ICICI Venture to fund DRL ANDAs

Mumbai, March 28 | Updated: Mar 29 2005, 05:33am hrs
Dr Reddy's Laboratories (DRL), the second-largest domestic drug maker, announced on Monday that it would receive $56 million (about Rs 245 crore) from ICICI Venture Funds Management, the venture capital arm of ICICI Bank.

The fund infusion will be to develop and commercialise abbreviated new drug applications (ANDAs) for their sale in the US apart from paying for research and legal costs.

ICICI Venture will fund the development, registration and legal costs of most of Dr Reddy's generic drugs for the US market.

"The ANDAs for this will be filed between FY05 and FY06," DRL chief executive officer GV Prasad said at a press conference in Mumbai. He added that, on commercialisation of these products, DRL will pay ICICI Venture a royalty on net sales which will be over a five year period.

ICICI Venture MD and CEO Renuka Ramanath said, "This is a new concept of R&D risk capital funding model in India. The innovative structure of the deal is part of our continuing philosophy of promoting the India story.

Under the terms of the agreement, ICICI Venture will fund $22.5 million in the first phase with an option to invest an additional $33.5 million in the second phase." Analysts expect that the agreement may help DRL to increase profit which have been declining during the recent quarters as competition in the generic drug market has eroded DRL's total sales.

FRESH DOSE
Dr Reddys to receive $56 million (about
Rs 245 cr) from ICICI Venture
Fund infusion to develop & commercialise ANDAs for sale in US apart from paying
for research and legal costs
ICICI Venture to fund development, registration and legal costs of most of DRLs generic drugs for US market
ANDAs to be filed between FY05
and FY06
DRL's research costs, including expenditure for discovering new drugs and developing generics for sale in the United States, have risen by 37% at the end of the December 31 quarter.

The company's legal costs have also been going up as its has been challenging the patents held by drug makers like Pfizer and Merck. DRL CFO, VS Vasudevan said that the company had spent around $14 million last year in fighting litigations in the US and in the current fisal too it may spend an equal amount.

"Indian drug companies have been taking a lot of risk while developing different drugs. Agreements of this nature takes some load off the balance sheet of companies involved in basic drug development," a senior analyst with HDFC Securities said.

On Monday, Dr Reddy's stock opened at Rs 755.25 at The Stock Exchange, Mumbai (BSE). After touching a high of Rs 779.90 and a low of Rs 755.25, the stock closed at Rs 772.30.