Strong dose from Dr. Reddy’s - Views on News from Equitymaster

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Strong dose from Dr. Reddy’s

Dec 14, 1999

Cheminor Drugs (Cheminor) part of the Dr. Reddy’s group is likely to assume full control of its US venture Reddy Cheminor Inc by acquiring the 25% holding of its US partner. So far Cheminor has been the main supplier of bulk drugs to Dr. Reddy’s Laboratories (DRL). The move will come ahead of the merger in India between Cheminor and DRL, which is likely to happen in the next financial year.

Another impending merger is that of American Remedies (ARL) with DRL. The latter acquired a 45% stake in ARL and has already acquired a further 15-20% stake from the associates of ARL’s promoters. An open offer for to acquire another 20% from the company’s shareholders is slated to open in January 2000.

Cheminor has filed six abbreviated new drug applications (ANDAs) in the US, four in the European Union apart from another six, which are in the pipeline. The company has set a target to file three to five ANDAs every year and have already received approval for ranitidine (75 mg), the anti–ulcerant omeprazole and anti-depressant fluoxetine.

Cheminor has also been proactive on another plane viz. in filing suits challenging the existing product patent of the patent holders. Reddy Cheminor has filed patent suits against multinational giants Astra Zeneca (producer of omeprazole), Bayer (ciprofloxacin) and Eli Lilly (fluoxetine).

As per the US law, if successful, the company filing the first case gets a six–month period of exclusivity while marketing its generic. Simply put, this means it can charge prices in the range of 50% of the branded product, rather than 10–30% when it has to compete with other generics.

Meanwhile DRL itself has three new original molecules in its research pipeline. One is an anti–cancer compound, another was a Cox II inhibitor (anti–pain) and third was a compound indicated for metabolic disorders. The company foresees licensing out two of these to MNCs for clinical trials in the near future.

Any deal DRL enters into is likely to be modelled along the line sit has with the Danish company Novo Nordisk which is developing DRL’s diabetes lead molecules. The company is also working on a new class of diabetes products called PPAR, expected to have considerable potential.

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