Dr. Reddy's expands into Mexico

By Kirsty Barnes

- Last updated on GMT

Related tags: Pharmacology, Active ingredient

Dr. Reddy's Laboratories (DRL) has signed a definitive agreement to
acquire Roche's Mexican API business, in a move to drive the next
wave of growth in its custom pharmaceutical services (CPS)
business.

The manufacture of high-potency APIs has become an attractive niche sector for custom pharmaceutical manufacturers, such as >DRL's,​ as generating double-digit sales growth.

Pharmaceutical companies are increasingly recognising the benefits of outsourcing research and development and in particular there has been a continual increase in demand for custom chemical manufacturing services for highly potent APIs.

The $59 million (€50.2 million) acquisition includes all 340 employees and business supply contracts, and provides DRL with added unique steroids manufacturing capabilities.

DRL's chief executive G. Prasad said the deal would allow his firm to strengthen its global position in the CPS business and be able to cover the entire value chain of pharmaceutical services.

"This strategic acquisition provides an opportunity for our CPS business to grow from the current base of $10 million to $100 million over the next 18 months,"​ he said.

In March this year the company also struck a landmark deal with ICIC Venture to raise $56 million to fund the cost of launching generics in the US market.

DRL has been working to improve productivity and cut costs and is making a continuous effort to drive revenues in their key markets after experiencing a major downturn in profits over the last year.

The downturn stemmed from the company losing ground in some of its key products in the US generics market and the announcement from Novo Nordisk that it was discontinuing trials of an insulin sensitiser molecule licensed to DRL.

An earlier disappointment last year at a failure to win US approval for a generic version of amlodipine, a widely-used cardiovascular drug, also dashed the firm's hopes of an opportunity to rake in over $200 million in peak sales from the drug and in the process be able to launch its first specialty drug.

This latest acquisition by DRL, expected to be completed by end of December 2005, involves the manufacture and sale of APIs, including intermediates and steroids, to >Roche​ and other companies.

The API market is experiencing a number of challenges worldwide, in particular, manufacturing overcapacity and a trend towards outsourcing to production to CMOs, and this may have fuelled Roche's decision to sell off its facility.

According to a Frost & Sullivan analysis early this year, the European API market will grow at a compound annual rate of 3.8 per cent by 2010.

The low growth rate indicates that the decline in the pipeline of new drugs and failures of late-stage drugs have adversely impacted the outsourcing of API manufacturing.

Established in 1984, Dr. Reddy's Laboratories produces finished dosage forms, active pharmaceutical ingredients and biotechnology products and markets them globally, with focus on India, US, Europe and Russia. The company conducts research in the areas of diabetes, cardiovascular, anti-infectives, inflammation and cancer.

Headquartered in Basel, Switzerland, Roche is one of the world's leading research-focused healthcare groups in the fields of pharmaceuticals and diagnostics and employs roughly 65,000 people in 150 countries.

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