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Piramal Has Finite Taste for Drug R&D as Deals Beckon

Ajay Piramal wants Piramal Enterprises Ltd. to be a global maker of patented drugs. He’s just not willing to spend an infinite amount to reach that goal.

Piramal Enterprises will decide over the next quarter whether to begin a late-stage trial of the company’s most advanced drug, P276, for a side effect from cancer treatments, said Piramal, the Mumbai-based company’s chairman. Two other medicines are in early trials targeting tumors. and the company is in talks with potential partners to develop diabetes treatments, he said in an interview in his London apartment overlooking Green Park.

Since selling a branded-generic drug business to Abbott Laboratories for $3.72 billion in 2010, the 57-year-old billionaire has plowed money into pharmaceutical research. Piramal said he’s also spreading his bets, investing in Vodafone Group Plc’s Indian mobile-phone unit and lending company Shriram Transport Finance Ltd. because investors won’t reward him for taking on the risk of drug development.

“There’s a finite amount of money we can put in it,” Piramal said of drug research. “Hopefully it will get us through. There’s no valuation for a company doing drug discovery. It’s only looked upon as a cost on the revenue line.”

Trial Data

Piramal Enterprises will review mid-stage trial data and speak with regulatory authorities before deciding the fate of P276, he said. The drug is being tested as a treatment for mucositis, a painful inflammation of the mucous membranes lining the gastrintestinal track caused by chemotherapy and radiation. The compound also has been tested in pancreatic and head and neck cancers.

Piramal has narrowed the focus of the company’s drug research to cancer and diabetes and has dropped infectious diseases.

Piramal Enterprises provides contract manufacturing for drug companies, sells consumer-health products in India and makes inhaled anesthetics used in hospitals and laboratory diagnostics. The company bought U.S. health-care research provider Decision Resources Group LLC last year for $635 million to tap demand for information on the drug market.

To generate revenue for drugmaking, he is in talks with big pharmaceutical companies for which he already manufactures drugs to form partnerships that “go beyond one-off deals,” Piramal said.

And the executive is looking to build his company’s over-the-counter health-care business. He said he gets offers “every day” from companies interested in buying the business, yet doesn’t want to sell because it’s growing at 25 percent a year and keeps his foot in India’s burgeoning consumer-health trade.

Vodafone Stake

Piramal will sell the stake in Vodafone’s Indian unit next year as planned because it was intended to be a “short-term to medium-term investment,” he said. The company paid $1.21 billion for an 11 percent stake, which he expects will reap a return of between 17 percent and 20 percent. In the longer term, Piramal plans to add to the 10 percent stake in Shriram acquired in May.

Piramal is scouting further acquisitions in finance, real estate and information management, he said.

Piramal Enterprises shares have risen 9.2 percent this year, giving the company a market value of 98.3 billion rupees ($1.65 billion). India’s benchmark Sensex Index is down 0.7 percent.

Few Indian drugmakers have pursued the patented route, favoring generics and contract manufacturing. Piramal said it’s hard for shareholders in India to understand why he has decided to take the risker path of drug discovery instead of distributing profit from the Abbott sale as a dividend and continuing to be a contract manufacturer.

“We didn’t put all our eggs into pharmaceuticals because drug discovery is too risky for a company like ours,” he said. “And we felt confident we could create value by going into new areas.”

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