Dr Reddy’s Laboratories is set to sign a definitive agreement with Fujifilm of Japan in the first quarter of the next fiscal to set up a drugs joint venture for the Japanese market.
Dr Reddy’s would hold 49% stake and Fujifilm the balance in the venture, which would pursue opportunities in generic drugs.
The agreement with Fujifilm is being seen as a stepping stone for Dr Reddy’s into the Japanese market, which is estimated to be having significant potential for generic drugs, primarily because the Japanese government is keen on promoting generic medicines.
The generic market in Japan is estimated to be worth about $97 billion. Various pharma companies including Dr Reddy’s are optimistic about the prevailing low penetration of generic drugs in the Japanese market, which is at about 25% in terms of volumes as against over 70% in the US.
Despite signing of an agreement by June, the real benefits of the joint venture are expected to flow in only after two to three years.
Dr Reddy’s management too has been indicating at a timeframe of three years for the venture to gain enough traction for the benefits to accrue into the balance sheet.
The JV may also set up a manufacturing plant in Japan, though sources said the traction and volumes would ultimately decide on the nature of the unit.
“Once the products that are planned start getting approvals, there would be more visibility on the strategy to tap the market effectively. That would ultimately swing the decision in favour of having a manufacturing plant in Japan,” the source said.
The new company will develop, manufacture and promote competitive and high-quality generic drugs utilising both Fujifilm’s advanced quality control technologies built through photo film business and Dr Reddy’s expertise in cost-competitive production technologies for active pharmaceutical ingredients and formulations. The joint venture intends to launch its first products in Japan in the next three to four years. It also plans to design products that fit the specific requirements of the Japanese market.
While Fujifilm is expected to contribute its market presence and technology to the joint venture, Dr Reddy’s would bring its bulk drugs, low-cost and high-quality manufacturing capabilities to the table.
Source: DNA India