Dr Reddy''s Laboratories would be spending 8% of its turnover on R&D in 2002-03, almost double from about 4% in the year 2001-02. DRL''s expenditure on research during last year stood at Rs 98 crore out of its turnover of Rs 1,652 crore. This itself was more than double of Rs 41.54 crore it spent during 2000-01, according to the company''s Annual Report for 2001-02.

The company is setting up two more R&D laboratories, one in Bangalore and the other in Boston, USA. This will take the total number of research laboratories of the company to five. The existing laboratories are Dr Reddy''s Research Foundation and the new Technology Development Centre, both in Hyderabad, and Dr Reddy''s US Therapeutics Inc (RUSTI) located in Atlanta, USA.

The Bangalore facility being set up by Aurigene Discovery Technologies, a wholly owned subsidiary of Dr Reddy''s, would go on stream in a couple of months. The company would invest about Rs 50 crore for setting up this lab.

The Bangalore lab would have dedicated laboratories for molecular biology, protein expression and purification, structural biology, pharmacology and medicinal chemistry.

Aurigene Discovery Technologies would also open its R&D laboratory in Boston by the year end. This facility would be much smaller than the one at Bangalore, but this specialised lab would be the new global hub of Dr Reddy''s discovery research.

Hyderabad''s leading pharmaceutical company, Dr Reddy''s would be entering into a co-marketing alliance with a US-based company for its restenosis drug. The molecule was in advanced pre-clinical stage. The drug had been developed by Dr Reddy''s Atlanta- based RUSTI. The drug would be used for coating stents that are used for angioplasty. A stent is a stainless steel tube inserted in the artery of a heart patient to open the blockages. Stents are now being coated with drugs to prevent restenosis, or recurrence of blockages.

According to sources in the company, Dr Reddy''s would launch its new biotech drugs to combat cancer later this year. The drugs were in different stages of development and would be released in phases.

The company''s research laboratories in the US have three compounds in the Speciality segment and 9 new chemical entities (NCEs) under development. The company was developing the NCEs in the metabolic disorders, cardiovascular and cancer segments, according to Adam Levitt, the company''s Executive Vice-President for its US operations. He was making a presentation to the 15th annual health conference of Bear Stearns, an investment banking and brokerage company, in New York City, details of which were made available in Hyderabad.

Levitt said of the 9 NCEs, three -DRF 4848, DRF 4832 and DRF 3188 -were in the pre-clinical trial stage. DRF 4848 was for pain management, DRF 4832 for metabolic disorders and DRF 3188 for cancer.

It may be recalled the company had licensed out two compounds to Novo Nordisk and one to Novartis, all type-II anti-diabetes molecules. DRF 2593 and DRF 2725 were licensed out to Novo Nordisk, which suspended the phase III clinical trials on DRF 2725 in July after some rats were reported to have developed bladder tumours.

According to Levitt, the company''s near-term strategy would continue to focus on Generics. The company had filed a total of 44 ANDAs (abbreviated new drug applications) in the US, Europe, Canada, South Africa, Australia and New Zealand. These include 26 filed in the US.

The company has made it a corporate strategy to file more ANDAs, under para IV, challenging weak patents of multinationals, enabling it to launch a generic version of the patented drug before the expiry of the patent period. There were too many weak patents in the US, which could be challenged. If successful, the company could gain a benefit of six months exclusive marketing rights for the drug, generating quite a high revenue. A win in invalidation challenge could more than offset the cost of litigation in other cases. And if lost, no damages need to be paid.

In April 2002, Dr Reddy''s filed three ANDAs under para IV. In one case, it had applied for launching clopidogrel bisulfate tablets, a generic version of patent holder Sanofi-Synthelabo''s Plavix for tackling stroke and vascular deaths. In the US, the drug had sales of $1.1 billion in 2001.

It may be recalled, Dr Reddy''s had filed a 505 (b-2) application with the US FDA for Amlodipine maleate, which is different from Pfizer''s $2.5 billion drug Norvasc. Pfizer has sued Dr Reddy''s in a US court claiming patent infringement.

Dr Reddy''s is fighting one of the most sensational cases relating to AstraZeneca''s Prilosec, which is a $6 billion brand for the Anglo-Swedish drug firm, the second largest in Europe. The company had sued Dr Reddy''s, against its generic version Omeprazole, and other generic drug makers last year in a New York court. The hearing in the landmark case was completed in July but the judge''s ruling is awaited.

Meanwhile, the US FDA has granted a 180-day marketing exclusivity for a generic version of Prilosec to Andrx Corp of the US, a move which has been challenged by Dr Reddy''s in a US court, seeking the re-instatement of its 180-day marketing exclusivity for Omeprazole 40mg capsules, the generic version of Prilosec.

The company claimed that it had filed an application under para IV with the US FDA in February 1999 for Omeprazole delayed-release capsules 40mg. However, in May last year, a court ruled that the 4,636,499 patent (one of AstraZeneca''s seven patents that are a part of the litigation) was not infringed upon by Dr Reddy''s. In November last year, the US FDA denied Dr Reddy''s the grant of exclusivity on the ground that patent 4,255,431, for which Dr Reddy''s was the first to file, had expired during the pendency of the suit and that Andrx was the first to file with respect to the other patents.