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DRUGS: Dr. Reddy’s is developing eight more biotech drugs in India

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SOURCE: Bloomberg, USA

AUTHOR: Jason Gale & Ashok Bhattacharjee


DATE:   21.06.2007

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June 21 (Bloomberg) -- Dr. Reddy’s Laboratories Ltd., India’s biggest drugmaker, is developing eight generic medicines using biotechnology and plans to release one for sale a year, challenging companies such as Roche Holding NV and Amgen Inc.

Reddy’s may double the number of people in its biotech division to about 340 in the next two years and plans to spend about $20 million bolstering production capacity there, Chief Executive Officer G.V. Prasad said yesterday.

Reddy’s and local rivals including Ranbaxy Laboratories Ltd. and Wockhardt Ltd. built billion-dollar businesses copying blockbuster medicines and selling them at a fraction of the price in the U.S. and Europe. They are developing the capability to produce more complex drugs, known as biologics, for which sales are growing at 14 times the pace of traditional chemical compounds and are among the most expensive prescriptions.

”If the launches are successful, Dr. Reddy’s will see huge growth in revenue and profitability,” said K.K. Mital, who manages the equivalent of $49 million of shares at Escorts Asset Management in New Delhi. ”These are fairly complex drugs and the rewards for greater complexity are always higher,” said Mital, who owns about 17,000 shares of Dr. Reddy’s and intends to hold on to his investments.

Shares of Dr. Reddy’s rose 2.4 rupees, or 0.4 percent, to 644 rupees on the Bombay Stock Exchange at 11:06 a.m. local time. They have declined 21 percent this year, compared with a 5 percent gain in the exchange’s 30-member Sensitive Index.

$40 Billion Market

About $40 billion of biologic medicines are dispensed annually in the U.S., accounting for about 15 percent of Americans’ drug purchases, according to IMS Health Inc., a research company in Fairfield, Connecticut. These products include Amgen’s Enbrel for arthritis and Aranesp for anemia, the Herceptin breast-cancer drug sold by Roche, as well as insulin and human growth hormone.

The expiry of their patents opens the door for other companies to sell copies as much as 70 percent cheaper. Mumbai- based Wockhardt is seeking U.S. sales of insulin and a genetically engineered version of erythropoietin, or EPO, a protein made in healthy kidneys that stimulates red blood cell production.

”A large portion of the drugs coming off patent in the future will be biotech drugs,” Prasad said in an interview from the company’s headquarters in Hyderabad. ”Biologics are going to play an important role in therapy in future and even now.”

Cheaper Rituxan

Reddy’s already sells Reditux, a version of Basel, Switzerland-based Roche’s rituximab cancer medicine, in India, where it charges about 50 percent less than the brand name product. The injectable treatment, which Roche sells as Rituxan, isn’t protected by a patent in India and was developed using a cloned antibody made for Reddy’s by a U.S. company.

Its release in April came about six years after Grafeel, Reddy’s version of Neupogen, a drug to boost white blood-cell production made by Thousand Oaks, California-based Amgen, the world’s biggest biotechnology company.

Prasad declined to name the biotech products in development, saying only they include so-called monoclonal antibodies used to treat cancer as well as arthritis medicines that work by inhibiting an immune system protein called tumor necrosis factor.

Reddy’s, which had sales of $1.42 billion in the year ended March 31, generates less than 5 percent of revenue from biotech drugs. Biotechnology, or the use of cellular material to make medicines, may contribute as much as 30 percent to revenue within a decade as the company starts selling Reditux outside India and patents on other biologics expire, allowing Reddy’s to copy them.

”Our plan is to take it to the global markets,” Prasad said. ”And when the U.S. and Europe open up, we will be there.”



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