Nicholas to spin off new drug research unit

New Delhi, Aug 31 (UNI) Nicholas Piramal India Ltd today said it would spin off its new chemical entity (NCE) research unit into a separate company to restructure its research activities.

Nicholas Piramal shareholders will get one share in the new company for every 10 held, the company said in a statement.

Under the proposed de-merger scheme, the NCE undertaking with net assets (at book value) intended for R&D worth Rs 95 crore would be transferred from the company to the new company with effect from April 1, 2007, the statement added.

Post de-merger, the company would hold 18 per cent of the equity capital of the new company and the remaining 82 per cent would be held by the shareholders of the company.

Nicholas will initially invest Rs 4.55 crore in the new company, and transfer the novel drug research business assets worth Rs 90 crore at bookvalue and cash of Rs 95 crore to the new firm.

The new company would be listed on the BSE and NSE and after listing, at an appropriate time, will explore various options for raising further funds to meet its business requirements.

The research unit is working on developing new molecules, including one undergoing initial stage trials as a possible cancer treatment and molecules for pain management and anti-infection which were in mid-stage trials.

The unit was also working on Eli Lilly&Co's drug candidate for metabolic disorders in exchange for milestone payments on meeting certain targets, as part of a drug development deal with the US firm.

Nicholas expects to have eight compounds in clinical trials by end of the current financial year. This will result in increased spend as clinical development costs constitute about 2/3rd of the total R&D cost of a drug.

Dr Reddy's Laboratories and Sun Pharmaceutical Industries have also hived off their research units, to help lower the parent's risk exposure to high drug development costs and to unlock the value of the units.

UNI