Dr Reddy's gets R&D risk capital funding

$56 mn deal reached with ICICI Ventures.

Pharmaceuticals major Dr Reddy's Laboratories has entered into a $56 million deal with ICICI Ventures for the development and commercialisation of abbreviated new drug applications (ANDAs) to be filed in the next two years.

For the first time, a private equity investor will be funding a company's drug development plans, which are largely focussed on the US generic drugs market.

According to the agreement, ICICI Ventures will provide $22.5 million in the first phase with an option to invest another $33.5 million in the second phase. However, ICICI Venture will have no equity participation in Dr Reddy's Laboratories.

ICICI Ventures will fund the development, registration and legal costs related to the commercialisation of the abbreviated new drug applications on a pre-determined basis. The agreement covers most of such applications to be filed by Dr Reddy's in 2004-05 and 2005-06.

Once the products are commercialised, Dr Reddy's will pay ICICI Ventures royalty on net sales for five years. Company executives refrained from commenting on the specifics of the deal.

Declining to divulge the number of patents that had been filed so far, GV Prasad, chief executive officer of Dr Reddy's, indicated that the equity investor would reimburse the costs of the applications that had been filed this year.

Commenting on why the company opted for partnership with a private equity player instead of utilising its $150 million reserves, Prasad indicated that the reserves would be utilised for a number of initiatives the company had planned.

Prasad said, "This model will enable us to share the product development costs, while leveraging our global scale and infrastructure."

Renuka Ramnath, managing director and chief executive officer of ICICI Ventures, said, "This is an exciting and new concept of R&D risk capital funding model in India."

Dr Reddy's conducts research and markets drugs for diabetes, cardiovascular ailments, anti-infectives, inflammation and cancer.

---

Drug deal

MONEY MATTERS

ICICI Ventures will provide $22.5 million in the first phase with an option to invest another $33.5 million in the second phase

PAYBACK TIME

Once the products are commercialised, Dr Reddy's will pay ICICI Ventures royalty on net sales for five years

DR REDDY'S ON THE BSE

Rs 772.30 (b 2.8%)