The Hindu Business Line : Nicholas Piramal hiving off research unit

Mumbai, Aug. 31 Taking a cue from its rivals, Nicholas Piramal India Ltd (NPIL) said on Friday that it will spin off its drug discovery operations into a new company to cushion risks as more promising drug molecules enter clinical trials and seek more funds.Drug discovery and development of New Chemical Entities (NCE) and herbal products would be a separate company with a product pipeline of 13 molecules, said the NPIL Chairman, Mr Ajay Piramal. Research supporting NPIL’s custom manufacturing business and generic formulations business, would remain with NPIL, he said.

NPIL’s announcement makes it the second drug-maker to spin-off its novel research, after Sun Pharma undertook a similar exercise last year. The only other company to de-risk its business and strike innovative alliances to support its research and litigation spends is Dr Reddy’s Laboratories.

The de-merger gives shareholders an exit option, Mr Piramal said. Shareholders interested in the high-risk, high-reward business would participate in the research company.

Also, it would allow direct participation by strategic and financial investors, he said.

NPIL will hold 18 per cent in the research company, promoters 41 per cent and the rest will be public. NPIL will initially invest Rs 4.55 crore in the new company, and transfer the novel drug research business assets worth Rs 90 crore at book-value and cash of Rs 95 crore to the new firm, he said. Shareholders will get one share of the research company for every 10 shares that they hold in NPIL. The demerger is with effect from April 2007, and the new research company is expected to get listed on the bourses in June 2008, he said.

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