The Hindu Business Line : DRL-GSK deal: Cure for both

In a deal that reiterates the changing dynamics of the global pharmaceutical industry into that of an increasingly symbiotic one, Dr Reddy’s (DRL) has announced a partnership with GlaxoSmithKline (GSK) Plc to develop and market select products across emerging markets outside India.

Under the terms of the agreement (effective June 16), GSK will gain exclusive access to more than 100 branded pharmaceuticals of DRL in the fast-growing therapeutic segments such as cardiovascular, diabetes, oncology, gastroenterology and pain management.

While DRL will manufacture the products, it will be licensed and supplied by GSK in various emerging markets such as Africa, West Asia, Asia Pacific and Latin America. In certain markets, however, the products will be co-marketed by GlaxoSmithKline and Dr Reddy’s.

Benefit for both

While the financials of the deal haven’t been made public, on the face of it, this deal promises to benefit both the parties.

For Dr Reddy’s, the deal straightaway would help increase its product reach into regions where it otherwise had only negligible market presence. Besides, partnering with GSK will help DRL cut down on the expenses associated with establishing a front-end presence in newer markets.

On a broader plane, this partnership also appears in line with DRL’s plan to better focus on key markets such as the US, Europe, Russia and India, which together make up for more than 90 per cent of its overall global generics revenue.

The deal, however, may not call for high margins on the drugs sold thus, as revenues will be booked by GSK and only later shared with DRL as per the agreed terms. That said, it would help DRL tap sales from emerging markets with little investment.

As for GlaxoSmithKline, the move will help better its share in the growing global-generics pie.

Deals of this nature are not new to GSK as it had earlier announced similar deals with other global generic players such as South Africa’s Aspen Pharmacare Holdings and Belgium-based UCB, in a bid to increase its generics exposure.

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