Ranbaxy Laboratories is planning to hive off the research and development (R&D) of its new chemical entities (NCEs) into a separate company, reports ET. Ranbaxy COO Atul Sobti said, “When the research enters into advanced stages of development, it will entail large investments. We plan to hive off the R&D of the NCEs into a separate company.”

The idea is to hedge the downside of developing new drugs where the upside of successful commercialisation is great but the downside of making substantial investments with no guaranteed success too is considerable. The company plans to complete the hiving off process by the year end or early 2008 and is looking at various models including partnerships with private equity players, says Mr Sobti.

Other pharma companies, too, have adopted the model of spinning off their R&D units into separate subsidiaries. While Sun Pharmaceuticals and Nicholas Piramal have hived off their R&D divisions into separate companies, Dr Reddy’s Laboratories has set up Perlecan Pharma Private Ltd in partnership with ICICI Venture and CVC.

Currently, Ranbaxy has around 10 NCE products at various stages of development. Of these, its anti-malaria drug has successfully completed the phase II trials and the company is now planning to conduct the advanced phase II trials of the combination form of the drug. WHO agency Medicines for Malaria Venture (MMV) who was part funding the research parted ways with Ranbaxy earlier this year. Company officials say Ranbaxy will continue to conduct clinical trial for the antimalaria drug and is open to partnerships.

Meanwhile, Ranbaxy Laboratories is planning to set up a joint venture in China to manufacture active pharmaceutical ingredients (APIs) used in drug manufacturing.

“We are currently talking to two-three large API manufacturers from China and also evaluating various other options. It is too early to divulge more details and name of the companies,” said Naresh Kumar, senior vice-president, API research and manufacturing business, Ranbaxy Laboratories, on the sidelines of CPhI Worldwide, the annual pharmaceutical exhibition at Milan. He said currently majority of the APIs produced by Ranbaxy were used for internal consumption and the joint venture in China would be part of the move to expand its API capacity. Ranbaxy already has three API manufacturing facilties in India and a good share of raw material are sourced from China.

Most of the leading Indian drug makers have either JV or own subsidiary in China, though very few companies have succeeded in their China foray. Some of the recent joint ventures include – the NCPC-Orchid joint venture to make cephalosporins, Granules India with Hubei Biocause Heilen Pharmaceutical Company and Aarti drugs with Huanggang Yinghe Pharmaceutical.

Ranbaxy was among the earliest Indian pharmaceutical companies to enter the Chinese market through a joint venture – Ranbaxy Guangzhou China Ltd (RGCL), started in 1993. Later, Ranbaxy increased its stake in the company which manufactures and sells finished drugs. It currently supplies over 35 products to over 4,000 hospitals in China through an extensive agency network of more than 150 agents. Its generic versions of ciprofloxacin (an antibiotic) and simvastatin (an anti-cholesterol drug) were among the market leaders in China, said sources.