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Blocking buyouts by MNCs misplaced nationalism: GV Prasad, Dr Reddy's Laboratories

Any effort to put hurdles in the way of foreign drug firms buying Indian companies is 'misplaced nationalism,' GV Prasad, vice-chairman and CEO, Dr Reddy's Laboratories said.

, ET Bureau|
Updated: Jul 19, 2012, 11.17 AM IST
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Blocking buyouts by MNCs misplaced nationalism: GV Prasad, Dr Reddy's Laboratories
Drugmaker Dr Reddy's Laboratories has chalked out a business strategy for the next decade with an aim to emerge as a leading global generic company with strength in differentiated, proprietary products, its vice-chairman and CEO GV Prasad has said. It is moving away from 'me too' products and focussing more on complex molecules, biologics and drugs that require more science and technology, he said in an interview with ET. Any effort to put hurdles in the way of foreign drug firms buying Indian companies is 'misplaced nationalism,' Prasad, 52, said. Excerpts:

There have been concerns about foreign pharmaceutical companies acquiring Indian drug firms. What is your view?

I think it is misplaced nationalism. Why would you be worried when someone comes and takes over Indian companies? Where there is a market opportunity, business will follow. They say that someone like the Competition Commission of India should clear it. Every industry should pass the test for monopoly. Why only the pharmaceutical industry? To create a huge bureaucratic process is not fair to the industry. If a small entrepreneur wants to exit, he should exit. Somebody wants to enter, he should be allowed. This is a free world. We can go and acquire a company anywhere in the world. We did it.

What is your vision for Dr Reddy's?

We will continue to be a generic company for the next 10 years. We are moving up the technology curve. We are going into more complex molecules, biologics, products which require more science and technology. That is how we are creating value as we go forward. In the branded markets, we are driving several core therapeutic areas and deepening our presence there. We are moving out of 'me too' products, largely where other companies are able to do equally well. As we are doing this, we are also trying to innovate, bring differentiated proprietary products. But then it is still some time away.

What kind of proprietary products?

Products of original research. And, also products of incremental innovation on existing molecules to meet some profiles, whether it is side-effect reduction or improved efficacy or synergism. There will be incremental innovation and there will be new chemical entities.

Do you see generic companies selling out and consolidation happening?

Not selling out. The Indian market is highly fragmented. There will be some consolidation at some point because the opportunities for growth are slowly going to diminish and size will become important to pay for cost. So, at that point of time, there could be some consolidation. A company with a size of Rs 500 crore will be unviable. Maybe we will need companies of Rs 1,000 crore revenue size and above for viability. So, there will be some consolidation.

How much does size matter to you?

We are reaching Rs 10,000 crore revenue this year. But we are not looking at numbers. Our growth is through the kind of products we develop, the impact we make on affordability in our chosen markets and the core therapeutic areas. If we do all this well, growth will automatically happen. We are comfortable where we are and we are not aiming to double, triple or quadruple the revenues. Our ambition is to be a very strong company in terms of innovation. We are shifting a little bit towards that. It is already happening as we speak. To complete the transformation, it may take 3-4 years but we are already on the journey and have made good progress. Today, each of our products generates may be $2 million. After 3-4 years, we will be triple or quadruple that. We will go after opportunities that are difficult. By definition, there will be less competition and more marketshare.

What will take you towards that?

I think we need to build capabilities, have to globalize our R&D and build external linkages. We now have a research centre in Cambridge. We are actively considering another location in the world for formulations. It will be somewhere in the West.

How is the regulatory environment overseas?

I think it is getting tighter, which is good. Some of the Indian companies got into issues. We are comfortable. There is significant upgradation that is happening in the industry, coinciding with the increasing scrutiny.
 
What is the plan behind the recent tie-up with Merck Serono for biosimilars?

The tie-up is to take four of our biologics to the regulated markets and some emerging markets. This company has deep expertise in biologics manufacturing. They have innovated products and they understand biologics marketing. It is a set of oncology assets that we put in the joint venture. It will be the first wave of biologics that we will be launching in First World markets. Through this process, we will learn the game: manufacturing for First World markets, registration processes, clinical development and others.

What is the status of your JV with GSK?

That is for small molecules and only for the emerging markets whereas with Merck it is a global deal. Partnership plays out over a long period of time. Our philosophy towards partnerships is to build businesses and not immediately get huge milestones. Both the alliances (GSK and Merck) reflect our philosophy: building businesses for long term.

What are the emerging trends as far as drug discovery goes?

In the not too distant future, each drug will be specific to you. And that precision is probably the next big thing in medicine and pharmaceuticals. The other big trend is devices. I think a lot of technology improvements are happening which will help you manage your health with that device. May be your mobile phone will be your health monitor. The third big trend is that the diagnosis is going to become more predictive.

Will you consider sale if price is right?

It is a very hypothetical question. If you have something and somebody is willing to pay huge amount of money for it, then that is a situation where you don't know what you will do.

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