Dr. Reddy’s expanding injectable drug offerings, seeking deals

Mumbai: Dr. Reddy’s Laboratories Ltd is expanding its US offerings from basic generic pills to higher-end products such as generic injectable drugs and could make acquisitions of as much $1 billion as it seeks to boost growth.

India’s second-largest drug maker aims to file applications for four or five complex injectables for the US market in the next 24 to 30 months, chief operating officer Abhijit Mukherjee said in an interview.

After selling a rising portion of the world’s generic pills over the past decade, Indian drug makers like Dr. Reddy’s are now setting their sights on treatments that are harder to make and so command higher prices. Widening its pipeline into injectable drugs would help Dr. Reddy’s gain a foothold in an area where shortages are frequent and competition is less intense because of the complexity of the products.

“As the low-hanging stuff runs out, you are aiming for products” in segments where entry barriers are a little higher, Mukherjee said. Other complex products the company has in its pipeline include patches, eyedrops and topical medications.

The Hyderabad-based company will file its first application for a liposomal injection with the Food and Drug Administration (FDA) next month, said Mukherjee. Liposomal injections disperse a drug’s active ingredient through the body via tiny bubbles made of lipids, called vesicles. They’re used to deliver drugs for cancer and other diseases.

Preparing an application for a generic liposomal injectable is a longer and more complex process than generic tablets.

Share price

Dr. Reddy’s stock was trading 1.3% lower as of 10:38am in Mumbai, exceeding the 0.8% decline in the S&P BSE Sensex index.

Dr. Reddy’s 32% share gain over the past year has lagged that of larger rival Sun Pharmaceutical Industries Ltd, which has benefited partly from making deals. Sun Pharma on Wednesday said it had completed its acquisition of Ranbaxy.

“I think in the next two years it will be very important for us to make some good moves on inorganic growth,” said Dr. Reddy’s chief financial officer Saumen Chakraborty.

The company is looking to acquire dermatology or migraine medication brands, companies that give it access to new technology like drug delivery systems or nanotechnology, and those that give it more access to markets in Latin America, chief executive officer G.V. Prasad said. Deal size could vary from several small acquisitions to a large one of as much as $1 billion, Chakraborty said.

Complex process

An approval for the company’s application for a generic version of AstraZeneca Plc’s heartburn drug Nexium has been delayed by an FDA inspection of the plant where Dr. Reddy’s was going to manufacture the bulk ingredient for the product.

The FDA in November issued a Form 483, which details manufacturing conditions to be remedied. Dr. Reddy’s has transferred the technology for manufacturing the drug’s bulk ingredient to another site, Mukherjee said. It may launch the product in the US in the year ending March 2016.

The company will earn about 60% of its US sales from complex products in three years’ time, from about 25% today, said Chakraborty.

“What they’ve been very, very clear about is that the bulk of their incremental filings will be on complex products,” said Nitin Agarwal, an analyst at IDFC Securities Ltd in Mumbai. While complex products can command better pricing, delays are a possibility, said Agarwal. “There can be a lot of back and forth before the FDA gets around to approving generics for these products.”

Bulk drugs

Founded by chemical engineer K. Anji Reddy in 1984, the company started off exporting the bulk ingredient for methyldopa, an off-patent hypertension drug discovered by Merck and Co. Dr. Reddy’s had sales of ₹ 13,200 crore in the fiscal year ended March 2014, data compiled by Bloomberg show. Its products range from a generic version of Dacogen, an injectable oncology medicine, to over-the-counter treatments for conditions like heartburn.

Dr. Reddy’s in 2001 became the first Indian drugmaker to get 180-day exclusive marketing rights for a generic drug in the US market with the launch of fluoxetine capsules.

Today the company has six US-registered bulk drug ingredient plants in India, as well as seven finished formulation manufacturing facilities for the US and other markets. It also has manufacturing units in Mexico, the UK and in the US. Bloomberg