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Photographs by Niloptal Baruah

Think Beyond, Stay Ahead

"Keep questioning the business model all the time"
Biocon founder Kiran Mazumdar-Shaw traces her journey from brewmaster to biotech pioneer

Kripa Mahalingam

I tell people I am an accidental entrepreneur. I never intended to start a company. I wanted to become a brewmaster because of my father who was, perhaps, the greatest influence in my life. He was a man ahead of his time and a true scientist at heart. My father was passionate about the science of brewing and wanted to share it with me. So in 1975, I returned to India after completing my studies in Australia and tried pursuing a career in brewing.

But, being a male-dominated industry, it was a hostile environment for women. While no one doubted my technical abilities, most breweries saw me as more of a risk than an asset. They believed it would be difficult for male managers to accept a woman in a senior position and were unsure how I would manage trade unions who were not used to female bosses. 

At the end of two years, when I had stopped trying to fit in and was actually planning a career overseas, a chance meeting started me on my entrepreneurial journey. An Irish entrepreneur named Les Auchinloss, who had founded a company called Biocon in Ireland, tracked me down through friends in Australia. He was in Baroda and wanted to talk to me about a business proposal. Auchinloss planned to set up an enzyme-based biotechnology company in India and wanted me to come on board and help him with it.

He wanted to make papain from papaya fruit and also introduce some other products in the Indian market. Auchinloss was looking for a brewer who had a sense of detail in these matters. If things didn’t work out, he said, he would get me a job. I thought, “Let me have a go at it”, and started making enzymes using my learnings from fermentation science. It was then that I saw all that biotechnology had to offer and was excited to build a business around it.

Battling prejudice

As a 25-year-old woman wanting to start her own business, I faced huge credibility challenges. In a way, the challenges I faced when I set off to become a brewmaster had prepared me for the hardships I would face as an entrepreneur. Back then, even if you were male, you needed to belong to a business family to enjoy financial support from banks; and here I was, a young, inexperienced woman trying to start a business.

I also had no collateral to offer other than my degree and my short experience as a brewing consultant. When I approached banks for credit lines, they would ask if my father would sign a bank guarantee on my behalf, since I wasn’t married. I would explain to them that he had nothing to do with the business and that they would have to base their decision on my credentials. Many banks weren’t comfortable doing that, so I refused to deal with them — I was quite rebellious even at that age.

Just as I was losing heart, in 1978, a very enlightened bank manager called Dinesh Nayak from Canara Bank gave the business its first lease of life. He was very excited that I was pioneering a new sector and when I told him how I was struggling to raise funds, he got me a credit line of 3 lakh. And that gave me the confidence to start building my business.

Then came the challenge of recruiting people. Most people didn’t want to work for a woman. So, forget employees, I couldn’t even get a female secretary. Besides, I was operating out of my garage, and that was a let-down for most people who came for interviews. Since I was young, most of them assumed I was the secretary. My first recruits were a couple of tractor mechanics — they were the only ones willing to join me and I needed someone to run the machines at the manufacturing facility I was setting up. Eventually I did get a few brave people to join me, some of whom are still with me.

I built my first manufacturing and R&D facility in Bangalore with a term loan of 14 lakh from Karnataka State Financial Corporation (KSFC) in 1979. Back then, women entrepreneurs were clubbed together with the handicapped and backward classes, and given concessions through a special scheme. I said I was neither handicapped nor did I belong to a backward class, so I didn’t need special concessions. Many people thought I was being stupid but I went ahead and took the term loan at regular terms. You need to believe in your principles and take the route that is fair even if it is tougher. 

Narayan Vaghul of ICICI, one of my mentors, also played a huge role in shaping my entrepreneurial journey. He gave me an opportunity to build an innovative business. In 1989, I wanted to scale a technology we had developed at a pilot level. KSFC was not willing to fund the expansion — it was worried about failure and 1 crore seemed too big an amount to risk. It wanted me to license imported technology instead. One day, I met Mr Vaghul over breakfast and told him how I was unable to raise funds for scaling up the new technology that could manufacture new enzymes.

He said this project was exactly what Technology Development and Information Company of India (TDICI) — which was set up by UTI and ICICI to provide private equity to small and medium businesses — was looking for. He would be happy to fund it, provided we let TDICI take a stake in the company. I was more than happy to do so: I went looking for a term loan and returned with an equity investor. Mr Vaghul’s faith in Biocon was repaid many times over in less than a year when Unilever picked up a stake in our parent company Biocon Biochemicals. Unilever recognised the value of technology and bought out TDICI’s stake by paying 4 crore more. By 1995, with the help of new technology, we were able to expand the business by more than 4x. 

Time to transform

1998 was a transformational year, personally and business-wise. Not only did I get married, I also decided to enter pharmaceuticals. It was also the year we bought back Unilever’s stake in the company and became independent since it didn’t want to enter pharma. I cleaned out my husband of all his wealth — he sold his house in Chelsea to buy back those shares from Unilever. Of course, he has done very well on his investment — he owns almost 20% of the company now. 

The same year, we decided to transform our business model. I believe in questioning the business model all the time. So we keep seeing evolution in our business — that has been my hallmark. In 1998, we decided to go beyond enzymes where we were already developing amazing technology and intellectual property. We wanted to leverage all that we had done in enzymes and apply it in biopharma. We chose products that helped us leverage our existing technology, be it statins, insulin, immunosuppressants or monoclonal antibodies. 

Also, the enzyme business wasn’t growing as fast as we wanted it to as it dealt with specialty or niche enzymes and the global market opportunity was very restricted. So, foraying into pharma made even more sense. Since we maintained global manufacturing standards from a very early stage, transition to pharma was easier. Our research efforts delivered a patented technology called PlaFractor. This enabled us to develop Mycophenolate mofetil, an immunosuppressant drug used in organ transplants, through a novel enzymatic route as well as through a novel, solid-state fermentation technology, which got us early entry into several regulated markets. Our proprietary solid-state fermentation technology circumvented process intellectual property (IP) and saw us gain first-mover advantage in cholesterol-lowering drug Lovastatin in the US and Europe.

The business of science

Being a research-led business model, the perennial questions for us were, how do we create value from a research-based model and can we unlock value from IP?  My biggest challenge has been to make people understand business is not only bricks and mortar and that IP is a more important asset and bigger in value than a factory. We did that when we went for our IPO in 2004. The huge valuation we got was an endorsement of the biotechnology business we had built over the past two decades. That was our first eureka moment, since we hadn’t realised what we had created. 

The second such moment was when we sold the enzymes business to Novozymes in 2007 for $115 million. It was an emotional decision for me to sell the business I had built the company on, but we truly realised the value of IP with the sale. The markets were surprised at the premium the buyer was willing to pay when we sold the business, most of which was because of the IP.

As a rule, Indians don’t know how to value IP — our investor community is used to multiplying the EPS by a price-earnings multiple to arrive at a valuation. So, the Novozymes deal was very satisfying because it reflected my belief in IP and was a great confidence booster that allowed us to keep investing in IP, be it in our biosimilar business or in novel research programmes.

Courage and conviction

My journey has been about value creation. For me, wealth equals value. When Pfizer broke off the deal with us for insulin, the market saw it as a setback. For me it’s a passing phase, and we are confident of coming out much stronger with our modified regional strategy, which focuses on partnering with many regional players instead of joining hands with a single global major. Such setbacks only make us stronger.

By and large my ability to face and learn from failure and move on has helped me a great deal in my entrepreneurial journey. I have been pulled down more than a couple of times by investors who have been unhappy when our share price slipped. They said I should step down as CEO and that I was a poor leader. But I said, not only are our business fundamentals sound, we are also one of the few cash-rich pharma companies. I told them, “I am not a CEO who does what you want me to do. I will do what is right for the business, not what is right for some investor who wants to make a fast buck.” 

I have been approached with offers to buy out Biocon but have no interest in selling. I want to build an enduring company and as long as I can lead and add value, I won’t give up. Today, there is no price for Biocon.

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