Dr. Reddy's To Close Atlanta Facility In Reorganization; Focus On Key Markets To Drive Revenues To $3 Billion By 2013

MUMBAI - Need for optimization of infrastructure and resources, falling productivity and spiraling cost of discovery research has led Dr. Reddy's Labs, one of India's largest drug companies, to integrate its drug discovery operations with Aurigene - a partnership-based discovery biotech unit that it owns in Bangalore.

This will entail transition of employees, facility and infrastructure to Aurigene for generation of near-term profitability. As a result of the exercise, Dr. Reddy's will close down its research facility in Atlanta, Ga. "Next year, we hope to bring down costs by nearly $15 million," Dr. Reddy's Labs CEO G.V. Prasad told PharmAsia News in an interview.

Dr. Reddy's will be creating a new group of about 30 scientists to focus on proprietary product development, responsible for building the branded R&D portfolio in collaboration with partners and service providers. The new group will be headed by Raghav Chari.

"This organization will work with Aurigene and other discovery biotechs to ensure effective management of ongoing and future drug discovery programs. All the existing intellectual property will be owned and managed by this new unit. This group will also have responsibility for the development portfolio and the company's differentiated formulations efforts," Dr. Reddy's said.

Interestingly, even after pumping in huge investments, Aurigene had experienced turbulent times before stabilizing its operations and becoming profitable. Over the years, Aurigene has forged relationships with 10 multinational companies that include Novartis. Aurigene was created in 2002 as a drug discovery biotech and has a pipeline of 15 products at various stages from hit generation to late-stage preclinical optimization.

Dr. Reddy's also announced approval for Phase I trials on three Investigational New Drugs in Europe; one of those drugs is DRL 17822, a selective inhibitor of cholesteryl ester transfer protein for the treatment of dyslipidemia, atherosclerosis and associated cardiovascular diseases. Pfizer had taken torcetrapib, a same class of molecule, into late-stage trials, but later halted its further development (Also see "CETP Trials Still Inhibited As Torcetrapib Results Fail To Illuminate Outcomes" - Pink Sheet, 12 Nov, 2007.).

Dr. Reddy's has pioneered drug discovery research in India with licensing deals for its anti-diabetes molecules to Novo Nordisk and Novartis in the late 1990's. The company's discovery research has been undergoing continuous changes as the number of drugs in its development pipeline were pared down from nine to three last year.

As part of its continuous evolution into a discovery-led company, Dr. Reddy's had altered a deal signed in 2005 with private equity ICICI Ventures, which had agreed to fund the development of a few new chemical compounds by forming a new entity called Perlecan Pharma. In 2008, Dr. Reddy's agreed to buy back the equity stake held by ICICI Venture in Perlecan after protracted discussions.

Presently, Dr. Reddy's has one anti-diabetes compound named Balaglitazone in Phase III trials being developed with Rheoscience while another COPD compound is undergoing Phase I trials. Four other dyslipidemia drugs are also being researched by Dr. Reddy's Labs, according to a recent presentation made to investors.

Targeting sales of $3 billion by 2013 from the current $1.4 billion, Prasad laid out the company's future strategy, which will feature a sharper focus on key markets through delivery of products with limited competition, supply chain excellence and vertical integration with cost, technology and IP leverage. The company will put special emphasis on large markets in the U.S., Europe and India.

For India, Dr. Reddy's plans to launch biosimilar and differentiated products, address the portfolio gap with a combination of in-house and in-licensed products in diabetes and cardiology and scale up its presence in rural markets.

The U.S. remains the most ambitious market for Dr. Reddy's, with revenues surpassing $400 million. Amit Patel, head of Dr. Reddy's North American operations, said the company intends to be among the top five generic drug makers in the U.S., moving up from its ranking in 11th place now. "Injectables, cytotoxic, liquids and biosimilars will be the next growth segments to be looked at," Patel told PharmAsia News.

Dr. Reddy's dismissed possibilities of future goodwill write-offs on account of Betapharm, its struggling German operation. "Adopting flexible cost structures, optimizing vertical integration by shifting manufacturing from Germany to India and launch of new products has prepared us for the challenges of the German generics markets," a senior official at Dr. Reddy's said. Dr. Reddy's bagged Betapharm for $570 million in 2006 after a fierce bidding battle with Indian rival Ranbaxy.

To seize on huge biosimilars opportunities globally, Dr. Reddy's officials said there are four products in late-stage development. "In the next 12-18 months, we are hoping to launch two products and after that we should be able to launch one new biosimilar every year," G.V. Prasad noted.

Dr. Reddy's was the first to develop a generic copy of the anti-cancer drug Rituximab and branded it as Reditux . Last month, Dr. Reddy's signed a deal with India's Natco Pharma on developing and commercializing a basked of value-added oncology drugs (Also see "India’s Dr. Reddy’s, Natco Strike Deal To Target Abraxane And Several Other Oncology Drugs" - Scrip, 16 Apr, 2009.).

Noting Dr. Reddy's ambitious growth targets, Citigroup India has upped its projected price target for the stock to 700 rupees per share ($14.5) in a detailed report based on an investors meeting.

- Vikas Dandekar ([email protected])