The Hindu Business Line : Dr Reddy’s to focus on R&D projects to drive more revenue

The Hyderabad-based company, which announced a major restructuring of its discovery research activity by placing it under its arm Aurigene on Thursday, will however, ensure continuation of its focus on research in developing new chemical entities (NCEs).

“We are trying to reduce investment in high risk R&D projects. The drug discovery is a long term game and it takes its own course,” Mr G.V. Prasad, Vice-Chairman and Chief Executive Officer, Dr Reddy’s told Business Line.

Aurigene, which will fully spearhead discovery research from July, would help the company to lower fixed costs and bring in better cost structures.

“We have a large pool of employees and large infrastructure. It is better to facilitate greater utilisation of them. In that way, the restructuring makes sense for Aurigene,” Mr Prasad said.

Collaborative research

A greater focus on near-term research projects would mean that Dr Reddy’s — which spent 6 per cent of its $1.4 billion revenue in 2008-09 on R&D — may take up more collaborative research, especially in generics segment.

“Except in NCE’s, we are open to collaborative research,” Mr Prasad said. Dr Reddy’s had recently entered into a pact with Natco Pharma to jointly develop and sell cancer drugs. And more such agreements may happen now.

In the recent past, Dr Reddy’s has been trying to safeguard the risk-ridden drug research initiatives through different means. In 2005, by roping in Citigroup Venture Capital and ICICI venture funds it floated Perlecan Pharma Pvt Ltd with an equity capital of $52.5 million. But, the firm could not make much headway due to exit of partners forcing Dr Reddy’s to acquire the full equity of Perlecan last year.

“But the reorganisation of Aurigene and Perlecan cannot be compared. The former is a major shift in our activity to drive revenues and research, while the latter was purely a financial arrangement,” Mr Prasad said.

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