Dr Reddy's Laboratories strategic acquisition of Roche's API business in Mexico provides an opportunity for the company's Custom Pharmaceutical Services (CPS) business to grow from the current base of over USD 10 million to USD 100 million by May 2007.

Dr Reddy's Laboratories Ltd has entered into a definitive agreement to acquire Roche's API business at the state-of-the-art manufacturing site in Cuernavaca, Mexico including all employees and business supply contracts, during early November, 2005. The total investment outlay is about USD 59 million including working capital.

This business involves the manufacture and sale of APIs including intermediates to Roche and other innovator companies. The product portfolio currently comprises about 18 products including mature APIs and a range of intermediates and steroids.

This acquisition also adds unique steroids manufacturing capabilities to Dr Reddy's. The Cuemavaca site at Mexico currently employs nearly 340 people and has been inspected by the US FDA and other international regulatory agencies.

With the acquisition of Roche's API business at the Mexico site, Dr Reddy's will emerge as a leading player in Custom Pharmaceutical Services (CPS) business and position itself as a partner of choice for innovator companies across the globe with service offerings spanning the entire value chain of pharmaceutical services.

The integration of these businesses-people and technology, the expertise of the management team and distinctive manufacturing capability at the Mexico site, with that of Dr Reddy's strengths in process chemistry and world class research capabilities will provide a strong foundation to drive the next wave of growth in its CPS business. Dr Reddy's expects the financial impact of the acquisition will be realised from the year 2006-07 onwards.