India’s leading drug maker Dr Reddy’s Laboratories Ltd is expected to finalize its joint venture partner for entering the Japanese market, the world’s second largest pharma market, in a week.

The company’s managing director and COO Satish Reddy is in Japan to finalize the deal with one of the top 10 drug makers in that country. The partnership is likely to be announced by the end of the month, said a person familiar with the development, who does not wish to be identified. Mint couldn’t ascertain the name of the potential Japanese partner.

“Our managing director and his team are in Japan now to take a final decision on this, ” said Dr Reddy’s vice-chairman and chief executive officer G.V. Prasad. “There is great opportunity for generic pharma companies in Japan, though it’s complicated in nature due to regulations and customer mindset on generics. We will be launching our products in that market by next year.”

Generic drugs are copy versions of branded drugs already free from patent exclusivity.

With annual sales of $58 billion, Japan is the second largest pharmaceutical market after the US. Dr Reddy’s will be following other Indian drug makers such as Ranbaxy Laboratories Ltd, Cadila Healthcare Ltd and Lupin Ltd into Japan.

Representing 11% of the world’s pharmaceutical market, Japan has been largely dealing with branded products marketed by big multinational companies with patent protection. Till recently, generic drugs’ presence there was less than 10% of the total volume.

Hence, unlike their attempts in the US or Europe, Indian drug makers did not make serious attempts to enter the Japanese market. But with its health-care bill remaining consistently high, the trend is changing in Japan and the local government has started encouraging the use of generic drugs. The government has also recently implemented regulatory changes to promote cheaper generic drugs, allowing entry of generic players, including Indian companies.

In 2006, the total pharmaceutical sales in Japan declined by 0.7% to $58 billion in value, while generic drug sales grew by 5.1%.

“A local partnership will help us understand the market requirement there, in addition to facilitating faster registrations for our generic drugs in that territory,” says Prasad.

Indian drug makers that have entered Japan have tied up with local players. While Ranbaxy was the first Indian company to enter in a tie-up, with Nippon Chemiphar Ltd in 2005, Ahmedabad-based Cadila Healthcare took over Nippon Universal Pharmaceuticals, thereby strengthening its base in Japan.