Financial Daily from THE HINDU group of publications
Wednesday, Jun 29, 2005
Financial Daily from THE HINDU group of publications Wednesday, Jun 29, 2005 |
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Corporate
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Venture Capital Dr Reddy's bullish on third party venture capital Our Bureau
Hyderabad , June 28 HAVING recently partnered with ICICI Venture Funds Management to de-risk its R&D financials, Dr Reddy's Laboratories Ltd is now working on similar models for its innovation-led business, according to its Chairman, Dr K. Anji Reddy. Dr Reddy said that the old model in which all elements of R&D from molecular selection to clinical trials were under a single organisational roof was proving to be too expensive and risky. "In its place, we are seeing networks of innovative alliances — between boutique R&D companies and pharmaceutical players, between different pharma companies, between pharma players and clinical research organisations — many of which are mediated by third party risk capital of venture capital enterprises," Dr Reddy said in the latest annual statement of the company. The ICICI Venture Funds Management Company partnered with Dr Reddy's for commercialisation of the latter's US ANDAs (abbreviated new drug applications) in the generic business. In a $56-million deal, ICICI Venture would fund the development, registration and legal costs related to the commercialisation of most of the US ANDAs filed in 2004-05 and 2005-06. In terms of this arrangement, as and when each of these generics is commercialised, Dr Reddy's would pay ICICI Venture a royalty on net sales for five years. "We are working on structuring similar mutually beneficial models for our innovation-led businesses. It is premature to share any details at this stage; but I assure you that the information will be properly disseminated as and when these deals are finalised," Dr Reddy said in a letter to shareholders. Admitting that 2004-05 was a very challenging year for the company with fall in revenues and net profit, Dr Reddy, however, said the company did not react to the fall in revenue by reducing its R&D programmes and investments. "We have consistently felt that the only viable way of securing higher growth and profits and thereby reaching global scale of operations is through successful R&D. Therefore, despite short-term market reversals, we raised R&D investments by almost 41 per cent, from Rs 1,992 million in 2003-04 to Rs 2,803 million in 2004-05," Dr Reddy said. Further, according to Dr Anji Reddy, the company's R&D investments now account for 14 per cent of the total revenues, "which is not only the highest among the Indian pharmaceutical players but also is proportionately in line with global best-in-class."
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