GlaxoSmithKline may buy 5% stake in Dr Reddy’s
UK-based pharmaceutical giant GlaxoSmithKline (GSK) is likely to buy 5% stake in Indian drug manufacturer Dr Reddy’s Laboratories Ltd for $150 million.
 
This is a marriage between Western makers of branded drugs and Indian generic producers. However, the acquisition will not give GSK any control over Dr Reddy’s as the proposed stake is far lower than the limit of 15% and does not invite any open offer to the public.
 
Both GSK and Dr Reddy's are in a winning situation. Dr Reddy’s could expand its product profile in the UK and Europe as it can tap GSK’s huge network. In 2008-09, Dr Reddy’s generic revenue increased by 51% to Rs4,979 crore whereas total sales grew by 40% to Rs6,945 crore. In addition, “Dr Reddy’s will have first access to innovative products of GSK in India,” says Sarabjit Kaur, VP, Angel Broking. GSK will also get access to a basket of generics at a time when a large numbers of drugs are going off-patent.
 
“The acquisition of 5% is more of a strategic policy,” says Mrs Kaur and the move is in line with Glaxo’s recent acquisition in Africa. Global multinational companies are under pressure to maintain market share as their patented drugs are likely to lose sales when they become generic. Multinational companies having low number of new discoveries have to invest in other generic companies to maintain sales growth.
 
Multinational sales from new launches are also coming down. GSK’s new launches have contributed to only 0.8% of total sales in 2008. Since there is a limit to new launches in patented drugs, GSK may have to opt for generic drugs for growth. In addition, the company has to increase its business in other emerging areas. Dr Reddy’s can fulfill both of these conditions and is an attractive opportunity for GSK. For Dr Reddy’s, in its total sales of Rs6,949 crore, Europe’s contribution increased by 16% to Rs 1,189 crore.
 
GSK, a £25 billion UK company, has a strong presence in drugs for asthma, HIV, malaria, depression, migraine, cancer, diabetes and digestive conditions whereas Dr Reddy’s has a strong presence in painkillers, gastrointestinal, antibiotics and heart depression drugs. The combination of these drugs will enable both companies to expand their therapy areas.
 
GSK has expanded its Chinese presence and is also spreading its wings in Africa. In May 2009, GSK bought a 16% stake in Africa's biggest generic drug maker, Aspen Pharmacare, for $465 million.
 -Dhruv Rathi [email protected]
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Kingfisher Airlines surviving on “cash and carry” mode
While Bharat Petroleum Corp Ltd (BPCL) has come down heavily on Kingfisher Airlines on pending dues for jet fuel, repayments to various other entities for services has been an important issue with the airline over the past several months and it is running all its services on a “cash and carry” basis.
 
In a recent hearing on the jet fuel dues at the Bombay High Court, BPCL demanded a substantial amount to be given as the repayment of dues, against the monthly payment of Rs10 crore offered by the airline. Kingfisher owes BPCL around Rs314. 32 crore. Meanwhile, Kingfisher Airlines alleged that BPCL had not honoured the 90-day grace period granted by the Indian government to all airlines.
 
Kingfisher owes a total of Rs940 crore to state- run oil companies, including Rs37.40 crore to Indian Oil Corporation (IOC), Rs598.80 crore to Hindustan Petroleum Corporation Ltd (HPCL) and Rs314.30 crore to BPCL.
 
Along with BPCL, IOC too had put the airline on the “cash and carry” mode since February 2009. Similarly, the Airport Authority of India (AAI) had also disallowed any further credit to Kingfisher in July 2009 and had put all services to the airline on the same mode.
 
In the court proceedings held yesterday at the Bombay High Court, the BPCL lawyer argued, “They (Kingfisher) put us on “cash-and-carry” just a few minutes before planes were due to take off at various airports.”
 
Both BPCL and Kingfisher Airlines refused to comment on the matter since it is subjudice.
 
Last month, Kingfisher Airlines had to face a strike by its ground handling staff, reportedly for non-payment of ground handling fees at the Delhi Airport. However, the spokesperson said, “It was an issue between the staff at of the previous ground handling agency Kingfisher had, and the new ground handling agency that we have hired now. We have asked them to settle the issue in the labour court.”
- Amritha Pillay. [email protected]
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Consumers bitter over butter shortage
Consumers across India are increasingly perturbed as they are unable to abundantly butter their toast, thanks to the unprecedented shortage of butter for the past two months fuelled by unrestrained exports to foreign countries

Your toast is no longer delicious because butter is utterly non-existent in various parts of the country.
 
The prices of dairy products—especially butter and cheese—have risen sharply over the past couple of weeks because of countrywide shortage of milk. Many big and small retail stores around Mumbai city have not received butter stocks since August.
 
Talking to Moneylife, Shirish Virkar, deputy commissioner, Dairy Dvelopment Board of Maharashtra said, “It is true that several states like Maharashtra, West Bengal, Gujarat and Madhya Pradesh are facing shortage of dairy products like ghee, cheese and butter to a larger extent. In Maharashtra the situation is not that acute compared to other states.”
 
Irony is that, India dairy giant Amul has been exporting its products to the US and Middle East to meet huge demand for Indian butter and cheese, while Indian cities are reeling under a severe shortage. The government has also failed to keep a check on the export of butter and other milk products to foreign countries.
 
Blaming it on dairy giant Amul, Virkar said, “Around 80% of butter supply in India is done by Amul. It has been more than two months since Amul ran out of butter stock in Maharashtra and several other states in India. This is because there has been some shortage in production of dairy products in Amul in the last couple of months, thanks to the delayed monsoon. This has decreased the yield of milk by over 35%, thereby bringing down butter production in the country.”
 
When asked to comment on the issue, Srinivas Tuma, area sales officer (Mumbai Division) of Amul said, “I agree that there is paucity of butter across India. This is due to shortage of milk production which is likely to continue till Diwali.”
 
BB Bhandari, general manager (Marketing) of Warana said, “The production of table butter of our company is down 80% this year. We have been able to recover production by 20% since August. Earlier, our daily supply of butter was around 2.5 tonnes per day but now, it is only 400 kg. As milk production is gradually recovering after the monsoons, we are hoping the production of butter to normalise after Diwali.”
 
Ajay Gangwani of Vaibhav Concerns, a Mumbai-based butter distributor said, “There has been a shortage of butter in Mumbai for last six months. I have stopped supplying table butter of all leading brands since then.”  
 
Pritam Shah, managing director of Pune-based Gowardhan Dairy said, “The situation of milk production is improving in India. Also there has been a steadily increase in butter stocks since August.”
Vidyut Kumar Ta with inputs from Pallabika Ganguly, Aditya Kshirsagar, Amritha Pillay [email protected]
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