Aurobindo Pharma may hive off research facility

Joining the dedicated R&D company bandwagon, the Rs 1,500 crore bulk drug major Aurobindo Pharma is planning to hive off its research and development division into a separate company.

The Hyderabad-based active pharma ingredients (API) company which has a strong focus on product filings in the regulated markets with an array of value added generics in the research pipeline, will also rope in a leading private equity (PE) player in the new venture with fresh investments to the tune of Rs 100 crore.

Sources close to the development said the company was already in talks with few leading venture capital and financial servcies companies including EXIM Bank of India to partner in the new research entity.

The move is believed to be part of its strategy to de-risk the generic business by making the R&D unit a separate profit centre, at a time when the research investment is expected to be heavier due to the current market demands.

Sources said since the company's discussions with the PE partner has almost reached a final stage, it is likely to announce the move shortly. However, Aurobindo executives declined to comment on the development.

"Since the growth in the generic business is heavily dependent on newer products especially the drugs getting off patent in the next couple of years, these companies need to put substantial investments in the research and development. At the same time, the main line of business can not be risked with this increased focus on the R&D as well. So they are increasingly looking at the venture capital companies or other financial institutions to be roped in for this additional investment requirement," says a senior executive from a leading venture capital company.

Earlier, the leading research oriented pharma companies like Dr Reddy's Laboratories (DRL) and Sun Pharmaceuticals had spun off their R&D arms into separate companies.

While DRL had partnered with Citicorp and ICICI Venture to launch Perlican"" its new R&D company for new discovery research, Sun Pharma has just completed the demerger by adjusting its own resources.

Currently, Aurobindo's R&D strengths are in developing intellectual property in the area of non-infringing processes and resolving complex chemistry challenges.

In the process, the company is developing new drug delivery systems, new dosage formulations, applying new technology for better processes.

Aurobindo Pharma's R&D expenditure went up to Rs 32.43 crore during the nine months period ended December 2005.

It filed 5 DMFs and 2 ANDAs for the US markets. It had also filed 22 EDMFs/COS for EU markets.

"R&D spending has been increasing steadily each year. This year saw the completion of our new research facility at Mumbai. We have placed sophisticated laboratory equipment at the disposal of our research team. Our existing facility located near Hyderabad has also been upgraded," says sources from Aurobindo.

The company's research centre, located on the outskirts of Hyderabad, has a multi-disciplinary team of over 450 scientists.

The centre is focused on the areas of organic synthesis, analytical research, dosage form development, pharmacology, bio-equivalence studies and drug delivery systems.