The Hindu Business Line : ‘We have a $20-m R&D budget for pure drug discovery’

Hyderabad, Feb. 21 India’s $1.5-billion drug-maker Dr Reddy’s Laboratories has been slipping in revenues this year. There is pressure on its foreign acquisition Betapharm (Germany); not many block-buster drugs are on the horizon; and global competition is increasing.

However, the company plans to retain its strong emphasis on research and development (R&D), where it is the highest spender among Indian pharma companies. Dr Reddy’s aims to follow the Merck (whose R&D budget is $5 billion) way to emerge as a discovery-driven global drug company.

In an interview with Business Line, Dr Kallam Anji Reddy, Founder-Chairman, said, “We have a $20 million R&D budget for pure discovery and a pipeline of drugs at various stages of development.”

Excerpts from an interview:

What is the current focus of your R&D, key outcomes and how many drugs are in the pipeline? Our primary focus is on development of a first-in-class drug.In the first four years after setting up our company, we could develop Ragaglitazone. Of course, we had to withdraw it in the final stage. If everything had gone well, by 2003 it would have got $200 million as royalties. We are targeting a $5 billion market with Balaglitazone which is undergoing phase III clinical trials in Europe. It should be in the market in three years from now.

Another drug for diabetes, AMP-activated protein Kinase (AMPK), will be undergoing phase II clinical trials in next three months. We are also keen on bringing into the Indian market our own Dipeptidyl peptidase IV (DPP IV) drug for diabetes. A reasonably-priced DPP IV could generate Rs 500 crore per year with just Rs 100 crore investments. Our DPP IV could enter Phase I clinical trials in next six months.

Work is also in progress on Cholesterryl Easter Transfer Protein (CETP) gene. Pfizer had a compound in Phase III. We went behind and one of our compounds has been tested (DRL 15725). We are currently hunting for another follow up. Our ‘Polypill’, a combination pill for heart problems is also in advanced stage of trials.

What is the promise offered by biosimilars? Where do you stand?

In the near term biosimilars hold a big promise. We are among the first to bring a product to the market. Our second biologics product, Reditux (its brand of rituximab), a monoclonal antibody (MAb) used in the treatment of non-Hodgkin’s lymphoma launched six months ago, is also doing well.

From now onwards, we will be launching two products every year and would have 10 in the market in next five years. By that time the biosimilars/biologics path in the global regulatory framework and market will also be clear. In the next five years, I estimate not more than three major players in monoclonal anti-bodies segment and we will be the first one.

Are you equipped enough to tap the biosimilars market?

We are fully equipped. We will be building a separate manufacturing block in Hyderabad with huge reactors by investing $30-$35 million. We also have a good team of about 250 scientists. I see a big opportunity in biosimilars. Biosimilars, which are follow-on biologics (proteins), are new versions of biopharmaceuticals whose patents have expired.

In the long term what is your company’s strategy for R&D growth?

We intend to pursue a twin strategy. The ‘First in Class’ approach, which would see work in new discovery research (the Merck way) and the second is ‘Fast Forward’, which intends to shorten the life cycle and draw on multiple strengths and routes.

In Aurigene, our 100 per cent subsidiary based in Bangalore, we have restructured and adopted a variant of the second strategy. It is based on achieving milestones and getting handsome payments. The idea is to bring a target, receptor or protein and develop invitro compounds. If that is a hit it could go from gene level to phase I, which means a jump in several stages.

This model, based on a structured guided drug design, is perhaps the first-of-its-kind in India and helps in reducing risks. At least six big companies are working with us in this de-risked model.

How do you see collaborative research? Is the entry of global pharma majors into India for R&D a threat?

We are very much into this. In association with the Institute of Life Sciences (ILS), Hyderabad we are looking into some anti-aging compounds. A compound in red wine, called Resveretrol, is known to make people live longer by helping overcome age-associated complications for different organs.

A compound of Sirtuins is currently undergoing phase II in India to be developed into anti-biotic drug. The Wistar Institute (US) has also chosen ILS as collaborator for chemistry part of the job while it would offer biology expertise to us.

Indian pharma companies are in a good position because of the low developmental costs as well as the ability to do clinical studies at reasonable expenditure. This also offers a big attraction to multinationals to tap into India for all these advantages.

Of late, some companies are hiving off their R&D divisions into separate entity. Do you have any plans to make your R&D a separate entity?

No. We do not have any such plans. Dr Reddy’s focus has always been on an integral R&D division.

In the last fiscal year, Dr Reddy’s became the number one company in India in total revenue. How do you see the future?

Last fiscal was an exception. We had already said that retaining that position this year was not possible. But we will definitely be among the top three companies. After, three-fouryears, we hope to come back strongly to the top.

Is finding good research manpower an issue. What is the attrition at the scientists level?

Research manpower is not an issue for our company. We also have foreigners, including Chinese, working with our global research projects. Incidentally, a former Eli Lily scientist, Dr Santosh Mishra, will be heading our discovery research. There are several others who want to join us.

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