Cheminor to merge with Dr Reddy’s

The proposed merger may help Dr Reddy’s group to become a Rs 1,000 crore company by end of 2000-01, says a market analyst. During 1999-2000, the combined turnover of the duo is Rs 712 crore with DRL reporting a sales turnover of Rs 497 crore while CDL has posted sales of Rs 215 crore.

While DRL had taken over American Remedies with a view to synergise its operations with in primary therapy products with secondary care products, the merger of CDL will benifit the company in the US generic market, said the market analyst, while pointing out that 75 per cent of CDL’s turnover comes from export market.

Recently DRL had obtained the shareholders approval to increase theauthorised capital to Rs 50 crore from Rs 30 crore to facilitate the ADR issue of about $ 200 million.

DRL had promoted Cheminor Drugs in December 1981 to manufacture and market bulk actives both in domestic and international markets. Over a period of time, with the increased competition and low margins the company had to re-focus its operations diversifying into generic finished dosages and custom chemical services besides bulk actives.

CDL had set up a USFDA approved formulation unit at Bonthapally near Hyderabad where it manufacture various off-patent products for US markets.During 1999-2000 CDL has launched four products, an anti-inflammatoryagent Celecoxib, Sibutramine for obesity, Olanzapine for depressionand Zolpidem for insomnia.

The Hyderabad-based Dr Reddy’s group is one of India’s leading pharmaceutical groups focused on research and development. Anji Reddy, chairman of Dr Reddy’s Laboratories had indicated in April 1999 that the two firms would be merged in two years’ time.

Dr Reddy’s posted a net profit of Rs 60.320 crore on sales of Rs 493 crore in 1999/00, while Cheminor posted a net profit of Rs 26.506 crore on sales of Rs 215 crore.

Dr Reddy’s shares ended at Rs 1,340 at the Bombay Stock Exchange on Friday. Cheminor Drugs finished at Rs 340.

The company recently announced an ADR issue to mobilise $100-$150 million. The ADR proceeds will be used largely to fund the company’s core strength — research and development. DRL apparently plans to take around six new molecules into clinical trials (the estimated cost could be around $15-$20 million per drug). And among them, analysts say, could be a "potential money-spinner" pain killer drug falling in the same category as block-busters Celebra (from GD Searle) and Vioxx (from Merck).

DRL recently announced the amalgamation of American Remedies Ltd (ARL) with itself. The DRL-American Remedies amalgamation was fixed at a swap ratio of 1:12 — one share of Dr Reddy’s Laboratories for 12 shares of American Remedies.