Dr. Reddy's make risky biogenerics move

At the Motley Fool, Brian Orelli analyzes a recent decision by India-based generic drug developer Dr. Reddy's Laboratories to spend $20 million to produce eight new generic versions of biologics over the next eight years and double its biogeneric operation to 340 people in the next two years. The drugmaker hasn't specified which drugs it plans to copy.

The biotech industry has long held that while it's not opposed to generic competition, manufacturing generic biologics is extremely complex process, and that generic drugmakers should be required to conduct clinical trials to prove the bioequivalencey of their drugs.

Dr. Reddy's move is risky, considering the FDA has yet to roll out a faster, less expensive route to generic approval. But given the sometimes astronomical costs of biotech drugs, and the fact that a number of biologics will be coming off patent in the next few years, the FDA has been fielding increasing demands for a faster biologic approval process. There is no such process yet, but it certainly seems that in the near future, the FDA will put in place a system by which generic biologics can prove their equavelancy to branded drugs without having to conduct costly clinical trials.

The manufacturing facilities required to make these drugs take time to build, but by getting a head start now, Dr. Reddy's will be able to beat out other generic developers and hit the ground running if and when the FDA green-lights a faster approval process. As Orelli observes, "The company is taking a huge risk to get ahead of the pack, but I think it's well worth the rewards of being in front of its competitors."

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