr.Divi is how down to earth and low key he is. All of his success is earned and deserved. He is richer than the media hugging batch of Hyderabad by several fold. Yet he tries to avoid the media as much as possible.
on Feb 8, 2015well said Murali Divi....live & let live....
on Nov 3, 2014Murali garu is a sincere workhorse who has stamina throughout 24 hours and that made Divis Labs what is today! Congrats and we are proud to be Divis shareholders.
on Oct 27, 2014Respected sir U are the great person in India u single only hard work and got this much of named to Divis laboratories.Most of the peoples are interested to rejoin in same industry who are moved from there worked.so place give opportunity to them if u r interested sir thank u very Mich given opportunity to me sir .
on Oct 22, 2014Live and let live. Don\'t destroy and get destroyed by being over-greedy
on Oct 21, 2014Heartening to read this story about The Divis. Funny & true, the separation between Reddy & Divi made many others progress in life too. All for the good,indeed. Separation led to more wealth creation :)
on Oct 17, 2014