Dr Reddy’s, Cheminor merger: The right prescription - Views on News from Equitymaster

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  • May 22, 2000 - Dr Reddy’s, Cheminor merger: The right prescription

Dr Reddy’s, Cheminor merger: The right prescription

May 22, 2000

It’s finally been announced: Cheminor Drugs (Cheminor) part of the Dr. Reddy’s group is to be amalgamated with Dr. Reddy’s Laboratories (DRL). This comes on the heels of the another merger: that of American Remedies (ARL) with DRL. Cheminor has been the main supplier of bulk drugs to the USA via its US subsidiary Reddy Cheminor Inc. (almost 67% of the turnover of the company, comprised exports to the USA). The company has capacities for Dextromethorpan (a cough suppressant), painkillers such as ibuprofen and naproxen (both used for arthritis), anti–ulcer medicines ranitidine and famotidine and diltiazem (a cardiovascular drug used for controlling blood pressure).

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.

The company 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).

Cheminor reported a turnover of Rs 2154 m last year and the merger would lead a turnover of Rs 7084 m for the combined entity. This would also ensure better valuations for the DRL, which has announced plans for a $ 150–200 m ADR issue in the current financial year.

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