India’s second-largest drug maker, Dr Reddy’s Laboratories, has decided to rope in the world’s largest producer of opium-based drugs, UK’s Johnson Matthey, to venture into the highly-controlled segment of narcotic drugs. Dr Reddy’s is one of the two companies that the government has so far allowed to produce opium derivatives like morphine from the raw opium produced by a state-run company.
The Hyderabad-based company will divest 49% stake in its wholly-owned subsidiary Macred India to the $4.2-billion British drug major for the technology to derive controlled substances such as morphine, codeine, dionine and thebaine from opium. Now, the government-owned Opium and Alkaloid Works is the only company that produces opium from poppy, plant from which the sleep-inducing latex called opium is taken by scoring immature seed pods.
The government has received a request from the UK-based company for picking up 49% stake in Marced India, government sources said. The application is to be considered by the Foreign Investment Promotion Board (FIPB) this week.
The DRL-JM venture will produce ingredients that go into numerous pain killers and sedatives. The companies are yet to decide on the valuation of their joint venture and the exact quantum of investments to be made, it is learnt.
Johnson Matthey is likely to invest in the JV through its Dutch subsidiary Matthey Finance BV either by subscription to fresh shares or purchase of existing shares of Macred India from Dr Reddy’s or both, it is learned. The JM group which controls about a third of the world market in bulk opiates provides technology to only those companies in which it could get a substantial stake. It has no other partner in India. The JM group has the capacity to meet 31% of the world’s morphine demand and 29% of the world’s codeine requirement.
Production and supply of narcotic drugs used in palliative care are highly regulated the world over as they are habit forming and are prone to abuse. The government allowed the private sector to participate in the down stream manufacturing processes in a limited way only recently.
Source: Economic Times