Dr Reddy's plans ADS, Ranbaxy may take cue

Dr Reddy's plans ADS, Ranbaxy may take cue
ENS ECONOMIC BUREAU

Mumbai, March 17: Move over infotech, the medicine men are taking stock--quite literally--of the situation. The country's premier pharma innovator Dr Reddy's Laboratories (DRL) on Thursday announced plans to consider an American Depository Shares (ADS) issue, even as marketmen expect a clutch of others including Ranbaxy Laboratories and Nicholas Piramal to follow suit soon.

Industry sources say that Dr Reddy's ADS issue size is in the region of $100-$150 million and proceeds will be used largely to fund the Hyderabad-based company's core strength--research and development.

DRL apparently plans to take around six new molecules into clinical trials (the estimated cost could be around $15-$20 million per drug). And among them, analysts say, could be a "potential money-spinner" pain-killer drug falling in the same category as block-busters Celebra (from GD Searle) and Vioxx (from Merck).

DRL, driven by chairman Anji Reddy's vision to emerge as a "change-leader" in the new millennium, has already licensed two diabetes lead molecules to Danish giant Novo Nordisk. DRL has since received milestone payments of $6.25 million from Novo Nordisk as its drugs move up the development ladder and more is expected to follow.

Another trump card in DRL's pack is its biotech thrust and a future in pharmacogenomics. Internationally, the market cap of the biotech sector, foreign media reports say, has risen from $97 billion in 1998 to a whopping $350 billion in mid-February, 2000.

While no official confirmation on the finer details on the issue could be got, the DRL board on Thursday notified the Bombay Stock Exchange that it would meet on March 23 to consider an ADS issue and payment of interim dividend for the fiscal 1999-2000 (April-March).

The DRL scrip, which has been on the rise since March 10, opened the day at Rs 1,517, moving down to close at Rs 1423 on the Bombay Stock Exchange on Thursday. On March 10, the stock closed at Rs 1292.

Analysts say that JM Morgan Stanley and DSP Merrill Lynch may be the front-runners to handle DRL's proposed ADS offer, though this could not be confirmed.

DRL is probably the first Indian pharmaceutical company to tap the ADS market, though the Mumbai-based Wockhardt had floated a global depository receipts (GDR) issue some years ago.

Market sources expect Ranbaxy Labs and Nicholas Piramal to follow suit with an overseas listing over the next few months, though Ranbaxy Labs senior vice-president (finance and corporate services) Vinay Kaul said: "Currently, we are not working on an ADR issue". The Nicholas Piramal top brass told The Indian Express: "Every one is looking at it, but we have not set a date or appointed bankers".

Analysts say that DRL, which recently announced the amalgamation of American Remedies Ltd (ARL) with itself, may not necessarily wait till it merges group firm Cheminor Drugs with itself. The DRL-American Remedies amalgamation has been fixed at a swap ratio of 1:12--one share of Dr Reddy's Laboratories for 12 shares of American Remedies.

The amalgamation will see Dr Reddy's Laboratories' domestic formulation sales exceed Rs 350 crore in fiscal (FY) 2000. It will also catapult the combine's ranking to number five as per ORG rankings. Dr Reddy's Laboratories had registered total sales of Rs 426 crore for the year ended March 31, 1999.