Channel: Companies

Tuesday, 22 February 2011
Dr Reddy's to buy GSK penicillin unit
By Amanpreet bhatia
 
 

The global buying spree of Indian pharmaceutical companies continues unabated, with the latest addition to the record books being Dr Reddy-s Laboratories establishing a bridgehead into the US antibiotics market through the acquisition of Glaxo SmithKline's penicillin manufacturing site in Bristol, Tennessee, and rights for the Augmentin and Amoxil brands in the USA. GSK will retain the existing rights for these brands outside USA. The Indian generics maker, Dr Reddy's Laboratories said the acquisition fits well with current plans to bolster its presence in North America while providing further opportunities for future collaborations with other drugmakers.

 

The acquisition allows Dr Reddy's to enter penicillin-containing antibacterial market segment in the US, thereby adding a new dimension to its manufacturing capabilities. This is also expected to significantly scale up its generics business in North America while providing an opportunity to explore additional synergy with its other businesses.

 

By the nature of the deal it appears to be an opportunistic and not the strategic one for Dr Reddy's. Now, it will be important to see how the opportunity will be utilised by tapping the maximum market potential by launching generic versions of these brands by keeping the costs strictly under control.

 

On the other hand, the sale of US rights to its Augmentin and Amoxil brand will allow GSK to divert time and money on its newer portfolio of differentiated products. According to IMS data, GSK's Augmentin and Amoxil brands generated revenues of $73m in 2009, but the drug database firm said Dr Reddy's is unlikely to see similar sales as a result of strong competition from generics.

 

The penicillin manufacturing site currently employs 46 people, according GSK, which believes Dr Reddy's will maintain the workers who are already established at the unit, along with other applicants once it takes over.

 

GSK will however, retain the rights to sell Augmentin and Amoxin outside the US, and may still market the products as branded generics in emerging markets.

 

Competition in the generic penicillin based antibiotic market in the US, estimated at $750 million and has been increasing as more companies are entering the market

 

The sale is a mirror image of the marketing deal GSK signed with Dr Reddy's in June last year that was designed to help the UK major pursue opportunities in 'pharmerging' markets.

 

Under that agreement, GSK gained access to products in Dr Reddy's portfolio of 100 branded therapeutics for the treatment of cardiovascular disease, diabetes, oncology, gastroenterology and pain management.

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