Dr Reddy's plumps for hi-tech gambit in US

Strategy change for the beleaguered generics major

Drug maker Dr Reddy's Laboratories has indicated that it will focus on products with "high technology barriers for the US market".

Meaning, it would try to develop and produce off-patent products that require very sophisticated technology. This marks a sharp departure from its earlier strategy of entering the US market only through patent litigation-based opportunities.

It is also scouting for strategic partners to reduce its increasing expenditure on research & development (R&D) to rectify the acute mismatch between higher investments and short-term profitability.

The management, in a conference call with analysts, indicated that the next four quarters will be tough and it may be able to get back on to the track only by financial year 2007.

It is looking out for alliance partners which could either be a pharmaceutical company or even a strategic investor.

The company faced a major setback last year owing to the unfavourable court verdict on Amlodipine.

"DRL's strategy of focusing on patent challenges in the US generic market has resulted into this mismatch between short-term profitability and investments for building a pipeline for the long-term future. It will take DRL at least two-three years to acquire a critical mass in the US generics market in view of the uncertainties attached to patent challenges," said a Mumbai-based pharmaceutical analyst.

According to analysts, the company will find it difficult to fund its European generic business considering the heavy investments it is already faced with in building its US pipeline, besides litigations linked to patent challenges.

Dr Reddy's has a pipeline that includes 39 pending abbreviated new drug applications (ANDAs), 63 drug master files (DMFs), six new chemical entities (NCEs), besides around 30 projects under development and a niche US specialty portfolio.

Of these 39 pending ANDAs, 13 include non-patent challenges and 26 include patent challenges addressing innovator sales of $22 billion.

Some of the top patented drugs that the company is contesting are Lilly's Zyprexa, sanofi/ Bristol's Plavix, GlaxoSmithKline Plc's Zofran and Aventis' Allegra.

"It is important to fuel the R&D engine that provides for future growth even though our profitability would have been better without these investments. A powerful and highly productive R&D engine, integrated APIs and formulations capabilities and a global presence in key markets are the pillars on which we are building the company's future," the company management said.

Dr Reddy's conducts research in cancer, diabetes, cardiovascular, inflammation and bacterial infection.