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Dr Reddy’s gulps bitter pill of Novartis

Mumbai, Jan. 23: In yet another major setback to Hyderabad-based Dr Reddy’s Laboratories (DRL), Novartis has decided to stop further work on an anti-diabetes compound licensed to the Swiss drug maker, the second time in six months that a foreign partner has halted development of the Indian firm’s drugs.

In July last year, Novo Nordisk of Denmark had announced that it is suspending trials of Ragaglitazar, the anti-diabetes drug of DRL after bladder tumours were found in a mouse and a number of rats treated by the compound.

DRL had licensed the insulin sensitizer DRF4158 to Novartis in May 2001 when it was in pre-clinical trial stages for which it received $ 5 million as an upfront payment. The discontinuation of the compound's development would mean that DRL would not receive milestone payments of $ 55 million for this drug.

While DRL did not state the reasons behind Novartis discontinuing work on the compound. However, the Swiss major would continue to work with DRL on another dual-acting insulin sensitizer as part of the original agreement. A DRL official, however, did not specify as to which compound.

DRL currently has a research pipeline covering 10 molecules that are in various stages of development.

Dr Reddy's said that under the terms of the agreement, Novartis has rights for an additional development compound that is a dual-acting insulin sensitizer. “The terms and conditions of the original agreement remain unchanged,” the company added.

Pointing out that it will independently assess all data on DRF4158, DRL said that it also intends to carry out additional pre-clinical studies to determine the appropriate development path for the molecule.

Uday Saxena, chief scientific officer of DRL said, “We accept the decision taken by Novartis and both parties are currently in close discussions on a series of potential dual-acting insulin sensitizer candidates for development. Dr Reddy's is a world leader in the chemistry and pharmacology of dual-acting insulin sensitizers and is committed to developing new medicines that will address unmet medical needs in the areas of diabetes and metabolic disorders.”

The news led to panic gripping the DRL counter on the BSE today and the share slipped by more than 6 per cent to an intra-day low of Rs 885.65 after it had opened at Rs 945. The counter, however, managed to recover from this depths and closed at Rs 903.05, a loss of Rs 46.15 or 5 per cent over its previous finish.

Analysts pointed out that the discontinuation of work by Novartis displayed the risk associated with research in the pharma sector. Domestic companies led by DRL and Ranbaxy Labs that have stressed on research over the past few years have recorded reasonable amount of success in this sphere. They have even succeeded in penetrating the developed markets.

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