Indian drug companies, for long seen as good imitators of global peers who develop drugs on the back of mega research investments, could make billion dollar drugs merely by taking forward the research leads dropped off by large multinationals, says Anji Reddy, chairman of Dr Reddy’s Laboratories Ltd. Since the reasons for them to drop a project are not often its scientific failure, it gives potential leads to many, says Reddy, whose company has developed and licensed out molecules. The Hyderabad company has had its share of research and development (R&D) setbacks when the licensee company dropped these projects abruptly. Setting off an earlier research fallout, Dr Reddy’s is now taking forward its first discovery product—balaglitazone, a diabetic drug—into advanced stages of tests. The company has also expanded its research pipeline with new drug leads for atherosclerosis (inflammation of arterial blood vessel walls), anti-cholesterol and several other leads. Reddy is also seen as a pioneer of a yet-to-be-proven model of spinning off drug R&D work to a group company with the backing of private equity investors. In a recent interview with Mint, Reddy, who is pulling back from active management at the company, talks of drug research at the firm he founded in 1984 and the succession process in place at the company. Edited excerpts:

Could you link the theory of potential big drugs coming up from leads dropped off by large researchers? Can you relate it with any of your new projects?

Dr Reddy’s Laboratories chairman Anji Reddy says the company is trying to develop a reverse cholesterol transport drug that global pharma companies had failed to take beyond the first phase

Similarly, our new lead for reverse cholesterol transport was a project that was tried by many but did not go beyond the lab stage. For example, a project by AstraZeneca Plc. on this drug failed in phase-I. But we have now attempted a totally different approach from the earlier ones, and are in the process of developing it. We hope that we will be able to get to this unmet medical need.

We have also demonstrated that one of our earlier diabetes molecules, balaglitazone, which was returned by Novo Nordisk A/S after they decided to discontinue trials, can be successfully developed for a commercial launch in 2011.

What do you perceive are the future goals for the company? (Last fiscal year, Dr Reddy’s topped $1 billion, Rs3,940 crore, in revenues.)

To make Dr Reddy’s a discovery-led global pharma company. However, the generic business, which gives us the money to carry forward R&D, cannot be ignored. We are looking at biotechnology as a major opportunity in future, both in terms of innovative drugs as well as generics. Currently, we have two bio-similars in the market and an additional six in the pipeline. In another 15 years, about one-third of our revenues will come from biotech. We are also looking at several new leads that will help tackle unmet medical needs, which is ignored by global pharma companies.

Dr Reddy’s has a reputation in the Indian drug industry, both in terms of business and innovation. Who will lead this legacy ahead after Anji Reddy?

Dr Reddy’s is a brand now. The brand value will remain, irrespective of who runs the company in future. Both my son and son-in-law are equally responsible for the growth as well as failures. As we three hold the same equity in the holding company—Dr Reddy’s Holdings Ltd—which has a 26% stake in Dr Reddy’s Laboratories, (there are) hopefully no ownership issues as of today.

Recently, there has been a restructuring of responsibilities between the CEO, your son-in-law G. V. Prasad, and the chief operating officer, your son, Satish Reddy. Is this due to any conflict of leadership issues between them ?

I don’t think there are any professional issues between them. In fact, it was they who initiated the merger of the two companies Cheminor Drugs Ltd (an associate company of Dr Reddy’s) and Dr Reddy’s Lab, where Prasad and Satish were CEO and managing director, respectively. Though I discouraged them on the merger proposal initially as it may create unnecessary issues in future, they convinced me about the synergies and advantages of merging these two entities to create value. If they have issues now, it is their problem and I am not party to it.

Who will be your successor?

It’s a professional-led firm and there is no dearth of leadership. Both Satish and Prasad are professionally capable of running the company. As far as succession is concerned, let the boys decide that.