Dr Reddy’s Laboratories is strategically shifting focus towards biosimilars and innovation. The company is increasing investment in biosimilars, anticipating significant growth within five years. Generics and active pharmaceutical ingredients will continue to be major revenue sources. Dr Reddy’s aims to compete in a biologics-led future by investing in research and development.
Dr Reddy’s Laboratories is looking to sharpen focus on biosimilars and innovation while continuing to fetch majority of revenues from generics and active pharmaceutical ingredients, said GV Prasad, co-chairman and managing director. Speaking to ET’s Rica Bhattacharyya, Prasad said the Hyderabased-based company is accelerating capital allocation to biosimilars, expecting it to reach meaningful scale in five years. DRL plans to continue its R&D spending at 8-10% of sales and make sustained investments to compete pete in a biologics-led future. Edited excerpts:
We continue to be a pharmaceutical company focused on access, affordability, and innovation. What is evolving is the kind of business segments that are coming up as important to us. We made a big bet in consumer health (buying Haleon Plc’s global nicotine replacement therapy portfolio). We have started investing in innovation, licensing in, as well as organic development. And then, the whole biosimilars pipeline has really accelerated. We’re putting a lot more capital into these areas as they are growth drivers for us.
The pipeline is shifting for the innovators. As a generics company, we have to follow that trend. A large portion of the future pipeline is in biologics and biosimilars where we are investing. Increasingly, it will be an important part of the pipelines. In the next 5-10 years, a large portion of the therapeutic modalities will be through biologics. We are going to invest in that. But generics and APIs will still be a major part of our business while in the next five years, I expect biosimilars to reach scale.
In innovation, there is a requirement to solve unmet medical needs through deep science, clinical understanding, and disease understanding. We are making bets there with oncology being one of our major focus areas. Some portion of our revenue will start coming from innovative assets.
What is your R&D investment outlook?
Generics will continue to be our core business. We are investing in biosimilars and innovative products in oncology. Our R&D budget varies between 8-10%. We would like to remain at that level.
What are your biggest challenges, and how do you compare India with China?
We have been as an industry largely focused on small molecules, APIs, and generics. This is a game we have mastered. Biologics is a different game. The traditional skills of synthesis are of no use here. Products are made by living cells. They’re much more sensitive and much more complex in terms of manufacturing. So, those are the skills we have to learn.
Innovation is a very different game. You need to understand the disease, the mechanism, the modalities. Then you design the drug and test it in the clinic. These clinical trials are very expensive. We shouldn’t think that it’s from generics you’re moving up the value chain. I think it’s a different value chain, not an evolution of the current value chain.
As far as China is concerned, they brought in a lot of talent back from the US, including leadership level. They’ve created scientific institutions incentivised to publish and do novel work relevant to biotech. They have created a regulatory system which is very smooth, very fast, and competitive. Their recruitment rates in clinical trials are five to 10 times faster than many countries. Finally, they have a home market. They created a vibrant local market for innovative products at premium pricing and reimbursed. This offsets the costs of innovation and also prepares them to go global after that.
They played this game very well.
What is India’s biggest regulatory bottleneck?
The intent is good. The government is very strongly supportive of advancing the innovation agenda they call it volume to value. But institutional capacity takes time to build. It is not a traditional bureaucrat role; it’s a specialised role. They have to hire experts, not rely on people who have never done a drug before in their lives but come and sit as experts. That may not work.
R&D is expensive and long-gestation. How do you balance that with affordability?
Actually, it is not an issue; I think we only make it an issue. If a drug works and it is better than existing drugs, people are willing to pay for it. You have to charge a premium. There are insurance systems which account for that. It’s not a question of affordability; it’s about having the right systems in place.
Can AI be a gamechanger in pharma?
I don’t know if AI can make products more affordable. They can make it faster, more precise, and reduce the overhead of work. It could be a force multiplier. But it’s a tool. It’s not going to change the economics of drug discovery and drug production.
Your view on anti-obesity drugs like semaglutide?
I think it’s an amazing discovery. It’s a drug which will change the lives of many people in the world. It’s not a permanent cure for obesity. So, it’s a good solution for clinically obese people and definitely for diabetics. I think it’s a breakthrough drug.
How about chances of misuse?
This is the responsibility of the medical profession. They should not frivolously write up GLP-1. There’ll be a little misuse like in every other thing, but I hope it won’t be grossly misused.
How do you see geopolitics and supply chain shifts?
I think it is overplayed. Supply chains cannot adjust so rapidly, especially where regulatory cycles are long. Some shift has happened from China to India, but not a dramatic one because in the end you have to compete. You want to replace a source, you have to be more economical and better. Unless India is very competitive, business won’t come to India. Economics dictate at the end of the day.
The US and EU have not been very great for Indian companies in the recent past. Competition has become very severe; pricing has declined. We have to find new ways of creating value – diversify into more complex products where there is less competition or be cost leaders and selective about the portfolio.
Source : Economictimes
