The Hindu Business Line : Dr Reddy's forms drug development firm to reduce research risks

To fast-track drug development, the Hyderabad-based Dr Reddy's Lab has formed an integrated drug development company Perlecan Pharma Pvt Ltd with an equity capital commitment of $52.5 million (Rs 230 crore).

Citigroup Venture Capital International Growth Partnership Mauritius Ltd and ICICI Venture Funds Management Company will contribute $22.5 million each (Rs 98 crore) and Dr Reddy's will contribute $7.5 million (Rs 32 crore) towards the initial equity capital of Perlecan.

The development and commercialisation rights for four prospective drugs in the metabolic disorder and cardiovascular segments have also been transferred from Dr Reddy's to Perlecan.

The pathway of drug discovery is fraught with risk. But today's deal helps Dr Reddy's mitigate its risk, as it shares the upside of the reward, company top brass said.

Second deal with ICICI Venture: This is the second time Dr Reddy's has got ICICI Venture to support capital-intensive research initiatives. Earlier this year, it inked a $56-million (Rs 245 crore) deal with ICICI Venture for development, registration and legal costs of its generic drugs to be sold in the US between April 2004 and March 2006. Dr Reddy's was to pay an undisclosed amount as royalty to ICICI Venture.

Dr Reddy's equity-holding in Perlecan will increase progressively from the current `mid-teens' to 80 per cent in three years, depending on the milestones reached in the drug development process, a Dr Reddy's official said. Precise financial details of the deal have not been disclosed. Perlecan will be managed by an independent board and will receive the first tranche of $26 million shortly.

`Innovation in financing': Dr Anji Reddy, Dr Reddy's Founder Chairman, said innovation confined to the laboratory had extended itself to financing as well. The creation of Perlecan is necessary to fund output from research, which is large in both quality and quantity, he said.

Perlecan will facilitate the development of prospective drug molecules through the second phase of trials on human beings or phase II clinical trials. Subsequently, it will explore out-licensing, co-development or joint commercialisation opportunities of the prospective drug molecule with other drug companies.

Perlecan will have the first right of refusal on Dr Reddy's future pipeline at fair market value. Dr Reddy's will be offered commercial rights to Russia, India, China, a company official said.

Other molecules: Dr Reddy, however, clarified that fast-tracking of certain molecules did not mean others were on the back burner. Development of other molecules is progressing on schedule, he told Business Line. Other prospective molecules were not brought under the Perlecan umbrella as they may not have required additional funds for development, clarified Mr Satish Reddy, Dr Reddy's Chief Operating Officer.

Mr G.V. Prasad, the company's Vice-Chairman and Chief Executive Officer, said the deal will not alter the company's research spend, which would remain at last year's levels.

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