New Delhi: The nation’s largest drug maker by sales, Ranbaxy Laboratories Ltd, is set to form an alliance with US-based Merck and Co. to discover new medicines, according to a senior executive with knowledge of the development.
The tie-up is the second such one for Ranbaxy and could potentially generate up to $100 million (Rs414 crore) in revenues for the Indian firm’s new research unit.
The company plans to list the recently hived-off unit, Ranbaxy Life Science Research, under which the tie-up will be made.
The agreement between Merck and Gurgaon-based Ranbaxy is coming almost three weeks after Malvinder M. Singh, Ranbaxy’s managing director, indicated that such a development was in the making. However, Singh did not name the international partner then.
Singh could not be immediately reached for comment and a company spokesman declined comment on the tie-up.
“The tie-up will be on the lines of what we have with GSK (GlaxoSmithKline Plc.) and it will start from early-stage development to as far as phase II (human) trials. It will span a range of therapeutic categories, though the focus will be on anti-infectives,” said the senior executive, who did not wish to be named.
While Merck will identify the drug leads—potential molecules that can be developed into new drugs—Ranbaxy will develop the drug all the way to the second-last stage of human trials. The Indian firm would receive royalties and payments as the drug crosses important development milestones.
The company had signed the agreement with the UK-based GSK in February 2007 to work on new drugs in areas such as anti-infectives, metabolic disorders, respiratory diseases and cancer.
A molecule for treating respiratory inflammation is already under development.
Ranbaxy’s stock closed at Rs469.45 a share, declining 0.13% on the Bombay Stock Exchange (BSE) on Friday in a bearish market, with sector analysts attributing the tepid investor response to the uncertainty of cash flows to Ranbaxy from such agreements.
The benchmark BSE Sensex closed 2% lower at 16,737 points.
Merck is not new to such deals. It has similar tie-ups with Ranbaxy’s local rivals Nicholas Piramal India Ltd and Advinus Therapeutics Pvt. Ltd.
“Faced with declining research productivity and drying pipelines internally, global drug makers have begun looking at ways to speed up drug research in cost-efficient ways” and these risk-hedged agreements provided just that, said Sarabjit Kour Nangra, sector analyst with Mumbai-based Angel Broking House.
Another analyst from a global equity firm said this “exploratory arrangement” made no material difference for the global companies as there would not be any upfront payment. “With big patents expiring and burning a big hole in the revenues of the big drug makers, their investment appetite for new drug research is also being hit. They are now wondering if they could focus on 60 molecules down from 100 before and ask others to develop the other 40,” explained the analyst.