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Dr Reddy's leads Indian drugmakers to new frontiers

Sitaraman Shankar

When Kallam Anji Reddy licensed a drug made by his chemists - working on a shoestring budget - to Swiss giant Novartis in May, it capped a remarkable run for the 59-year old son of a south Indian turmeric farmer.

A month earlier the short, bespectacled figure was seen waving from the balcony of the New York Stock Exchange, after his company, Dr Reddy's Laboratories, became the first Indian drugmaker to list in the United States.

In March, the President, K R Narayanan awarded him the Padmashree at a glittering ceremony in New Delhi.

"Events have overtaken me in the last few months," he says.

The drug licensed out to Novartis, like another Reddy licensed to Danish firm Novo Nordisk, is part of a class of drugs that treat diabetes, hypertension and obesity at the same time.

"The deal is a vote of confidence in Dr Reddy's capabilities," says SG Asia analyst Jesal Shah.

"This class of compounds is promising, and the Reddy-Novo Nordisk drug could be one of the first of its kind to hit the world market," he adds.

The deal has thrilled an industry that's struggling with its image as a mere copier of Western drugs.

Ironically Reddy, a chemical engineer, was at the forefront of this copying exercise: industry hands remember Pfizer being forced to pull a heart drug from the Indian market after Reddy started selling his copy at throwaway prices.

Now, he represents the changing face of the sector.

"Reddy's achievements have given the entire drug industry a halo," says D S Brar, managing director of competitor Ranbaxy Laboratories, India's largest drugmaker by sales.

Reddy's company is among the top 10 local drugmakers by market share, and had a profit of Rs 1.34 billion on sales of Rs 8.99 billion for the year to March.

The company's American Depository Receipts have gained over 60 per cent since the listing, and closed at $16.25 on Wednesday.

Singapore-based Arisaig Partners Pte Ltd and the Singapore Investment Corporation are reported to have bought a 6.58 per cent stake in Dr Reddy's Labs through the ADR issue.

SIZE DOESN'T MATTER

"Size has nothing to do with innovation," says Reddy, quoting Ed Scolnick, president of the research laboratories at Merck & Co, the company he most admires.

Reddy's company spent just Rs 608 million on research last year, against Novartis' 4.66 billion Swiss Francs ($2.59 billion).

Reddy says Indian drug companies can start drug discovery research with just Rs 100 million per annum and if competent, could take a drug past preclinical trials at this cost.

Indian costs of research are among the lowest in the world partly because highly skilled Indian scientists are paid a fifth to a tenth of their Western counterparts.

The company's research will be funded in part by selling its generics, or drugs that are off patent, in the US market.

It expects to launch its generic versions of Eli Lilly's antidepressant Prozac and AstraZeneca's ulcer drug Prilosec in the United States after patent disputes on them are resolved by US courts.

BACK TO THE LAB

As a part of the World Trade Organisation requirements, India will soon tighten its patent laws, forcing local companies to carry out research rather than just copy existing drugs.

But Reddy, who did his doctoral work at the National Chemical Laboratory in Pune, started an original research programme at his company as early as in 1992, driven by a desire to get back to the lab.

"I missed doing research," he says, recounting with obvious pride his discovery of a chemical kinetics equation while still a researcher.

"I thought: if I can derive an equation in 48 hours, why can't I do drug discovery?" he asks.

But his drugmaking roots go back even further.

In his spare time, his father used knowledge of an ancient Indian system of medicine -- ayurveda -- to cure young girls of dysmenorrhea or painful menstruation.

"When he was old, he disclosed the formula to my wife, but asked her not to tell me as I would use it to make a profit," says Reddy wryly.

But some of his father's philanthropy seems to have made an impact on Reddy: one of his community projects has pulled out 3,000 children from back-breaking labour and sent them to school.

Dr Reddy's Labs is run by Reddy's US-educated son and son-in-law, with Reddy casting a paternal eye over research.

"There's no question of my retiring," he rasps. "Our research needs someone to give it direction. Besides, I'm a cheerleader for my chemists."

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