Dr Reddy's: R&D Investments paying off - Views on News from Equitymaster

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Dr Reddy's: R&D Investments paying off

Aug 5, 1999

Dr Reddy's will be launching two new anti cancer drugs, irinotecan and topotecan, in the last quarter of the current financial year. The company has also developed a new molecule for chemotherapy, which is expected to get clearance for clinical trials shortly. Dr Reddy's is one of the fastest growing companies in the pharmaceutical sector having a 1.4% market share in domestic formulations. The company has developed from being a purely bulk drug based company to a formulation-based company. The company is one of the leading spenders on R&D in India.

Dr Reddy's has been aggressively investing in research and development (5% of sales in FY99) in order to stay competitive after the product patents are recognised in India. The company has achieved some measure of success in the anti diabetes segment. The molecules developed have been licensed to Novo Nordisk, which pays Dr Reddy's milestone payments as and how the clinical trials progress.

While the two cancer drugs are already patented in the international markets, the new molecule for chemotherapy is likely to undergo Phase 1 clinical trials once the application is approved. This will make Dr Reddy's the second Indian company, after Ranbaxy, to have a product under Phase 1 trials in the country.

The company has priced the new anti cancer product Docetere at Rs 9,000 per vial, which is a quarter of the price at which patent holders Rhone Poulenc sells it.

The Indian companies still lack funds to carry on large scale R&D and go through the entire process of developing a product, testing it and finally launching it. Until that point is reached, Indian companies will have to keep licensing out most of the promising molecules to international firms in return for fees and royalties.

Market View:
Analysts are increasingly getting convinced of the seriousness of the R&D efforts of the company. They are recommending a 'BUY' as they expect the R&D efforts to yield returns for the company in the future.

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