Gulp it down

London, Feb. 24 (PTI): Dr Reddy’s Laboratories (DRL) is planning to bid for the generic arm of Merck, the German pharmaceutical company.

“We will take a look at it and then decide,” G.V. Prasad, vice-chairman and chief executive officer of DRL, said.

Prasad said any bid from Dr Reddy’s would be as part of a consortium, most likely to be backed by private equity.

“We don’t have the size to do it on our own,” Prasad, who was on a visit to London, told The Times.

Hyderabad-based Dr Reddy’s, one of India’s largest manufacturers of generic medicines, already owns a small European generics business.

“We see the potential to grow that quite significantly,” Prasad said.

Germany’s Merck said in January it was planning to sell its generic drugs business to help pay for its £7-billion acquisition of Serono, the Swiss biotechnology group.

A sale of the Merck generics unit, which is believed to be worth between 3 billion euros and 4 billion euros, would allow Merck to concentrate on its core prescription pharmaceuticals business.

Merck generics has sales in more than 90 countries and is the third-largest generics business in the world.

In 2005 it reported sales of 1.8 billion euros and operating profits of 238 million euros. It has around 5,000 employees.

Prasad said Dr Reddy’s was aiming to achieve a revenue growth of 20-25 per cent in Europe from 2008 onwards.

Globally, the company had sales of $546 million in 2006 and is India’s second-largest pharmaceutical company after Delhi-based Ranbaxy Laboratories.

Ranbaxy and Iceland’s Actavis are also interested in buying Merck’s generics business.

Another Indian drug firm, Cipla, had earlier expressed interest but recently said the price was too high.

Prasad said Indian generics business were likely to “play a very important role” in the development of the global generic medicines industry.

“India offers a vibrant chemical industry and the costs of manufacturing and infrastructure are still much lower,” he said.

Dr Reddy’s makes a range of generic drugs for different conditions. The company has a drug development unit, which is trailing drugs for diabetes, obesity and atherosclerosis.