December 19 2006
By: Amy Yee
Today, India's pharmaceutical industry is synonymous with generic drugs. But if they live up to their lofty ambitions, Indian drug makers will become innovators not just copycats. Dr Reddy's, India's third-largest pharmaceutical company, hopes to lead the way with a diabetes medication that would be India's first original drug. If all goes according to plan, it could be launched in 2010 or 2011.
At its Discovery Research Centre in Hyderabad, a laboratory devoted to developing more profitable original drugs, Dr Reddy's is also working on treatments for oncology, metabolic disorders, cancer, cardiovascular illness and obesity. Dr Reddy's spends 12 to 14 per cent of annual revenue on research and development. In June, Dr Reddy's launched generic versions of Merck's cholesterol medicine Zocor and prostate treatment Proscar in the US; the new drugs accounted for 39 per cent of second-quarter revenues.
Dr Reddy's is extending its reach in the US and Europe - the largest markets for generic drugs - as well as emerging markets such as Russia and South Africa. It sealed one of India's largest overseas deals this year with the €480m ($627m) purchase of Betapharm, Germany's fourth-largest generic drug maker.
Dr Reddy's is also expanding its "custom pharmaceutical service", which produces key drug ingredients to sell to other companies, through deals such as the acquisition of a Roche factory in Mexico for $61m last year.
Dr Reddy's is also partnering with other pharmaceutical companies to share the long and expensive research and development process. It does early-stage research then finds a partner to take on costly clinical trials, as reflected in a recent deal with ClinTec of the UK to collaborate on developing a cancer drug. ClinTec offsets soaring costs of drug development by piggybacking on research done by India's pool of high-quality but comparatively inexpensive scientists.
In addition to scientific innovation, Dr Reddy's is also experimenting with new financial models. To help separate high costs from its main business, it formed Perlecan Pharma, a joint-venture with the venture capital arms of Citigroup and ICICI, India's largest private-sector bank.
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