Ranbaxy Laboratories - Clinical precision
January 8, 2008If in the previous decade Indian Pharmaceutical companies discovered gold in generics, the coming decade may well see them prospecting in the true innovation space of drug discovery. Early signs are visible in the hiving off of drug discovery divisions, which work on new chemical entities (NCEs), into separate companies. Last October, Ranbaxy Laboratories, too, revealed its plans to do what is essentially an Indian phenomenon.
Malvinder Mohan Singh, CEO & MD, Ranbaxy, explains: “We have been leveraging the opportunity in the global generics space, yet allocating long-term resources for drug discovery and at the same time withstanding pressure on the bottom line—juggling these three balls optimally is a quite a challenge.” It’s not surprising then that Ranbaxy intends to transfer its entire NCE pipeline of 12-15 molecules along with all relevant intellectual property to a new company.
Ranbaxy spent $100 million on research last year, of which $20-25 million was on NCE work alone (it follows a January-December financial year). And it expects the restructuring to bring in savings of around $20-25 million to the parent company. “The new structure will ultimately unlock value at different layers of the value chain, resulting in faster growth of the NCE business, thereby, generating greater wealth for shareholders,” says Singh.
Nevertheless, drug discovery is an arduous timeand fund-consuming exercise. Hence, Singh is not prepared to take on complete risk of taking a drug to market, except perhaps for the anti-malaria molecule. “We will explore the possibilities for more alliances, co-development, out-licensing and bringing in more partners,” he says.
Ranbaxy already has successful out-licensing deals behind it. In the last seven years, it has earned milestone payments and royalties close to $100 million from all its deals, including one for novel drug delivery.
Moreover, Singh believes that Ranbaxy’s risk-reward sharing alliance with GlaxoSmithKline is a decided advantage. Ranbaxy takes the molecule through the early stages while GSK comes in at the later stages. The alliance has significant benefits for Ranbaxy—potential milestone payments of more than $100 million and up to double-digit royalties on worldwide net sales. Yet, that pot of gold is still at the end of a very long rainbow. Shahina Mukadam, Head (Research), IDBI Capital, who has put a ‘Buy’ on Ranbaxy, does not factor in any of the positives from potential drug discovery as yet. She also believes that the pharma research companies are where the IT companies were a decade back: They’ve got a long way to go.
— Shalini S. Dagar