Dr Reddy's looking at adding its might to start-ups in allied areas: G V Prasad

Interview with co-chairman & CEO, Dr Reddy's Laboratories

As it expands its generics business, Dr Reddy's Laboratories is also looking for innovative ideas in allied areas. The company is planning investments in new ventures such as digital health and genomics, says Dr Reddy's co-chairman and chief executive officer GV Prasad in an interview with B Dasarath Reddy. Edited excerpts:

Are you looking at opportunities outside your core business area?

We are just putting together a group to look at investments in new ventures in allied areas such as analytics, digital health, nutrition, and drug delivery. We may take small equity stakes in other companies and in some cases we may actually incubate these ideas and develop them into businesses.

There are strengths that start-ups bring. They bring innovative ideas, they bring passion and entrepreneurial energy. We can add money, we can add reach with doctors and patients. We are looking at working with start-ups.

What opportunities does the health care sector present to start-ups?

Start-ups can develop drugs themselves or they can develop technologies. They use information technology to connect doctors and patients. Also, there are many start-ups in the areas of genomics, drug delivery technology and digital health.

The licensing agreement with US biotech company Amgen is the latest in a series of marketing collaborations you have been pursuing. What is the business plan behind it?

It is an important part of our business where we can bring innovative and patented products to market. This applies to markets where we have a field force and therapeutic area focus. We are seeking partners for markets like India, Russia and Venezuela where we have an established field force.

Dr Reddy’s spends 12 per cent of its revenues on research, more than most of its Indian peers...

While we fuel the growth of the generics business, we are also trying to build new avenues of growth through investments in proprietary products and biologics. That is the game plan and broadly that equation will remain in the next three to five years. Two-thirds of the R&D budget goes into generics as we develop products for the world market. Of the rest, over 60 per cent goes into proprietary products and the remaining money goes into biosimilars.

Is the portfolio mix of generics and speciality drugs going to change?

After five years. Today, the main business is generics. These businesses are very small. Over five years they will start becoming meaningful contributors. Till that time, it will be a very slow ramp-up.  

Our response to tougher price competition in the US is to be more innovative and develop products that are not available in the market. That is where our R&D money is going.

What is your strategy for a market like India?

We are not very big but we are growing quite well. Now we must maintain this growth for a year or two. As we look at market share, we look at inorganic opportunities. Its not easy to grow suddenly in this market.

Acquisition has become an important growth strategy. How does it apply to you?

We are not in for scale-based acquisitions. We have some priorities, such as entering markets and therapeutic areas and acquiring technologies. That is where we put our capital for acquisitions. We would like to make investments in the US as well as in emerging markets.

Your subsidiary Aurigene leads in innovation...

Aurigene is an investment we made with partners to develop oncology drugs. They are also looking at taking more risks and developing drugs themselves, but that comes in the next phase. For Dr Reddy's, our proprietary products group develops our own drugs in dermatology, neurology and allied areas.

In the past the company was hoping to launch the new biologic products in the US and other regulatory markets some time in 2017 and 2018. Will it happen?
Now it is 2019. It is moving because the scale of trials is very high. We will do it with our partners when we do it. We have partnership with Merck. We have four products in the market and two products under the development. It will take one by one as the patent expires. It is a long term game.