RANBAXY Laboratories may dilute up to 60% stake in its new research company, which will be formed by hiving off its R&D unit in 2008. “We are looking for an investor willing to pick up either a 40% or a 60% stake in the new research company, according to the valuation we are able to get,” said Ranbaxy R&D president Dr Himadri Sen. This may be a pharma company or a private equity fund, he added. The shape and strategy of Ranbaxy’s much-talked-about hived-off research entity is also becoming clearer. The company is planning to start a Contract Research Organization (CRO) under the ambit of its new entity. This will include Ranbaxy’s ongoing collaborative research programmes with UK drug giant GlaxoSmithKline (GSK). But it will also seek new ones with other global pharmaceutical companies. While drug discovery services will be provided by Ranbaxy’ new research company, clinical trials will be conducted by Fortis Healthcare, a Ranbaxy promoter group company, said Dr Sen. The new entity will also conduct bio-equivalence studies for Ranbaxy’s generic drugs pipeline, for which it will receive a fee. “After the hive-off, the second step will be to acquire a CRO in the US or in Europe.” According to the US Food and Drug Administration (FDA), only 30-40% of clinical trials for a new drug can be conducted in India, said Dr Sen. Therefore, to conduct all the trials required for a new drug’s clinical development, Ranbaxy will need to set up operations in the US or Europe. Ranbaxy is seeking a head for its new-hived off entity. Dr Sen will continue to look after research for the generic pipeline. Along with contract research services, the new research entity will continue to work on its own discovery research programmes. For this, it will seek external funding. Ranbaxy has a new malaria drug, currently in late phase-II trials in Africa, Thailand and India, and 8-10 experimental drugs still in the early stages of development. The company is looking for external funding to develop these molecules. According to industry estimates, it costs $800 million to $1 billion and takes 10-12 years for a drug to hit the market. Ranbaxy had announced last month the spin-off of its R&D division, in a bid to de-risk its core business. “The move may allow the company to decrease its annual R&D spend by 30%,” said Dr Sen. Ranbaxy spent Rs 386.3 crore (recurring expense) towards development of its generic and new chemical entity (NCE) pipeline in 2006 compared to Rs 486.4 crore in 2005. R&D capital expenditure stood at Rs 97.5 crore and Rs 153 crore in 2006 and 2005, respectively.