Dr Reddy's looks to move beyond drugs with VC arm

Hyderabad: Dr. Reddy’s Laboratories Ltd’s new venture capital arm is considering 20 business proposals, including a chain of dental clinics and health-diagnostic laboratories and is likely to back one or two as part of a plan to transform India’s second-largest drug maker into a broader health-focused company.
“We haven’t invested anywhere, we are setting up the processes now,” said G.V. Prasad, co-chairman and chief executive of officer of Dr. Reddy’s, without giving details of the corpus allocated for the fund or the name of the start-ups that the company is evaluating. “I don’t think money is a concern for us.”
Hyderabad-based Dr. Reddy’s is evaluating investments in new technologies that offer medical diagnostics and services to help patients, and also complement the firm’s larger strategy of transforming itself into a broader health-focused entity. Smaller rival Cipla Ltd was the first Indian drug maker to set up a fund in 2013 to incubate start-ups.
“We won’t go wild and invest everywhere, we will be strategic investors. This is not to make money out of our investment, this is to build businesses or to learn things,” Prasad said.
“If it is directly in our business, we won’t invest. If it is an unrelated area we look at it. Suppose it’s a new way of treatment, or new way of diagnostic, or a new way to help patients in their journey of illness to wellness, we will invest,” Prasad said.
Prasad said that company’s venture group will also incubate start-ups in-house until they become sizable entities, in addition to encouraging the company’s own people to come up with ideas.
“If somebody has a brilliant idea, we may back it with investment and incubate it,” Prasad said.
Big pharmaceutical companies including Pfizer Inc., AstraZeneca Plc., GlaxoSmithKline Plc. and Novartis AG have been investing in start-ups for years through their venture capital funds.
“It’s not very surprising for company like Dr.Reddy’s to come up with a venture fund,” said P.R. Ganapathy, president (India) at social enterprise incubator Villgro Innovations Foundation.
The company understands the healthcare space, he explained, and the gaps in it, apart from having the money power and expertise to back start-ups.
Healthcare and lifescience start-ups raised $136 million of venture capital in 2014, second only to information technology and information technology-enabled services, which includes Internet companies such as Flipkart and Snapdeal, according to data compiled by Chennai-based researcher Venture Intelligence.
“More and more companies are seeing healthcare as a safe bet to invest—there is a huge demand and it is recession proof,” said Rana Mehta, leader, healthcare, at consulting firm PwC India.