Dr. Reddy’s inks drug deal with Merck Serono

Posted: Wed, Jun 6 2012. 10:34 PM IST Hyderabad: Indian drug maker Dr. Reddy’s Laboratories Ltd and European biotechnology firm Merck Serono will jointly develop and manufacture biosimilar compounds—subsequent versions of innovator biopharmaceutical products that go off patent—to treat cancer, the two companies said on Wednesday. The focus of the venture will be on so-called monoclonal antibodies. Merck Serono, a division of Merck KGaA , based in Darmstadt, Germany, and Hyderabad-headquartered Dr. Reddy’s will co-develop biosimilar molecules, with the Indian partner leading early product and complete phase I development. Merck Serono will take over manufacturing of the compounds and will lead Phase III development. The partners will share the cost of research and development. Photo: Bloomberg “The partnership covers co-development, manufacturing and commercialization of the compounds around the globe, with some specific country exceptions,” Dr. Reddy’s said in a statement. Dr. Reddy’s has to date launched four biosimilar molecules. The partnership with Merck Serono expands on Dr. Reddy’s presence in the biosimilar space in select emerging markets and enables participation globally. Up to now, complex biotechnology medicines, which are given by injection, have been largely immune from generic competition, unlike conventional chemical pills and capsules. But the landscape is starting to change as patents end and regulators establish guidelines for developing so-called biosimilar versions of drugs, posing a threat to leading biotech groups like Roche and Amgen. In contrast to conventional chemical medicines, biotech products are impossible to copy precisely, forcing generic companies to develop biosimilars, which are close to the original but need to be sold as separate medicines. Merck Serono will undertake commercialization globally, outside the US and with the exception of select emerging markets which will be co-exclusive or where Dr. Reddy’s maintains exclusive rights. Dr. Reddy’s will receive royalty payments from Merck Serono upon commercialization. In the US, the parties will co-commercialize the products on a profit-sharing basis. “We strongly believe that biosimilars is an important area of future growth and these products give us the opportunity to provide affordable and innovative medicines to patients across the globe,” said G. V. Prasad, vice-chairman and chief executive officer of Dr. Reddy’s. He said recent guidance from the European Medicines Agency and the US Food and Drug Administration on biosimilars made it clear that “any significant player in the field will need strong biologics development, manufacturing and commercialization capabilities,” adding that Merck Serono’s and Dr. Reddy’s expertise in these fields would make for a powerful partnership. Europe has already approved some biosimilars, including copycat versions of human growth hormone and the anaemia treatment EPO. However, antibodies for diseases such as cancer and rheumatoid arthritis are a much bigger commercial prize. Stefan Oschmann, chief executive officer of Merck Serono, said sharing know-how, risks and rewards was the right approach towards entering the biosimilar market, citing Dr. Reddy’s expertise in generic drugs and emerging markets as well his company’s expertise in developing, manufacturing and commercializing biopharmaceuticals. “It’s a positive and equivalent tie-up for Dr. Reddy’s,” said Hemant Bakhru, an analyst at Mumbai-based foreign brokerage CLSA Asia-Pacific Markets. “The tie helps Dr. Reddy’s to take their biosimilars through late stage clinical trials, where it requires huge investment.” There will be time lag before the tie-up starts reflecting on Dr. Reddy’s earnings. “It takes at least two-three years to see any impact of this tie-up on earnings of Dr. Reddy’s,” Bakhru said. Shares of Dr. Reddy’s declined by 0.25% to Rs.1,614.75 at the close of trading on BSE Ltd while the benchmark Sensex index rose by 2.71% to close at 16,454.30 points. viswanath.p@livemint.com Reuters also contributed to this story.